Sundaram Finance (SUF IN) – Q2FY26 Result Update – Disbursements pick up; asset quality weakens – HOLD
Published on 04 Nov 2025
Q2 has seen a pick-up in disbursement growth (+18% YoY) post GST rationalization. While Q2 AUM grew 15% YoY, we build a higher run-rate of 16% for FY26, anticipating a pick-up in economic activity. Calculated NIM improved 9 bps QoQ to 5.47%; we expect an improvement in FY26 supported by a lower CoF. Asset quality trend deteriorated in the quarter (GS3/NS3 at 2.03%/ 1.13%) due to cash-flow pressures in the MSME segment; however, company expects an improvement post GST reform and a positive monsoon. We marginally tweak our estimates and value SUF’s standalone business at Rs 4,049 (2.8x Sep-27 ABV) and assign a value of Rs 951 to subsidiaries with a 20% holding company discount to arrive at a TP of Rs 5,000. While outlook on growth is improving, high credit costs continue to be a drag. Maintain HOLD rating as the stock price captures all the positives.
