SRG Housing Finance Ltd Management Discussions

1. THE MACROECONOMIC LANDSCAPE:

A FAVORABLE TAILWIND, WITH CAVEATS

India entered FY26 carrying a set of contradictions that would have baffled a lesser economy. The global backdrop was genuinely hostile - stubborn inflation in the developed world, a liquidity squeeze in emerging markets, geopolitical uncertainty that stretched from Eastern Europe to West Asia - and yet, Indias domestic credit machinery kept turning, even if at a slightly lower speed than the year before. This is the paradox that has defined Indian housing finance in FY26, and understanding it is the first obligation of any honest MD&A.

Indias GDP growth for FY25 came in at around 6.5% a modest step back from the 8.2% recorded in FY24, but one that is better understood as a normalisation rather than a deterioration. The Reserve Bank of India, which had held its key repo rate at 6.5% for an extended stretch, began its easing cycle, bringing rates down and transmitting some relief to the borrowing costs of both lenders and, critically, end-borrowers in the housing finance segment. This monetary pivot was perhaps the single most consequential macroeconomic event for housing finance in FY26. Cheaper money, a cumulative 125 basis points of cuts bringing the repo rate to 5.25% moves the needle materially when your average ticket size is under fifteen lakh rupees and your average borrower runs an informal business from a rural tehsil.

Indias GDP Growth

Year	GDP Growth
FY2024	8.2%
FY2025	6.5%
FY2026	7.7%

Consumer price inflation remained largely within the RBIs comfort band, approximately 2.6% for FY26 - the lowest in several years - which is meaningful for the sector. Stable inflation preserves the real incomes of informal workers, small traders, and self-employed households who constitute the backbone of the customer base SRGHFL serves. When inflation bites harder than it should, the milkman, the barber, and the saree shop owner in towns like Banswara, Mysuru, and Bhuj feel the pinch long before it appears in any macroeconomic dashboard.

From a sector standpoint, CRISIL Ratings estimated that overall mortgage finance AUM would grow at a healthy 18-19% in FY26. Within this, the housing finance segment that SRGHFL operates in was expected to deliver AUM growth of 22-23% in FY25, moderating to 20-21% in FY26 and FY27. This moderation is not alarming; it merely reflects the sector transitioning from the hypergrowth phase of the post-pandemic recovery cycle to a more sustainable, calibrated expansion trajectory. In the case of SRGHFL, as we shall see, the numbers have emphatically beaten this sectoral benchmark.

ICRA, in its comprehensive July 2025 review of the housing finance sector - a review that notably included SRGHFL in its small HFC category - projected the on-book portfolio of HFCs to grow by 14-16% in FY26 after a 16% expansion in FY25. ICRA also noted that gross NPAs for the sector were expected to stabilize at 1.8-2.0% through March 2026, and that HFCs were expected to deliver a Return on Managed Assets (RoMA) of around 2.0% for the year.

Growth of AUM Affordable Housing Finance Companies (HFC)

Year	Growth
FY2023-24	31%
FY2024-25	22-23%
FY2025-26 E	22-23%

In both metrics, SRGHFL has outperformed the peer group - the sort of performance that separates the genuinely differentiated operator from the index-hugger.

The NIM pressure is a real and widely documented sectoral phenomenon. With systemic interest rates declining and competition from banks intensifying at the salaried customer interface, HFCs have seen yield pressure on their home loan portfolios. However, the segment that SRGHFL serves - New-to-Credit, self-employed, rural & semi urban borrowers - remains largely outside the competitive orbit of banks. This is the fundamental insight underpinning SRGHFLs strategy, and it has paid off. The company has maintained NIMs in the 2.62%-2.82% range across FY26 quarters, even as its larger peers struggled with NIM compression.

2. THE HOUSING FINANCE SECTOR: STRUCTURAL GROWTH, GROWING COMPETITION

There is a number that puts Indias housing challenge in perspective: as of the beginning of this decade, the country faced an estimated housing shortage of approximately 29-31 million units, with the bulk of the deficit concentrated in the economically weaker and lower-income segments - precisely the markets that SRGHFL has made its own. This is not a shortage that a few quarters of above-average disbursements will fix; it is a structural multi-decade opportunity, and every serious player in the sector knows it.

The government has not been a passive spectator in Indias housing story. It has been, year after year, the single largest demand-generation engine in the rural and semi-urban markets that companies like SRGHFL call home.

The Pradhan Mantri Awas Yojana - in its Gramin and Urban avatars - is the institutional expression of that commitment. Under PMAY-Gramin, the numbers by May 2026 speak for themselves: 3.91 crores houses sanctioned, 3.05 crores completed, against a revised cumulative target of 4.95 crores pucca houses by March 2029. To put that in perspective - the government extended the original scheme in August 2024, added 2 crores houses to the target, and then proceeded to release over 21,000 crores to states in FY 2026-27 alone to make sure the pipeline did not slow down. Gujarat and Rajasthan - which together account for nearly 77% of SRGHFLs AUM - are both on the recipient list. This is not coincidence; it is the policy tailwind that every honest MD&A in this sector must acknowledge.

On the urban side, PMAY-Urban has, since inception, sanctioned over 1.64 crores houses and completed more than 98 lakh of them. The successor scheme, PMAY-U 2.0, has already added 13.61 lakh fresh sanctions across 16 states and Union Territories. The pipeline of first-time homebuyers being created by this machinery - families who will need a loan, a title, and a lender willing to serve them - is not theoretical. It is being built, brick by brick, with central government money.

NHBs refinance facility remains an important source of low-cost funding for smaller HFCs, and SRGHFL has historically availed of this window.

What is new in FY26 is the texture of competition. Banks - armed with falling deposit costs and the hunger to grow their retail books - have become more aggressive in home loans. Their digital infrastructure has improved, their branch penetration in smaller towns has deepened, and their rates are structurally lower than those of most HFCs. CRISIL notes that this bank competition is driving NIM compression across the sector, and that the pressure is most acutely felt by mid-sized HFCs with higher overlap with the salaried urban segment.

SRGHFLs antidote to this competition is geographic and demographic specificity. The company operates 96 branches across six states and one Union Territory, with 39.93% of its AUM concentrated in Gujarat, 36.90% in Rajasthan, and the balance spread across Madhya Pradesh, Maharashtra, Karnataka and Andhra Pradesh. Critically, 94.07% of the loan book is Rural. Banks do not contest this space with the same hunger that they bring to urban home loan markets. The self-employed borrower in Salumber or Kapadvanj may well bank with SBI/BOB. But banking with SBI/BOB and borrowing from them for a home loan are two different transactions. One requires a deposit; the other requires a salary slip, an ITR, and an underwriting officer willing to spend three hours understanding how a rural vegetable traders cash flows work. Banks have the branches. They do not, as yet, have the appetite.

This strategic specificity is the companys enduring competitive moat. It is also, one must acknowledge in the spirit of honest disclosure, a concentration risk. As banks extend their reach and digital verification of informal income becomes more sophisticated, the competitive dynamic may shift. Management remains alert to this possibility even as it justifiably takes confidence in the current market position.

Business Overview

3. BUSINESS OVERVIEW: A HOUSING FINANCE STORY FROM UDAIPUR

SRG Housing Finance Limited is, at its core, a credit institution with a philosophy. Founded in 1999 in Udaipur - the city of lakes, of Rajputana heritage, and of a quietly determined mercantile class - the company spent its first decade building what would become its most valuable asset: not its loan book, not its technology platform, but its understanding of the informal economy in western India.

The company received its NHB license in 2002 as the first HFC in Rajasthan, listed on the BSE SME Platform in 2012, migrated to the BSE Main Board in 2015 - Indias first company to do so - and listed on the NSE in August 2023. Each of these milestones marks not just a corporate event but a gradual widening of the circle of capital available to the institution, and a commensurate enlargement of its ambitions.

SRGHFLs mission is to serve the New-to-Credit, Underserved, and Unorganized population - the milkman, the repair shop owner, the tea stall operator, the vegetable vendor. This is not marketing language; it is underwriting philosophy. The companys credit policy is built around recognising income that does not come with a salary slip, cash flows assessed through field visits, bank statement analysis, and personal discussion notes rather than ITRs - and extending credit secured against residential property at a conservative loan-to-value of approximately 48% and risk that is assessed not by demanding more documentation but by investing in intensive personal diligence in the field.

The SRG SRAJAN program, launched in 2019, has been the digital fulcrum of this philosophy. Under this initiative, the company integrated a loan origination and management system that handles everything from lead generation and KYC validation through mobile application to automated credit report generation, geo-tagged personal discussion notes, and NACH-based collection management. The outcome is a stated 15-day turnaround time for loan approvals and 97% of borrowers paying EMIs through banking channels - a collection discipline that is genuinely remarkable for the customer profile SRGHFL serves.

As of March 31, 2026, the company managed an AUM of approximately 1,042 crores, operated from 96 branches across six states and one Union Territory, and served more than 25,000 customers. Founder and Managing Director Vinod Kumar Jain, who brings over 30 years of experience in housing finance for underserved India, holds - together with the promoter group - 59.03% of the equity, a commitment that speaks to conviction in the long-term opportunity.

4. FINANCIAL PERFORMANCE: THE NUMBERS SPEAK

4.1 FY2026: The Year the Compounding Showed Up

Key Performance Indicator	FY2026	FY2025	YoY Change
Gross AUM (? Crore)	1,042.15	759.36	+37.2%
Total Income (? Crore)	199.66	154.55	+29.2%
Net Interest Income (? Crore)	98.26	75.09	+30.9%
Profit After Tax (? Crore)	32.49	24.39	+33.2%
Earnings Per Share (?)	20.71	17.45	+18.7%
Net Interest Margin (NIM)	10.91%	11.03%	-12 bps
Gross NPA	1.77%	1.84%	-7 bps
Net NPA	0.65%	0.61%	+4 bps
Capital Adequacy Ratio (CRAR)	38.62%	47.75%	-913 bps
Number of Branches	96	90	+6.7%
Number of States / UTs	7	7	Stable

4.2 Quarterly Trajectory: Four Quarters, One Direction

Particulars (? crores)	Q1FY26	Q2FY26	Q3FY26	Q4FY26	FY26
AUM	795.39	866.64	943.93	1,042.15	1,042.15
Disbursements	80.00	116.59	107.34	139.61	443.54
Total Income	42.70	48.45	51.25	57.33	199.66
Net Interest Income	20.38	23.39	24.23	28.00	98.26
Profit After Tax	6.78	8.25	8.21	9.25	32.49
GNPA (%)	1.85%	1.88%	1.83%	1.77%	1.77%

4.3 Revenue: A 29% Leap That Tells a Story

Total income for FY 2025-26 came in at 199.66 crores, against 154.55 crores in FY25 - a growth of 29.2%. This is not a number that happened by accident. It is the sum of a deliberate geographic expansion, a disciplined disbursement engine, and the compounding effect of an AUM that has grown at a CAGR of approximately 32% since FY17.

Total Income Throughout the Year

Quarter	Total Income
Q1FY26	? 42.70 crores
Q2FY26	? 48.45 crores
Q3FY26	? 51.25 crores
Q4FY26	? 57.33 crores

Fee and other income contributed 23.74 crores in FY26 (20.18 crores in FY25), largely driven by processing fees on disbursements that have grown sharply year-on-year.

4.4 Net Interest Margin: Compression and Resilience

The NIM story in FY26 is, at its core, a story about structural asymmetry - and for once, the asymmetry works entirely in the companys favor. SRG Housing Finance lends at fixed rates in the range of 18-20% and borrows at floating rates linked to market benchmarks. In a falling interest rate environment, this creates a powerful, one-sided operating lever: liability costs reprice downward with each successive RBI rate action, while asset yields remain unchanged. The loan book does not reset. The EMI does not fall. The yield is contractually locked.

This structural feature separates SRGHFL from the mainstream housing finance universe in a fundamental way. Most HFCs - whether operating on MCLR-linked or repo-linked floating rate products - experience rate transmission on both sides of the balance sheet simultaneously. When rates fall, their borrowing costs drop, but so do their lending yields, often faster. The NIM improvement is partial, contested, and subject to competitive pressure on asset pricing. For SRGHFL, there is no such contest. The asset yield is fixed. Every basis point of reduction in borrowing costs accrues directly and entirely to the spread.

The cost of borrowing for FY26 stood at 10.95% against a gross yield on the loan portfolio of approximately 19.53% on housing loans and 20.97% on LAP - a blended yield well above 19%. This is not a spread that narrows when the repo rate moves. It is a spread that widens. The RBI has already delivered meaningful rate cuts since the start of the easing cycle, and the floating-rate liability book has begun to reflect this - management has guided for borrowing costs to decline further over the next one to two years. Each 25 basis point cut that transmits fully to the liability side, with zero offset on the asset side, is pure margin accretion.

The Acuite upgrade to A- Stable in March 2026 adds a second compression lever. Access to A- rated bond market funding - through the 2,500 crores borrowing program approved by shareholders - opens the NCD market at materially lower rates than term loans from banks and NBFCs. As this funding mix shifts, the blended cost of borrowing will decline further and faster than the rate cycle alone would deliver. The combination of RBI easing and rating-driven funding cost reduction is, in effect, a twin tailwind on the liability side, with a fixed-rate asset book that simply holds its ground.

The reported NIM on AUM of 10.91% for FY26, with the Q4FY26 quarterly NIM at 2.82% on a spread basis, already reflects this dynamic in its early stages. The direction is unambiguous. As borrowing costs fall, as newer branches season and contribute to disbursement volumes, and as the rating upgrade progressively lowers the marginal cost of funds, NIM expansion is not a possibility - it is a near-certainty, absent a reversal of the rate cycle.

4.5 Profitability: PAT Grows 33% Delivering Compounding Returns

Profit After Tax for FY 2025-26 was 32.49 crores, against 24.39 crores in FY25 - a growth of 33.2%. Profit Before Tax was 40.15 crores (FY25: 30.05 crores), reflecting an effective tax rate of approximately 19%. Earnings Per Share improved from 17.45 to 20.71, a reflection of disciplined capital management even as the equity base expanded with fund raises in FY25 (~80 crores via preferential issue in FY25).

The quarterly trajectory is equally encouraging. Q4FY26 PAT of 9.25 crores represents a 49.4% year-on-year jump over Q4FY25s 6.19 crores. On a sequential basis, every quarter in FY26 showed profitable growth: Q1 (6.78 crores), Q2 (8.25 crores), Q3 (8.21 crores), Q4 (9.25 crores). There is a clear progression here, and it is not disguised by one-time items.

The Return on Average Assets for FY26 was 3.18% - nearly double ICRAs sector estimate of 1.8-2.0% RoMA for the year, and a reflection of the higher-yielding composition of SRGHFLs rural, self-employed loan book rather than leverage. The quarterly progression tells the story more granularly: Q1 at 0.77%, Q2 at 0.88%, Q3 at 0.79% and Q4 at 0.81% - a broadly stable trajectory with the Q2 peak reflecting seasonal disbursement momentum. Return on Average Equity for FY26 was 11.58%, improving from 11.52% in FY25. The direction is right. The pace of improvement will accelerate as the book scales and the preferential capital raised in FY25 is fully deployed.

4.6 Cost Efficiency: A Story of Gradual Improvement

The Cost-to-Income ratio for FY26 came in at 64.56% improving from 65.78% in FY25. The quarterly trajectory tells the more interesting story: Q4FY26 closed at 63.15% against 67.50% in Q4FY25 - a 435 basis point improvement year-on-year in the final quarter, which is the direction that matters.

The ratio will invite comparison with larger HFCs, and the comparison will be unflattering if made without context. Three things explain it, and none of them are management failure.

The first is geography. Operating in rural Rajasthan and Gujarat - in towns like Salumber, Banswara, and Kapadvanj - costs more per loan than operating in Ahmedabad or Jaipur. Field officers travel further. Verification takes longer. The infrastructure of formal credit does not extend to these postcodes the way it does to tier-1 markets, which means the company builds it itself, visit by visit.

The second is ticket size. When your average loan is around 10 lakh, the fixed costs of origination, underwriting, and collection do not shrink proportionately. A 8 lakh loan and a 40 lakh loan consume roughly similar field time. The unit economics only work if you accept a higher cost-to-income at this end of the market - or if you abandon the market, which SRGHFL has chosen not to do.

The third is expansion. Every new branch that opens incurs fixed costs for 12-18 months before it reaches break-even disbursement levels. Six branches were added in FY26. The drag is real, but it is the drag of investment, not inefficiency.

The direction of travel - from 67.50% to 63.15% in a single year at the quarterly level - suggests the operating leverage is beginning to show. The question for FY27 is whether that trajectory holds as the branch network matures.

Total operating expenditure for FY26 reflected investments in headcount addition, new branch costs, and technology, accompanying the expansion from 90 branches (FY25) to 96 branches (FY26). The investment in building domain expertise in newer geographies - particularly the southern states - is ahead-of-the-curve rather than structural inefficiency. The management has articulated a clear path to cost-efficiency improvement as the newer branches mature.

The SRG SRAJAN initiative, which automates significant portions of the origination and collection workflow, is the technology lever that can drive operating leverage in the medium term. SRGHFLs fully digital loan origination - 100% online login by Relationship Managers, 15-minute application completion - positions it well for this trajectory.

5. ASSET QUALITY: DISCIPLINE AT THE DOORSTEP

Lending to New-to-Credit borrowers in rural & semi urban India is an act of calculated faith - faith in the informal economys resilience, in the companys ability to assess creditworthiness without conventional documentation, and in the borrowers aspiration to own a house as a non-negotiable life goal.

As of March 31, 2026, the Gross NPA ratio stood at 1.77%, continuing a steady improvement from 1.98% in Q3FY25 and 1.84% at the close of FY25. The Net NPA ratio was 0.65%. In absolute rupee terms, Gross NPAs were 18.46 crores & Net NPAs were 6.7 crores on an AUM base of 1,042.15 crores.

The housing loan portfolio reported a GNPA of 1.64% lower than the 2.10% recorded in the LAP segment, across borrower categories, salaried customers reported GNPA of 1.49% compared with 1.87% for self-employed borrowers. The company set aside 15.03 crores in provisions during FY26, against 12.38 crores the year before.

The collection architecture deserves credit for these outcomes. The Companys EMI collection mechanism is highly digitized, with around 97% of collections being received through electronic/digital modes, ensuring that repayments remain largely automated, seamless, and frictionless. The DPD-based escalation framework - from soft calls on Day 1, field visits from Day 31, legal action from Day 90+ - is structured, systematic, and technology-enabled through the companys ERP platform geo-tagged field visit tracking and robotic call automation.

Average Loan-to-Value (LTV) was maintained at ~48% as of March 2026. This conservative LTV - approximately 50% against the book value of underlying property - provides a substantial collateral buffer in the event of borrower stress, and is a structural credit enhancement that distinguishes SRGHFL from segments with higher LTV exposure.

Key Ratios & Change in Net Worth:

Ratios	FY26	FY25
Net Interest Income to average loans	10.91%	11.03%
Average Return on Equity	11.58%	11.52%
CRAR	38.62%	47.75%
Tier-I	38.20%	47.23%
Tier-II	0.42%	0.52%
Gross NPA	1.77%	1.84%
Net NPA	0.65%	0.61%
Provision Coverage Ratio	81.42%	88.56%
Basic EPS (in ?)	20.71	17.45
Interest Coverage Ratio	1.52	1.48
Debt Equity Ratio	2.89	2.21
Net Profit Margin %	16.27%	15.78%
Cost to Income	64.56%	65.78%
Opex to Avg Asset	7.71%	7.90%
Return to Avg Asset	3.18%	3.17%
Operating Profit Margin (%)	60.39%	58.65%

Return on Net Worth

Ratios	Amount (? In Cr.)	% Growth
FY26	296.91	12.49%
FY25	263.95	65.31%

6. AUM GROWTH AND DISBURSEMENTS: THE ARCHITECTURE OF SCALE

The AUM trajectory of SRG Housing Finance is one of the more compelling stories in the small HFC segment. The book has grown to approximately 1,042.15 crores by March 2026 - a CAGR of approximately 32% from FY17 to FY26. This is not the growth of a company riding a sector tailwind; it is the growth of a company that has built a scalable, repeatable model in difficult markets.

AUM Trajectory

Quarters (? Cr)	FY26	FY25	Y-O-Y
Q1	795.39	629.60	26.33%
Q2	866.64	650.56	33.21%
Q3	943.93	707.47	33.42%
Q4	1,042.15	759.36	37.24%

Disbursement

Quarters (? Cr)	FY26	FY25	Y-O-Y
Q1	80	44.57	79.49%
Q2	116.59	62.96	85.18%
Q3	107.34	90.95	18.02%
Q4	139.61	106.48	31.11%
Total	443.54	304.96	45.44%

Particulars

Particulars	Housing Loans (HL)	Loan Against Property (LAP)
Average Ticket Size (? Lakh)	16.99	10.69
Average LTV (%)	53.51%	47.40%
Average Tenure (Years)	8	7

The product mix has been steady: housing loans constituted 71.99% of AUM (750.24 crores) and LAP 28.01% (291.91 crores) in FY26, virtually unchanged from Q3FY25 (72% housing, 28% LAP). The customer mix shows a slight increase in the share of self-employed borrowers at 74.49%. This reflects a deliberate strategic choice: self-employed borrowers with established businesses - typically five or more years of operation - represent a more stable credit risk in SRGHFLs target segment than the available salaried pool. In rural and semi-urban geographies, salaried employment is predominantly low-wage and subject to sudden job transitions that can create repayment disruption. A business owner in the same geography, whose livelihood is rooted in the local economy, provides a more durable income base for long-tenure housing EMIs. The numbers bear this out: self-employed GNPA at 1.87% is contained and well within plan.

Geographic diversification continued through the year. The share of Others (Madhya Pradesh, Maharashtra, Karnataka, Andhra Pradesh) in the loan book grew from 16.42% in Q4FY25 to 23.17% in Q4FY26, as these newer geographies matured and the branch networks expanded. This diversification reduces concentration in Rajasthan (36.90%) and Gujarat (39.93%), though both remain core markets.

7.1 Capital Adequacy: A Buffer That Has Been Earned, Not Inherited

SRGHFL enters FY27 with a Capital Adequacy Ratio of approximately 38.62% as of March 31, 2026, comprising 38.20% Tier I capital and 0.42% Tier II. This represents a decline from the 47.75% reported at March 31, 2025, but the trajectory is one of rational utilization of capital for growth rather than capital deterioration. The FY25 end CAR was unusually high owing to the preferential equity raise in March 2025 (13.68 lakh equity shares at ? 365 per share), which expanded the net worth, which stood at ? 296.91 crores as of March 31, 2026. As this capital has been deployed into loan assets through FY26, the CAR has normalized to levels still comfortably above the regulatory minimum of 15%.

7.2 Borrowing Mix and Lender Relationships:

Lender Category	Share (FY26)	Representative Lenders
Banks & NHB (combined)	53.26%	SBI, UCO, Union Bank, IOB, HDFC, Axis, IDFC First, Federal, Bandhan, DCB, Saraswat Bank, etc.
NBFCs / Financial Institutions	38.72%	Bajaj Finance, LIC Housing, TATA Capital, Cholamandalam, Shriram Housing, Poonawalla, Sundaram, Hero Housing, etc.
Non-Convertible Debentures (NCDs)	8.02%	Private placement; new issuance of ? 26 Crore in Q3FY26; ? 50 Crore in Q2FY26

SRGHFLs borrowing profile spans 36 active relationships - public sector banks, private banks, small finance banks, Cooperative banks, HFCs, NBFCs, and the capital markets. No single lender dominates the book. That breadth is itself a form of risk management.

Two things changed in FY26. After a gap of nearly five years, the company returned to the NCD market - twice, in August and October. The market absorbed both issuances. For a company that had funded its growth entirely through bank lines through much of the last half-decade, the return to public debt markets is a signal worth noting: the capital markets are paying attention. As of March 31, 2026, secured term loans accounted for 90% of total borrowings, with NCDs at 8% - a mix that will shift as the capital markets relationship deepens.

Net worth is 296.91 crores as of March 31, 2026. The equity base has been actively managed through a combination of retained earnings and strategic equity raises that have maintained the promoter stake at 59.03% even as external capital has been brought in.

The Acuite credit rating upgrade in March 2026 - from ACUITE BBB+ Positive to ACUITE A- Stable - is a significant milestone that will have direct implications for borrowing costs in FY27. The upgrade reflects the rating agencys assessment of SRGHFLs strengthened financial profile, improved asset quality, stable profitability, and strong capitalisation. The withdrawal of CARE rating and consolidation of the rating relationship with Acuite represents a strategic rationalization of the credit profile management.

The other change is quieter but perhaps more telling. Saraswat Bank, NKGSB Bank, and The Greater Bank - co-operative banks, all of them - appear on the lender list for the first time. They operate in the same geographies, serve broadly the same communities, and carry the same instinctive understanding of informal India that SRGHFL has spent twenty-five years building. That they chose to lend to SRGHFL says something about how the institution is perceived from the outside.

The Acuite upgrade to A- Stable in March 2026 - covering a proposed NCD program and bank loan facility - is the balance sheet development that will matter most in the years ahead. A better rating means cheaper money. Cheaper money, at the ticket sizes SRGHFL writes, moves the needle on margins in ways that compound quietly but persistently into FY27 and beyond.

Liquidity Position & Technology

7.3 Liquidity Position:

Cash and bank balances stood at 6.8 crores. Investments in bonds, mutual funds, and fixed deposits added 72.9 crores. Unutilized CC and OD limits contributed 3.5 crores. Undrawn sanctions - facilities where lenders have already committed but capital has not yet been drawn - stood at 61.5 crores. In aggregate, the company had 144.7 crores of liquid or immediately accessible resources as of the balance sheet date, equivalent to nearly 14% of its AUM.

The ALM profile reinforces the picture - no cumulative mismatches in the any bucket indicate no refinancing stress on the horizon.

Perhaps the more telling data point is behavioral rather than structural: during the year, the company made ahead-of-due-date payments on outstanding NCDs. In a market where lenders watch repayment discipline as closely as they watch credit ratings, this is not a small signal. It tells the 36 banks, NBFCs, and capital market participants in SRGHFLs lender universe something that no balance sheet ratio can fully capture - that this is a borrower that pays when it says it will, and sometimes before.

8. TECHNOLOGY: THE INVISIBLE ENGINE

There is a quiet but consequential piece of work sitting at the heart of SRG Housing Finance that rarely gets called out in analyst notes. In 2019, the company undertook a business process re-engineering program - internally called SRG SRAJAN - that standardized how every loan, from origination to closure, would be executed across the organization. Clear SOPs, defined workflows, and a disciplined process architecture built around their in-house LOS, LMS, and collection management systems. No fancy product name, no third-party platform - just a homegrown technology stack and the organizational discipline to use it consistently.

The architecture choice is telling. The in-house platform is mobile-first and offline-capable - and in rural Rajasthan or tribal Banswara, that is not a feature, it is a survival requirement. Connectivity in these geographies is unreliable at best. A system that demands live internet to complete a personal discussion or validate a KYC document will simply not work in the field. The outcomes - a 15-minute application completion and sub-3-day approvals for creditworthy borrowers - are a direct consequence of getting both the process and the technology right together.

The collection module deserves particular mention. In FY26, SRGHFL meaningfully upgraded its collection infrastructure - introducing AI-powered voice calls for proactive borrower outreach and a WhatsApp chatbot for repayment reminders, layered on top of the existing DPD-based pool allocation and field collection tooling. These are unglamorous additions, but they are the machinery that keeps a rural portfolio clean.

97% of SRGHFLs borrowers pay their EMIs through electronic modes - a number that is, frankly, extraordinary given the customer profile being served. It is not purely a credit underwriting story. Process discipline, the right tooling, and the deliberate use of channels that borrowers actually use in their daily lives deserve equal credit.

Anyone who has watched housing finance companies scale - and stumble - knows that the ones who survive rapid AUM growth are those who built the operational backbone before they needed it, not after.

9. HUMAN CAPITAL: THE 980+ PEOPLE WHO MAKE IT REAL

Housing finance is a relationship business, and in the informal economy of rural India, it is a trust business. The 980+ employees of SRGHFL - spread across 96 branches in seven states - are the primary bearers of this trust. The companys ability to appraise informal income, build relationships with local realtors and community networks, and collect in communities where legal enforcement is slow, all depend on people who understand these markets from the inside.

SRG Housing Finance was founded in 1999 by Vinod Kumar Jain - a first-generation entrepreneur whose conviction in the creditworthiness of Indias informal economy preceded both the policy frameworks and the institutional appetite that would eventually follow. More than two decades later, that conviction has been institutionalized: the companys approach to credit, collections, and community engagement carries the founders imprint at every level.

Archie Jain, who joined the business 7 years ago and now serves as CEO, brings a fresh lens to the same fundamental belief - that digital technology and rigorous processes can dramatically scale what was once a deeply relationship-driven model without losing the human insight at its core. Archies recognition as ABP News BFSIs Young Achiever of the Year is a reflection of the impact this leadership continuity has had on the companys trajectory.

Ashok Modi has been CFO since 2012 - through the lean years, the listing, and now the 1,000 crores AUM milestone. That kind of institutional memory is not easily replaced, and in a sector where financial discipline separates the scalable from the stumbling, it has been worth more than any single quarterly number.

With Sunaina Nagar back at the helm of Treasury, FY26 marked a year of quiet but significant progress on the funding side. An Acuite upgrade from BBB+ to A-, a successful return to the NCD market after nearly five years, and easing borrowing costs collectively point to a liability franchise that is steadily earning greater market confidence. Treasury is a function where progress is measured not by visibility, but by outcomes - and the outcomes were hard to miss.

The broader leadership team has been assembled with deliberate intent. Mr. Ramrathinam, Chief Business Officer, brings 34 years of experience across banks, NBFCs, and housing finance. Mr. Praphull Dwivedi, Head of Technology, drives the companys digital infrastructure with 28 years of experience in program management and product development. Mr. Ashish Kothari, VP Operations (PGDM, IIM Kozhikode), keeps the operational machinery running across 96 branches with the rigor that distributed lending demands. Mr. Georgie Alexander leads the National Credit function, bringing 15 years of deep underwriting experience to a team that collectively ensures SRGHFLs credit standards travel intact across every branch and geography. Divya Kothari, Company Secretary, ensures the pace of growth never outruns regulatory compliance. CCO Vipin Saxena, a retired SBI General Manager, brings the compliance DNA of 37 years in institutional banking. The HR function, led by Shubham Katta, has built the people framework for an organization where keeping good people is, if anything, harder than finding them.

10. STRATEGIC OUTLOOK: THE ROAD TO 2,000 CRORE AUM

The companys strategic direction for the medium term - the next 24 to 36 months - can be distilled into four vectors: geographic deepening, product discipline, funding diversification, and technology maturation.

Geographic deepening means our strategy is centered on improving the efficiency and productivity of our existing branch network through deeper market penetration, enhanced customer engagement, and higher business generation across our established geographies, while continuing to strengthen our presence in Karnataka and Andhra Pradesh. The recent entry into four additional southern markets is a bet on the underserved rural credit markets of peninsular India, which have seen rapid income growth but remain significantly underpenetrated by organized housing finance.

Product discipline means maintaining focus on the segment where SRGHFL has a genuine competitive advantage - self-employed borrowers, rural & semi urban geographies, and New-to-Credit households. The average ticket size of 12.77 lakh and the 94.07% rural book are not constraints; they are the deliberate architecture of a company that has chosen its battlefield carefully.

Funding diversification - particularly the Acuite upgrade that opens the door to A- rated bond issuances - is the lever that could most meaningfully compress funding costs. The transition from a 10.95% borrowing cost range to something in the mid 9% range would, other things equal, expand NIM and drive a step-function improvement in profitability. This is not an imminent event, but it is the direction of travel.

Technology maturation - the continued enhancement of the SRAJANs technology architecture, the use of data analytics for early warning signals, the possible integration of bureau and alternative data sources for credit scoring - is the long-game investment. The companys vision for a credit model built on population segmentation and location-specific risk policies, rather than generic bureau scores, is differentiated and, if executed well, defensible.

11. ESG AND SOCIAL IMPACT: THE BALANCE SHEET YOU CANT AUDIT

There is a balance sheet that does not appear in audited financials but is equally real: the social balance sheet of a company that has, over 25 years, enabled thousands of families in rural Rajasthan, Gujarat, Madhya Pradesh, and beyond to move from renting to owning. Homeownership is the primary wealth creation vehicle for the Indian lower-middle class; it is the collateral against which future loans are taken, the inheritance that changes intergenerational trajectories, the anchor that reduces migration and provides family stability.

SRGHFLs customer profile makes the social impact sharper. Over 95% of cases involve women as co-borrowers - a deliberate policy that builds financial identities for women in communities where formal credit has historically been a male preserve. The average household income of the target customer is approximately ?30,000 per month - sufficient to service a housing loan, sufficient to aspire to ownership, but not sufficient to pass-through the filters of most organized lenders.

Environmental governance considerations - while not yet a material operational concern for a secured housing loan book - are being built into the framework. Home loans to rural & semi-urban borrowers carry indirect environmental exposure through the borrowers agricultural and informal business livelihoods. Climate risk is on the radar of thoughtful management teams in housing finance, and SRGHFL is no exception.

12. REGULATORY ENVIRONMENT: THE FRAMEWORK HAS TIGHTENED, AND SRGHFL HAS KEPT PACE

The regulatory landscape for housing finance companies is, by any objective measure, more structured and demanding today than it was five years ago. The National Housing Bank continues to supervise HFCs and provides refinance, alongside the RBIs overarching regulatory framework. Capital adequacy requirements of a minimum CRAR of 15%, the housing loan requirements, the limits on LAP concentration, and the increasingly stringent asset classification norms under the IRAC framework have all been absorbed into SRGHFLs operating model.

The SARFAESI Act designation - which SRGHFL received in 2016 as a Financial Institution under Ministry of Finance notification - is an important operational tool. It enables the company to initiate secured asset enforcement proceedings without going through the civil court system, which dramatically reduces the time and cost of recovery in NPA accounts. What matters, from a credit standpoint, is that SARFAESI applies - and that is a material enhancement in a segment where enforcement has historically been the weak link.

SRGHFL has maintained a consistent regulatory compliance track record. The Company undertakes periodic audits, updates internal policies in line with regulatory changes, and conducts regular training to ensure compliance currency across the organization.

13. RISK: WHAT THE BUSINESS CARRIES, AND WHAT COULD YET GO WRONG

13.1 The Architecture of Risk Management: Lending Where Others Wont

The risk management philosophy at SRGHFL is perhaps best summarized by a single observation: the companys customers are people whom most financial institutions have, at some point, decided not to serve. This is not accidental. It is a deliberate policy choice, and it comes with a distinct risk management architecture that is worth examining carefully.

The credit risk framework is built around three non-standard elements. First, location-based collateral and credit policy - the companys underwriting policies are tailored to the specific population dynamics, property market conditions, and income characteristics of each of its 96 branch catchment areas. Each geography is underwritten on its own merits. Second, extensive personal diligence - with geo-tagged mobile-based PDDS and field officer visits, the company builds a credit view on borrowers that no bureau score can replicate. Third, population segmentation-based risk management - the company tracks NPA trends not just by product and geography but by demographic cohort, enabling early identification of stress pockets.

As noted in the asset quality section, the portfolio-level NPA outcomes validate this framework. GNPA of 1.77% with an LTV of approximately 48% means that the collateral coverage is substantial and recoveries, when they do occur through SARFAESI proceedings, are likely to be meaningful.

Market risk is managed through fixed-rate loan pricing that embeds a risk premium above the borrowing cost, insulating income from short-term rate volatility. Geographic concentration risk (Rajasthan + Gujarat accounting for approximately 77% of the book) is being actively reduced through expansion into Maharashtra and the southern states.

Operational risk is the price of ambition. A company that lends where others wont - in the tribal belts of Rajasthan, the semi-urban clusters of Gujarat, the emerging markets of peninsular India - operates in conditions that stress-test every process, every person, and every system it has. SRGHFL manages this through a combination of technology discipline and human accountability: the SRAJAN IT program creates a digital audit trail across the entire credit and collection lifecycle, eliminating the discretion that is the usual entry point for operational failure; internal and external audits provide the independent check that no self-reporting system can substitute; and a structured training framework ensures that the Relationship Manager in Banswara applies the same credit standards as the one in Mysuru, even if the borrower profiles look nothing alike. The result is not a zero-risk operation - that is not possible at this scale and in these geographies - but it is one where operational risk is understood, tracked, and actively managed rather than assumed away.

Regulatory risk in the HFC space is no longer a background concern - it is a front-of-mind operating reality. The transfer of supervisory oversight from NHB to RBI has fundamentally redrawn the compliance landscape: capital adequacy norms, liquidity requirements, asset classification standards, and reporting obligations have all been tightened, and the direction of travel is toward greater rigor, not less. For a smaller HFC, the compliance burden is disproportionate - the same regulatory apparatus that a large HFC absorbs across hundreds of compliance officers - lands on a leaner team with a wider geographic spread.

SRGHFL has navigated this transition without a stumble. Its capital adequacy ratio of 38.62% sits more than double the regulatory minimum. Its asset classification is current. The voluntary consolidation of its rating relationship - withdrawing the CARE rating in March 2026 and committing fully to the Acuite framework, which promptly delivered an upgrade to A- Stable - is not the behavior of a company managing its regulatory and credit profile reactively. It is the behavior of a company that is ahead of the curve, and intends to stay there.

13.2 What Investors Should Watch: An Honest Accounting

An MDA that does not identify risks is an advertisement, not an analysis. With that in mind, here is an articulation of what investors and stakeholders should monitor.

Geographic concentration remains a key portfolio risk. With AUM in Gujarat (39.93%) and Rajasthan (36.90%), any state-specific shock - a drought in Rajasthans tribal belt, a real estate price correction in Gujarats tier-2 towns, a localized employment disruption - could generate elevated delinquencies. The ongoing expansion into Maharashtra, Karnataka, and Andhra Pradesh is the correct structural response, but diversification at this scale takes time to materialize in portfolio terms.

The informal income segment carries its own risk profile. SRGHFLs borrowers run businesses whose cash flows are not fully documented, are sensitive to commodity prices, local demand conditions, and occasionally to events as localized as a disrupted trade cycle. Historical episodes of economic shock serve as a reminder that informal economy disruptions can be sudden and concentrated. The relatively low average ticket size (12.77 lakh) and conservative LTV (48.16%) provide meaningful buffers, and the companys underwriting depth - built on geo-tagged personal diligence rather than bureau scores alone - is specifically designed to manage this risk.

The West Asia geopolitical environment warrants specific mention. A meaningful proportion of SRGHFLs borrower base in Rajasthan and Gujarat has livelihood connections to Gulf remittances and trade-linked activity. Prolonged conflict or economic disruption in the region could translate into income pressure for these borrowers, with potential implications for collection efficiency and delinquency in the affected pockets. Management monitors remittance-linked geographies at a granular level and has the field capability to respond with proactive engagement when early stress signals emerge.

Cost-to-Income ratio compression is a multi-year challenge. The current 64% ratio reflects the investment phase of a rapidly expanding branch network. The question is whether operational leverage will materialize as branches mature - specifically, whether the newer geographies will achieve disbursement velocities comparable to the established Rajasthan and Gujarat clusters. The FY26 data suggests the answer is a qualified yes, but the proof will be in the FY27 and FY28 numbers.

For most lenders, a falling interest rate environment is a mixed blessing - what they gain on demand, they give back on margins. SRGHFLs position is structurally different. The company lends at fixed rates and borrows at floating. In a declining rate cycle, that is an enviable place to be: funding costs drift down with the market, while the yield on the existing book holds. The result is spread expansion rather than compression - and FY26, with 125 basis points of RBI cuts transmitted progressively through the year, was precisely that kind of year.

The risk, therefore, runs in the other direction. If the rate cycle turns - and cycles always turn - borrowing costs will rise before fixed-rate lending yields can be reset. At NIMs of approximately 11%, SRGHFL carries enough cushion to absorb a moderate tightening without structural damage. But the direction of the cycle in FY27 and beyond is worth watching. The company has benefited from the tailwind. It should not assume the tailwind is permanent.

The promoter holding pattern reflects a calibrated approach toward balancing ownership and long-term growth capital requirements. While Promoter holding has moderated to 59.03% over three years. The dilution has been used to fund growth. That is the whole story. Importantly, the March 2025 capital raise of 49.93 crores at 365 per share indicates the promoter familys confidence in pursuing growth through market-aligned capital infusion, which can be viewed positively from a governance and scalability perspective.

14. What the company has built

Twenty-five years in one market does something to an institution that no strategy document can manufacture. SRGHFL knows western Indias informal economy the way a moneylender knows his lane - not from a credit bureau report, but from 20 thousand field visits, 20 thousand personal discussion notes, and the accumulated judgment of officers who have watched the same borrower through a drought, a wedding, and a GST disruption. That knowledge is the moat. The 94% rural book, the 15-day turnaround, the 97% electronic mode payments - these are the symptoms. The knowledge is the disease, in the best possible sense.

What it hasnt solved yet

Scale is the honest answer. At 1,042 crores, SRGHFL is a well-run small institution. Funding costs, operating leverage, and talent retention all get meaningfully easier at three times this size. The cost-to-income at 64.56% is explainable - small tickets, deep rural geographies, active branch expansion - but explainable is not the same as comfortable. Gujarat and Rajasthan at ~77% of the book is a concentration that any rating analyst will flag, and they are right too. A subset of borrowers in Rajasthan and Gujarat has income linkages to Gulf employment - a risk that is not theoretical; collection patterns in these pockets showed marginal stress during periods of West Asia escalation in FY26.

SWOT Analysis: Where the road ahead leads

The housing shortage is 29-31 million units, 95% of it in EWS and LIG. The government just released ?21,000 crores under PMAY-G in a single year, with Gujarat and Rajasthan on the recipient list. The Acuite upgrade to A- opens the capital markets at a tighter cost. The southern expansion - management has guided 1300-1500 crores AUM in FY27 - begins to address the concentration question. The pipeline is not theoretical. It is being built, borrower by borrower, in postcodes that larger lenders have not yet found worth visiting.

What should keep management honest

Two things. The first is the rate cycle. SRGHFL lends fixed and borrows floating. FY26 - with 125 basis points of RBI cuts - was the ideal environment for that structure. Tailwinds are pleasant until they stop. The second is more structural: digital income verification, account aggregator frameworks, and deepening bank branch penetration are slowly doing to SRGHFLs moat what time does to all moats. The informal income assessment gap that keeps banks out of Salumber or Mayore today will not be the same gap five years from now. Management knows this. The question is whether the company scales fast enough to be a different institution by the time that gap closes.

15. INTERNAL CONTROLS:

SRGHFLs internal control framework covers the full lending lifecycle - from customer sourcing and credit appraisal through legal and technical verification, disbursement, collection, and accounting. Maker-checker controls and defined approval hierarchies operate at each stage.

What has changed in recent years is the proportion of operations that are now system-driven rather than officer-driven. The SRAJAN PROGRAM - geo-tagged personal discussions, automated credit report generation, NACH-based collections, digital execution of agreements with audit trails - reduces the surface area for manual error and, more importantly, for manual override. In a business where the borrower has no salary slip and the collateral is a house in a village that no municipal database has fully mapped.

Based on audits conducted and reviews carried out during the year, management is satisfied that internal controls are adequate and operating effectively.

16. SEGMENT REPORTING: ONE BUSINESS, DELIBERATELY

SRGHFL does one thing. It lends against residential property to borrowers who cannot access formal credit through conventional channels. Everything else - the treasury, the technology, the field operations - exists in service of that single activity. There are, accordingly, no separate reportable segments under IAS 108.

17. CONCLUSION: 1,000 CRORE BEHIND. THE HARDER WORK BEGINS NOW

The best financial companies are the ones that look ordinary until you look very carefully. What it has is something harder to replicate and arguably more durable: 25 years of deep market knowledge, a technology-enabled operating model for informal India, a consistent track record of asset quality discipline in a difficult market, and a management team that has stayed the course through multiple cycles.

FY 2025-26 has been the year when several of the companys long-building investments, in the southern expansion, in the technology platform, in the fundraising infrastructure - began to crystallize into visible financial outcomes. Revenue of ?199.66 crores. PAT of ?32.49 crores. AUM of ?1,042.15 crores. RoAA of 3.18%. A credit rating upgrade to A- Stable. These are not small milestones for a company headquartered in Udaipur with a ~?390 crores (as on March 31, 2026) market capitalization.

Investors who look past the size - the ?1,000+ crores AUM is still modest against mid-sized peers - and into the operating model will find a company that is building something genuinely valuable in a market that genuinely needs it. That, in the end, is what makes SRGHFL interesting not just as a financial instrument, but as a financial institution.