In 1994, Rajendra Kumar Setia noticed a problem faced by small traders, transporters and self-employed individuals in Rajasthan. Though brimming with ambition, they were all bogged down by the lack of institutional credit. Other borrowing options, few and far between, were quite exploitative.
Setia, a first-generation entrepreneur, decided to fill that void, and founded SK Finance. Now, three decades later, SK Finance has become one of India’s fastest-growing non-banking finance companies (NBFCs) in the vehicle financing segment and the MSME financing segment, with Rs9,515 crore asset under management (AUM), 535 branches and over 10,700 employees. The company today serves over half a million borrowers, predominantly in semi-urban and rural India, and is now headed towards its next major milestone: a Rs2,200 crore initial public offering.
SK Finance caters to the financial requirements of individuals, businesses and enterprises, to provide customised products to meet specific needs of the customers through empathy, trust and technology. The NBFC operates in two primary verticals – vehicle financing and loans to micro, small and medium enterprises (MSMEs). Unlike urban-focussed lenders, SKF has always placed its bets on underserved, informal borrowers in Tiers II, III and beyond, those without credit histories, but with steady incomes and strong intent.
Betting on underserved
In the vehicle finance space, the company focusses predominantly on used vehicles – nearly 77 per cent of its loan book here is for second-hand cars, small commercial vehicles, tractors and two-wheelers. According to a CRISIL report, among the peers considered, for the nine months ended 31 December 2023, the company had the highest used vehicle finance as part of its vehicle financing portfolio. Many of these are bought by first-time owners, who use them to generate income. The company has a secured, granular and retail loan portfolio, covering both new and used vehicles, with the exception of medium and heavy commercial vehicles.
Meanwhile, the MSME lending vertical, launched in 2016, now makes up nearly 19 per cent of AUM. These loans are used to fund working capital for small shop owners, manufacturers and service providers, typically backed by residential or commercial properties. The ticket sizes are often below Rs5 lakh. According to a CRISIL report, SK Finance posted the highest AUM growth among its peers in both segments – 41.07 per cent CAGR in vehicle finance and 80.9 per cent CAGR in MSME finance between 2020-21 and 2022-23.
The secret sauce behind this scale lies in SK’s ground-tested credit philosophy built on the three ‘I’s – income, intent and insurance. “Our first pillar, being income, focusses on lending towards income generating activities of our customers,” explains Rajendra Kumar Setia, MD & CEO. “This helps our credit decision-making process by focussing on the collateral value and income-generating capability of our customers. Our second pillar, intent, is based on evaluating the intent of the customer. The assessment of the customers’ incomes becomes relevant for us to identify their intent to pay through multiple reference checks. Our third pillar, insurance, refers to our underwriting process, whereby our security backed lending acts as ‘insurance’ against potential customer defaults. Our underwriting process is conducted through a dedicated on-ground sales team and credit officers, who independently evaluate each loan application”.
Their underwriting process is about seeing the person beyond the score. SK Finance has merged traditional relationship-based lending with cutting-edge technology. The company has developed what it calls a ‘phygital’ approach – combining physical verification methods through on-ground sales teams with digitalised processes on its information technology platform. This approach helps SK underwrite ‘new-to-credit’ customers effectively. As of December 2023, over 59 per cent of disbursements were made to borrowers with bureau scores above 650, and 32.5 per cent to customers without credit history.
SK has digitised large parts of its operations. From eKYC and paperless underwriting to analytics-backed credit decisioning, the company has built a tech stack that supports scale without sacrificing field insight. By December 2023, 78 per cent of collections were digital, up from 46 per cent in 2020-21, marking a shift in borrower behaviour.
Reaching the ‘last mile’
SK Finance is built on an extensive distribution network that brings financial services to India’s doorstep. With 535 branches in 11 states and one Union territory, the company maintains a rural-centric hub-and-spoke model, expanding contiguously from its home state of Rajasthan into Gujarat, Madhya Pradesh, Maharashtra, and Punjab. This strategic expansion has been guided by a philosophy of contiguous growth, utilising neighbouring branches to evaluate local credit environments and hiring local staff who understand the catchment area and local market dynamics.
The branch network serves dual purposes: of providing secured business loans to the MSME sector, while the vehicle financing vertical serves customers through the broader network. This dual approach allows the company to maximise its reach while maintaining operational efficiency.
According to the DRHP, SK had the highest disbursement per employee and per branch among peers from 2020-21 to 2022-23. It also ranked second in AUM per employee and branch, a testament to its productivity. This efficiency, paired with deep market penetration, gives the company a sustainable operating edge. The technology infrastructure also includes tools for early warning signals, customer retention triggers and portfolio monitoring. Internal systems are now robust enough to support higher volumes with limited marginal cost increases.
Growth trajectory
The company’s financial performance tells a compelling story of consistent growth and operational excellence. For 2024-25, the company reported total income of Rs2,386.38 crore, marking a significant 32.73 per cent increase from Rs1,797.95 crore in 2023-24. Net profit surged to Rs379.67 crore, up 21.72 per cent from Rs311.92 crore in the previous year. SKF’s quarterly performance has been equally impressive. In Q4 2024-25, its total income rose to Rs646.37 crore, up 33.27 per cent from Rs485.02 crore in Q4 2023-24. Net profit for the quarter surged to Rs141.62 crore, representing a remarkable 49.35 per cent increase from Rs94.82 crore in Q4 2023-24.
SK Finance has built a diversified funding strategy that provides both cost-effective capital and stability. The company has access to funds from 61 lenders, including nine public sector banks, 25 private banks, four mutual funds and 23 financial institutions as of 31 December 2023. The company raises debt through various instruments including term loans from public and private sector banks, non-convertible debentures, working capital demand loans, overdrafts against fixed deposits, and external commercial borrowings. This diversified funding approach allows the company to access cost-effective and long-term financing while ensuring capital availability to meet business requirements.
The key management personnel and senior management team have been with the company for an average of over seven years, with an average experience of 18 years in the industry. This stability has been crucial in navigating the challenges of the NBFC sector and building long-term relationships with customers and stakeholders.
Setia has led the company for the past 31 years. Over the past decade, SK has attracted a formidable roster of investors. TPG Growth, Norwest Venture Partners, Evolvence, 360 One, and even MIT’s endowment fund have backed the company. In 2023-24, it raised Rs1,328 crore across primary and secondary deals to shore up growth and prepare for the IPO.
TPG, one of SK’s earliest backers, is confident about the NBFC’s trajectory. “We are pleased to see the significant progress being made by SK Finance since our initial investment in 2018, with the company today emerging as a scaled player in the used vehicle and MSME lending space,” informs Simit Batra, principal, TPG Growth. “In addition to developing a robust operational model, the company’s tech supported business has delivered improved efficiencies”.
The upcoming issue consists of a fresh issue of Rs500 crore and an offer-for-sale of Rs1,700 crore. Setia and his HUF will offload Rs200 crore worth of shares, while Norwest and TPG will each sell Rs700 crore and Evolvence will exit Rs100 crore. The proceeds from the fresh issue will be used to bolster capital adequacy and support future lending. Book running lead managers include Kotak Mahindra Capital, Jefferies, Motilal Oswal and Nomura.
SK’s roadmap now includes deeper penetration into existing geographies, with potential foray into Karnataka and other southern states. The company also plans to expand MSME lending to more branches and explore adjacent opportunities such as insurance distribution to improve customer lifetime value.
According to the CRISIL Report, the overall vehicle finance credit is expected to grow at a CAGR of 16-18 per cent from 2022-23 to 2026-27 to reach about Rs21 lakh crore. The company aims to leverage this position in continuing to grow their vehicle financing vertical.
The strategy remains rooted in its core principles: secured lending, granular portfolios, tech-enabled processes and field-first culture. Setia and his team remain cautious of over-diversification, preferring to grow in markets where they can build community-level trust.