With a market capitalisation of ₹455.00 crores, SRG Housing operates primarily in Rajasthan's housing finance segment. The company's Q2 performance showcased sequential acceleration across key metrics, yet the stock's bearish technical trend and expensive valuation grade have prompted a cautious stance from market participants.
The quarter's standout performance reflects SRG Housing's ability to scale operations whilst maintaining profitability discipline. Net sales reached ₹44.93 crores in Q2 FY26, representing a 14.71% sequential increase and 30.95% year-on-year growth. This marks the company's highest-ever quarterly revenue, underscoring strong demand for housing finance products in its core Rajasthan market.
Quarterly Performance Trajectory: Consistent Momentum Building
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 | 44.93 | +14.71% | 8.25 | +21.71% | 18.36% |
| Jun'25 | 39.17 | -2.20% | 6.78 | +9.53% | 17.31% |
| Mar'25 | 40.05 | +8.13% | 6.19 | +7.84% | 15.46% |
| Dec'24 | 37.04 | +7.96% | 5.74 | -13.03% | 15.50% |
| Sep'24 | 34.31 | +7.42% | 6.60 | +12.63% | 19.24% |
| Jun'24 | 31.94 | -2.05% | 5.86 | -3.78% | 18.35% |
| Mar'24 | 32.61 | — | 6.09 | — | 18.68% |
The quarterly trend reveals a company hitting its stride operationally. Over the past seven quarters, SRG Housing has demonstrated consistent revenue expansion, with only two quarters showing sequential declines. More importantly, the company achieved its highest-ever quarterly profit in Q2 FY26, surpassing the previous peak of ₹6.78 crores recorded just one quarter earlier.
Financial Performance: Margin Expansion Drives Bottom-Line Growth
SRG Housing's Q2 FY26 results showcased impressive margin expansion alongside revenue growth. Net interest income reached ₹44.93 crores, up from ₹39.17 crores in Q1 FY26, whilst operating profit before depreciation, interest, and tax (PBDIT) excluding other income climbed to ₹29.29 crores from ₹25.05 crores, representing a 16.93% sequential increase.
The company's PAT margin improved significantly to 18.36% in Q2 FY26 from 17.31% in the previous quarter, reflecting better operational efficiency and cost management. This margin expansion proved particularly noteworthy given the 8.06% sequential increase in interest costs to ₹18.10 crores, suggesting that SRG Housing successfully passed on higher borrowing costs to customers whilst maintaining loan book quality.
Employee costs rose 9.75% quarter-on-quarter to ₹12.72 crores, indicating controlled expansion in the workforce to support business growth. The operating profit margin (excluding other income) expanded 124 basis points to 65.19%, demonstrating operating leverage as the company scales its loan portfolio.
Quality of Earnings: Tax Rate Normalisation
A critical observation in Q2 FY26 was the tax rate normalisation to 20.06% from an unusually low 13.63% in Q1 FY26. This brought the effective tax rate closer to historical levels (19-20% range), suggesting that Q1's lower tax rate was an aberration. The normalised tax rate provides a clearer picture of sustainable profitability, with the company still delivering robust bottom-line growth despite the higher tax burden.
Operational Challenges: Return on Equity Below Industry Leaders
Whilst SRG Housing's quarterly performance impressed, the company's return on equity (ROE) of 14.64% on average basis reveals capital efficiency challenges compared to industry benchmarks. Higher ROE indicates superior capital efficiency and profitability, and SRG Housing's metric suggests room for improvement in generating returns for shareholders relative to the equity capital deployed.
The company's average debt-to-equity ratio of 2.21 times indicates moderate leverage for a housing finance company, though this remains within acceptable industry norms. The balance sheet shows shareholder funds of ₹263.95 crores as of March 2025, up substantially from ₹159.67 crores in the previous year, reflecting capital infusion and retained earnings accumulation.
⚠️ Key Concern: SRG Housing's ROE of 14.64% lags behind stronger housing finance peers such as Can Fin Homes (17.03%) and Home First Finance (12.23%), indicating that the company generates lower returns on shareholder capital despite its growth trajectory. This metric requires close monitoring as it directly impacts long-term shareholder value creation.
The company's loan book growth has been impressive, with current assets reaching ₹82.95 crores in FY25, nearly doubling from ₹41.93 crores in FY24. However, current liabilities also expanded to ₹606.41 crores from ₹512.35 crores, reflecting increased borrowings to fund loan disbursements. This expansion strategy, whilst driving topline growth, requires careful asset quality management to ensure sustainable profitability.
Asset Quality: Limited Disclosure Raises Questions
A notable gap in SRG Housing's disclosure framework is the absence of detailed asset quality metrics such as gross and net non-performing assets (GNPA and NNPA). For housing finance companies, asset quality serves as a critical indicator of loan book health and future provisioning requirements. The lack of transparent NPA reporting makes it challenging for investors to assess the sustainability of the company's growth and profitability.
The company's provisioning and write-off policies remain opaque in the available financial statements. Given the regional concentration in Rajasthan and focus on retail housing loans, understanding delinquency trends and collection efficiency becomes paramount for evaluating long-term investment merit.
Industry Context: Underperforming Sector Peers Significantly
SRG Housing's stock performance has diverged sharply from the broader housing finance sector. Over the past year, the stock declined 16.29% whilst the housing finance sector index surged 32.66%, resulting in a staggering 48.95 percentage point underperformance. This divergence suggests company-specific concerns overshadowing the sector's positive momentum.
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| SRG Housing | 17.73 | 1.70 | 14.64% | 2.21 | — |
| Home First Finance | 26.40 | 2.98 | 12.23% | 2.40 | 0.32% |
| Can Fin Homes | 12.72 | 2.15 | 17.03% | 6.61 | 1.36% |
| India Shelter Finance | 20.47 | 3.13 | 13.95% | 1.88 | 0.59% |
| Repco Home Finance | 5.90 | 0.80 | 12.18% | 3.25 | 1.48% |
| GIC Housing Finance | 6.72 | 0.47 | 9.80% | 4.45 | 2.63% |
Relative to peers, SRG Housing trades at a P/E multiple of 17.73 times, higher than the sector median but below premium players like Home First Finance (26.40x). The company's price-to-book value of 1.70 times appears reasonable compared to the peer average of approximately 1.90 times, suggesting the market isn't pricing in a significant premium despite recent operational improvements.
SRG Housing's ROE of 14.64% positions it in the middle of the peer group, outperforming Repco Home Finance (12.18%) and GIC Housing Finance (9.80%) but trailing Can Fin Homes (17.03%). This middling performance on capital efficiency explains the valuation discount relative to higher-quality peers.
Valuation Analysis: Expensive Grade Despite Correction
Despite the stock's 32.70% decline from its 52-week high of ₹414.65, SRG Housing continues to carry an "Expensive" valuation grade. The company's valuation metrics reveal a mixed picture: whilst the P/E ratio of 17.73 times appears reasonable for a growing housing finance company, the EV/EBITDA multiple of 10.17 times and EV/Sales ratio of 6.28 times suggest premium pricing relative to current fundamentals.
The company's valuation grade has fluctuated between "Fair" and "Very Expensive" over recent months, most recently moving from "Very Expensive" to "Expensive" on October 27, 2025. This volatility in valuation assessment reflects the market's struggle to price in the company's growth potential against concerns about sustainability and capital efficiency.
SRG Housing's book value per share stands at ₹168.38, implying the current market price of ₹279.05 trades at a 65.73% premium to book value. For a housing finance company with moderate ROE and no dividend payout (last dividend paid in March 2015), this premium appears difficult to justify purely on fundamental grounds.
"The disconnect between strong quarterly performance and weak stock performance highlights investor concerns about valuation sustainability and the lack of transparent asset quality disclosure."
Shareholding Pattern: Promoter Stake Remains Stable
| Category | Sep'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 59.11% | 59.11% | 59.13% | 64.79% | Flat |
| FII | 0.00% | 0.01% | 0.00% | 0.00% | -0.01% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% | Flat |
| Insurance | 0.00% | 0.00% | 0.00% | 0.00% | Flat |
| Other DII | 0.00% | 0.00% | 0.01% | 0.01% | Flat |
| Non-Institutional | 40.89% | 40.88% | 40.86% | 35.20% | +0.01% |
Promoter holding remained stable at 59.11% in Q2 FY26, unchanged from the previous quarter. Notably, promoter stake declined from 64.79% in December 2024 to 59.13% by March 2025, suggesting a stake dilution event, likely related to equity capital expansion from ₹13.30 crores to ₹15.68 crores during FY25. Importantly, there is no promoter pledging, which removes a key risk factor.
The complete absence of institutional investors—foreign institutional investors (FIIs), mutual funds, and insurance companies—raises concerns about the stock's institutional quality perception. With zero institutional holdings, SRG Housing lacks the stability and credibility that institutional participation typically provides. This absence may contribute to higher volatility and limited research coverage, making the stock less attractive to mainstream investors.
Stock Performance: Severe Underperformance Across Timeframes
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -4.92% | +1.84% | -6.76% |
| 1 Month | -6.78% | +3.06% | -9.84% |
| 3 Months | -10.01% | +5.34% | -15.35% |
| 6 Months | -9.58% | +4.55% | -14.13% |
| YTD | -22.05% | +8.58% | -30.63% |
| 1 Year | -16.29% | +9.20% | -25.49% |
| 2 Years | -1.60% | +30.66% | -32.26% |
| 3 Years | +35.17% | +37.30% | -2.13% |
SRG Housing's stock performance has deteriorated significantly across all recent timeframes. The stock declined 4.92% over the past week, 6.78% over one month, and 10.01% over three months, consistently underperforming the Sensex by double-digit margins. The year-to-date decline of 22.05% against the Sensex's 8.58% gain represents a concerning 30.63 percentage point negative alpha.
The stock's high beta of 1.50 indicates significantly higher volatility than the broader market, amplifying both gains and losses. With a volatility measure of 64.48% over the past year—more than five times the Sensex's 12.33%—the stock falls squarely into the "high risk, low return" category based on risk-adjusted metrics.
Technical indicators paint a uniformly bearish picture. The stock trades below all key moving averages—5-day (₹282.14), 20-day (₹291.15), 50-day (₹295.98), 100-day (₹304.41), and 200-day (₹310.72)—indicating sustained selling pressure. The overall technical trend turned bearish on November 3, 2025, at ₹283.50, with multiple technical indicators including MACD, Bollinger Bands, and KST confirming the negative momentum.
Investment Thesis: Growth Without Quality Recognition
SRG Housing presents a paradoxical investment case: strong operational performance coupled with weak market recognition. The company's Mojo score of 26 out of 100 places it firmly in "Strong Sell" territory, reflecting concerns that extend beyond short-term quarterly results.
The company's "Below Average" quality grade stems from its moderate ROE of 14.64%, high leverage ratio of 2.21 times, and complete absence of institutional holdings. Whilst the 5-year sales growth of 17.56% demonstrates healthy expansion, the quality of that growth remains questionable without transparent asset quality metrics.
Key Strengths & Risk Factors
✅ KEY STRENGTHS
- Strong Revenue Momentum: Net sales grew 30.95% YoY in Q2 FY26, marking the highest quarterly revenue achieved
- Margin Expansion: PAT margin improved 105 bps QoQ to 18.36%, demonstrating operational efficiency gains
- Consistent Profitability: Eight consecutive quarters of positive earnings with improving trajectory
- Regional Focus: Concentrated presence in Rajasthan provides deep market understanding and operational efficiency
- No Promoter Pledging: Zero pledged shares eliminate a key corporate governance risk
- Positive Financial Trend: Recent quarters show accelerating growth across key metrics
- Moderate Leverage: Debt-to-equity ratio of 2.21x remains within acceptable norms for housing finance
⚠️ KEY CONCERNS
- Weak ROE: Average ROE of 14.64% lags industry leaders, indicating suboptimal capital efficiency
- Zero Institutional Holdings: Complete absence of FII, MF, and insurance participation raises quality concerns
- Expensive Valuation: Trading at premium multiples despite below-average quality metrics
- Bearish Technical Trend: Stock below all major moving averages with deteriorating momentum
- High Volatility: Beta of 1.50 and 64.48% volatility create significant risk for investors
- Severe Underperformance: 48.95 percentage point lag versus housing finance sector over one year
- Limited Asset Quality Disclosure: Absence of transparent NPA metrics hampers risk assessment
- No Dividend Policy: Last dividend paid in 2015; no shareholder returns despite profitability
- Micro-Cap Liquidity: ₹455 crore market cap limits institutional interest and trading liquidity
Outlook: What to Watch in Coming Quarters
🟢 POSITIVE CATALYSTS
- Sustained quarterly profit growth above 15-20% levels
- ROE improvement towards 16-18% range through better capital deployment
- Entry of institutional investors (FIIs or mutual funds) providing quality validation
- Transparent disclosure of asset quality metrics and collection efficiency
- Geographic expansion beyond Rajasthan to diversify revenue streams
🔴 RED FLAGS
- Margin compression if interest costs rise faster than lending rates
- Asset quality deterioration leading to higher provisioning requirements
- Further promoter stake reduction without clear strategic rationale
- Continued absence of institutional participation despite operational improvements
- Technical breakdown below ₹267.75 (52-week low) triggering further selling
The immediate outlook for SRG Housing hinges on whether the company can sustain its quarterly momentum whilst addressing fundamental concerns about capital efficiency and transparency. The housing finance sector's positive trajectory provides a favourable backdrop, but company-specific issues require resolution before the stock can re-rate meaningfully.
The Verdict: Strong Operational Performance Cannot Overcome Valuation and Quality Concerns
Score: 26/100
For Fresh Investors: Avoid initiating positions despite strong quarterly results. The combination of expensive valuation (P/E 17.73x), below-average quality metrics (ROE 14.64%), bearish technical trend, and zero institutional holdings creates an unfavourable risk-reward profile. The 48.95 percentage point underperformance versus the housing finance sector over one year signals deep-seated concerns that quarterly improvements have not addressed.
For Existing Holders: Consider reducing exposure or exiting positions. Whilst recent quarterly performance has been encouraging, the stock's inability to gain traction despite operational improvements suggests fundamental scepticism about sustainability. The absence of institutional validation, combined with high volatility (64.48%) and negative alpha across all timeframes, makes this an unsuitable holding for most portfolios. Only investors with very high risk tolerance and long investment horizons should consider holding.
Fair Value Estimate: ₹235-245 range (15-18% downside from current levels), based on peer P/BV multiples of 1.40-1.45x applied to book value of ₹168.38, adjusted for below-average quality metrics.
Note- ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
