In the world of lending, growth and prudence rarely walk hand in hand. Yet, SK Finance Limited seems determined to prove otherwise. The Jaipur-based NBFC, known for its strong presence in vehicle and MSME lending, has clocked an impressive first half in FY 2026 — a period marked by both opportunity and margin pressure.
Riding the Credit BoomSK Finance’s loan book has ballooned 49% YoY, touching ₹ 16,029 crore. This isn’t a one-off spurt. The company has built its strength where others hesitate — semi-urban and rural India.
Its bread and butter?
Used-vehicle financing and MSME loans — segments still underserved by traditional banks but booming with credit demand.
Such rapid expansion shows how deep-rooted distribution and localized underwriting can deliver growth even in tightening liquidity conditions.
Revenue from operations jumped 19.6% YoY to ₹ 1,349 crore, thanks to higher disbursements.
But here’s the flip side — finance costs rose 21%, eating into spreads.
Net Interest Income grew 13%, but the Net Interest Margin fell sharply from 10.5% to 7.9%.
Higher borrowing costs, a competitive lending environment, and limited ability to hike lending rates have all conspired to compress margins — a theme playing out across the NBFC sector.
Despite cost pressure, SK Finance’s Profit After Tax grew 21% YoY to ₹ 179 crore.
How?
Operational discipline.
The company’s cost control, digitisation of collections, and strong recovery mechanism cushioned the hit.
The ROE slipped slightly to 9.8%, but profitability in absolute terms improved.
In other words — even if margins are thinning, the pie itself has gotten much bigger.
Rapid growth often hides bad loans — but not here.
GNPA stands at 4.77% (almost flat YoY) and NNPA at 3.27%.
For an NBFC expanding its loan book by nearly 50%, that stability is noteworthy.
Collateral-backed lending and early delinquency tracking have helped, though asset quality remains higher than that of larger, more diversified peers.
ROA of 2.2% and ROE near 10% position SK Finance among well-managed mid-tier NBFCs.
As its asset base compounds, margins may stabilise and lift these ratios further.
But investors should note — growth can’t indefinitely outrun cost of funds. Future profitability hinges on lowering borrowing costs through securitisation, co-lending, and institutional debt diversification.
Rising Cost of Funds: The biggest headwind; rate hikes continue to pressure NIMs.
Competitive Intensity: NBFCs and fintechs are crowding rural lending.
Regulatory Scrutiny: RBI’s tighter norms on provisioning and leverage could weigh on earnings.
Tier-III & Tier-IV Expansion: Credit penetration in smaller towns is still low.
Digital Underwriting: AI-driven scoring and predictive recovery models can cut NPAs.
MSME Lending: SK’s regional presence positions it perfectly for cluster-based growth.
SK Finance’s H1 FY 2026 report is a mix of strong momentum and prudent execution.
It’s expanding faster than peers, keeping credit quality in check, and digitising its backbone.
However, margin compression due to high borrowing costs is a near-term concern.
For investors in the unlisted space, SK Finance remains a structurally strong growth story — but not a risk-free one. Sustained discipline in underwriting and liability management will be key to long-term value creation.
Bottom Line:
SK Finance is doing what every NBFC dreams of — growing aggressively without losing control.
If it can keep that balance, it’s not just scaling a loan book — it’s compounding trust.
