SK Finance Limited

FY26 Result Analysis & P/B Valuation Deep-Dive

By Kanishk Devbangia, NISM Series XV Certified Research Analyst (NISM-202300182946)

1: What SK Finance Does

1: What SK Finance Does

Established in 1994, SK Finance Limited is a non-deposit-taking, middle-layer Non-Banking Financial Company (NBFC-ML) regulated by the Reserve Bank of India and has its headquarters in Jaipur, Rajasthan.

Business Model

As of FY26, SK Finance operates out of a network of over 650+ branches in 11 states and one union territory, hiring more than 12,000 employees. The presence of SK Finance in these eight regions gives it an advantage in catering to rural India's borrowing needs. Being entrenched in these geographies for three decades gives SK Finance a significant moat against any new competitors.

2: FY26 Financial Results

Analysis

Results of SK Finance for FY26 were declared on May 4, 2026. These results are a part of the consistent growth trend that the company has been experiencing since FY22. Following is an analysis of all key performance metrics for SK Finance:

Growth of AUM: Breaching the ₹15,000 Crore Mark

Assets under management of SK Finance amounted to ₹15,755.22 crore as of March 31, 2026, up from approximately ₹13,261 crore at FY25 end – resulting in growth of around 19% y-o-y. In Q1 FY26 update, AUM was reported at ₹13,668 crore (which translated into a growth of 23% y-o-y then).

What makes AUM growth all the more important is the fact that this growth happened despite the increase in number of hotels under eligibility criteria, and without any deterioration in asset quality. This has been an area of difficulty for most NBFCs.

Disbursements: Active Lending Activity

FY26 saw total disbursements of ₹9,162.27 crore by SK Finance. In Q1 FY26 itself, disbursements came in at ₹2,147 crore. Disbursement growth drives future AUM and revenue growth.

Income: Reliable Income Driver

The consolidated operational income for FY26 amounted to ₹2,823.60 crore, indicating substantial growth when compared to FY25 levels. The total income from Q1 FY26 amounts to ₹652 crore (an increase of 21% YoY from ₹540 crore). If annualized, this would suggest even more robust growth during the second half of FY26. The quality of revenue streams comes from interest income from secured loans, which are consistent and recurring sources of income.

Profit: PAT Surpasses ₹431 Crore

The Net Profit After Tax (PAT) of FY26 amounts to ₹431 crore, showing robust YoY growth. In terms of context: Q1 FY26 PAT was ₹87.59 crore (an increase of 30% YoY), and FY25 PAT was around ₹229 crore. Projecting the entire-year trend, it becomes evident that PAT growth during FY26 was around 88% YoY, owing mainly to operating leverage.

Balance Sheet Strength

SK Finance's balance sheet as of March 31, 2026 shows:

• Net Worth: ₹3,962.83 crore — a strong equity base providing protection against credit losses

• Debt-Equity Ratio: 3.23x — prudent leverage for an asset-backed NBFC; well below the regulatory ceiling

• Capital Adequacy: The company maintains adequate capital buffers to support continued disbursement growth

3: Asset Quality

In the case of any NBFC, the most critical parameter which distinguishes a good NBFC from merely an expanding NBFC is the quality of assets. In the case of an unlisted stock holder in SK Finance, it is essential to understand what GNPA and NNPA are and how these parameters perform in comparison to their competitors.

What is GNPA and NNPA?

GNPA stands for Gross Non-Performing Assets. This ratio determines the ratio of total advances where there is a default made by the borrower, excluding any provision which has been made.

NNPA stands for Net Non-Performing Assets. It determines the ratio of bad loans after deductions of provisions made against it.

Asset Quality of SK Finance – FY26 Analysis

According to H1 FY26 financials, which were the latest data available on SK Finance’s asset quality (Gross Non-Performing Assets and Net Non-Performing Assets), the GNPA was approximately 4.77%, and NNPA was 3.27%. The GNPA figures are relatively higher compared to other NBFCs, considering SK Finance's concentration on providing finance for used commercial vehicles and MSMEs, which have inherently higher risk profiles than residential housing or corporates.

A more significant insight is the trend and stability of the metrics: the GNPA figure has been stable on a YoY basis, even with rapid AUM expansion of 19%-23%. It is a good sign that NPA ratios remain stable during a high growth period.

4: P/B Valuation — What Are You Actually Paying Per Share?

In the case of financial institutions – banks and NBFCs – P/B ratio is the most commonly used tool for valuation. P/B ratio is more reliable compared to P/E ratio as P/B ratio is less volatile as book value increases steadily year by year as earnings are added to equity and gives direct information about the balance sheet.

Calculation of P/B Ratio

Price/Book ratio = Market Price Per Share ÷ Book Value Per Share

Book Value Per Share = Net worth ÷ Total number of shares

For SK Finance: Net worth as of 31 March, 2026 = ₹3,962.83 crore. Paid-up Equity Capital is ₹13.37 crore (face value ₹1 per share). This implies that there are approximately 13.37 crore shares.

Book Value Per Share (BVPS) Formula

BVPS = Net Worth / Shares Outstanding

= ₹3,962.83 Cr / 13.37 Cr shares

= ₹296 per share (approx.) (book value)

This forms the basic benchmark for any P/B valuation. Any price paid by an unlisted investor for the SK Finance stock must always be in comparison to this book value.

P/B Scenario Analysis — Unlisted vs. Listed Comparable

The table below maps out what different P/B multiples imply for the unlisted share price — and how those compare against where peers trade in the listed market.

5: IPO Status & What Unlisted Investors Must Know

SEBI Approval — The Pathway Is Clear

The SEBI approval for SK Finance's IPO was granted on August 30, 2025. The validity period of SEBI approval is one year, implying that the time frame within which the IPO must be launched will expire by August 2026. The firm has appointed Kotak Mahindra Capital Company as the Book Running Lead Manager and Kfin Technologies as the Registrar. Listing will take place on BSE and NSE.

IPO Structure

The ₹2,200 crore IPO structure can be summarized as under:

• Fresh Issue: ₹500 crore - for expanding its capital base for future lending purposes

• Offer for Sale (OFS): ₹1,700 crore – for exiting investors

• OFS Investors: Norwest Venture Partners (₹700 Cr), TPG Growth IV (₹700 Cr), Evolvence funds (₹100 Cr), Promoters' Family (₹200 Cr)

The presence of high OFS suggests that most funds from the IPO will benefit existing investors – something that potential buyers should keep in mind. Nevertheless, the ₹500 crore fresh issue will improve the financial position of the company.

Disclaimer:

This is written for educational and informational purposes only. Nothing here constitutes investment advice or a recommendation to buy or sell securities. All data is sourced from publicly available information. Investments in securities markets are subject to market risks — please read all offer documents carefully before investing.