SG Finserve (SGFIN)

FairStock Score: 48/100 — MIXED

Score breakdown: P/E: 2/3 · ROCE: 0/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Strong momentum: sales growth of 103.06% and profit growth of 37.06%, with PEG of 0.28.
• Piotroski F-Score of 7/9 points to decent near-term financial health.
• Promoter holding of 50.30% aligns interests with minority shareholders.
• Latest quarter net profit of ₹32 Cr on sales of ₹86 Cr implies a healthy net margin (~37%).

Concerns

• Debt/Equity of 1.85 and negative free cash flow signal leverage-dependent growth.
• Profit growth (37.06%) lags sales growth (103.06%), suggesting margin pressure or rising costs.
• ROCE of 6.83% is modest for a company trading at P/B of 3.53.
• No dividend yield; total reliance on future capital appreciation.

AI Analysis

At first glance, SG Finserve looks like a growth machine: sales up 103% and profits up 37%, with a PEG of only 0.28. But I have learned that in lending, raw growth without underwriting discipline is a one-way ticket to losses. This NBFC earns a return on equity of 12.75% and trades at 3.53 times book. That price implies a business that can compound reliably for many years—yet the return on capital employed is just 6.83%, far below what you would like from a company trading at such a premium. Debt-to-equity of 1.85 is not uncommon for a finance company, but it leaves little buffer for a credit cycle, especially with negative reported free cash flow. The promoter holding of 50.30% is encouraging; it aligns owners with minority shareholders. Still, I cannot get comfortable paying ₹543 for a book value of ₹153.65 without a demonstrated moat. A P/E of 19.96 may look reasonable next to the earnings growth, but profit growth is lagging sales growth by a wide margin—103% revenue growth produced only 37% profit growth. That is a classic sign of pricing power fading or borrowing costs eating into margins. The latest quarter's profit of ₹32 crore on sales of ₹86 crore suggests a net margin of 37%, which is decent, but I would want to see that margin hold up over time. There is no dividend to reward patience. In true Ben Graham fashion, I ask: where is the margin of safety? At 3.5 times book, the market has already priced in success. A fast-growing NBFC in India can be a wonderful business, but for every winner, many burn capital. I would wait for a lower price or a long track record through a full credit cycle.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer