SG Finserv , a financial services company, has announced the issuance of commercial papers (CPs) worth Rs 50 crore. This move highlights the company's strategy to raise short-term funds, potentially to meet working capital requirements or other immediate financial needs.

Key Details of the Commercial Paper Issue

Significance of the Issue

The commercial paper issuance by SG Finserv carries several noteworthy aspects:

1. Credit Rating: The [ICRA] A1+ rating assigned to the commercial papers indicates the highest level of safety regarding timely servicing of financial obligations. This rating suggests a strong credit profile for SG Finserv, which may help in attracting investors.

2. Investor Confidence: The subscription by Quant Mutual Fund for their Liquid Plan demonstrates institutional investor interest in SG Finserv's short-term debt instruments.

3. Market Listing: The company plans to list these commercial papers on the BSE Limited, which may provide liquidity to the investors.

4. Interest Rate: The 7.50% interest rate for a 91-day period reflects the current short-term borrowing costs for companies with strong credit ratings in the Indian financial market.

SG Finserv (CIN: L64990DL1994PLC057941) is headquartered in Delhi, with its corporate office in Ghaziabad, Uttar Pradesh. The company's move to issue commercial papers aligns with common practices in the financial services sector for managing short-term funding needs efficiently.

As per the regulatory filing, this issuance complies with the Securities and Exchange Board of India (SEBI) Listing Obligations and Disclosure Requirements Regulations, 2015, ensuring transparency in the company's financial activities.

Investors and market participants may monitor how SG Finserv utilizes these funds and its impact on the company's short-term financial position. The placement of these commercial papers may also indicate the company's ability to access short-term funding at competitive rates, which is crucial for financial services firms in managing their liquidity and cash flow requirements.

SG Finserv Limited, a key player in MSME supply chain financing, has reported a 15% quarter-on-quarter growth in its loan book, reaching INR 2,878.00 crores. This growth has led to a 14% increase in Profit Before Tax (PBT) and a 16% rise in net profit for the quarter.

Financial Performance and Outlook

The company has maintained its zero Non-Performing Assets (NPAs) status after disbursing INR 52,000.00 crores since its inception 36 months ago. However, SG Finserv has revised its Profit After Tax (PAT) guidance downward from INR 150.00 crores to INR 120.00-125.00 crores, citing macroeconomic slowdown affecting customer businesses.

Despite the revised guidance, the management expects a 10% quarter-on-quarter earnings growth going forward. The company aims to achieve an exit loan book of around INR 3,500.00 crores, with a target to reach INR 6,000.00 crores.

Leadership Transition

SG Finserv announced significant changes in its top management:

• CEO Sorabh Dhawan and CFO/COO Sahil Sikka have resigned to pursue new opportunities.
• Vinay Gupta, a chartered accountant with over 20 years of banking experience, will join as the new CEO in November.
• Sanjay Rajput, currently Head of Finance and Accounts, will take over as CFO.

The company assures a smooth transition, with the outgoing executives staying on for 40-50 days to facilitate the handover process.

Business Strategy and Expansion

SG Finserv continues to focus on supply chain financing, serving over 1,000 MSMEs with anchor partnerships including Tata Motors, Mahindra & Mahindra, and Tata Steel. The company is exploring expansion into retailer financing under its existing distributor networks, which is expected to improve Net Interest Margins (NIMs) by 50 to 100 basis points.

Sector-wise Exposure

The company's loan book is diversified across three main sectors:

Future Outlook

Despite the short-term challenges, SG Finserv remains optimistic about its long-term prospects. The company is targeting a Return on Equity (ROE) of above 15% as a first milestone, with plans to eventually reach 18-19%. This will be achieved through increased leverage and expansion into higher-yield segments like retailer financing.

As the company navigates through this transition period, it remains committed to maintaining its asset quality and prudent risk management practices while pursuing growth opportunities in the evolving supply chain finance landscape.