The Kela Playbook: Two Polar Opposite Turnarounds
Madhusudan Kela built his name on a hard habit. He likes to buy businesses the market has written off, then waits while the profits catch up. His book is full of firms that spent years in the red before the numbers turned. So, when two turnaround stories in his holdings start showing very different kinds of profit, it deserves a closer look.
The first is a supply chain lender he bought into last year, and the other is a Regulatory tech solutions company held through his wife Madhuri Kela. Both have moved from thin or negative profits to eye-catching growth. Both have been re-rated by the market. And both now trade at prices that assume the good run keeps going.
The big question, however, is the same for each stock. Is there still road left on the turnaround, or has the story quietly picked up a red flag that the profit line is hiding? Let us take them one at a time.
#1 SG Finserve: The 17,400% Apollo Ecosystem Lender
A decade ago, SG Finserve was a sleepy outfit called Moongipa Securities. It barely earned anything. In August 2021 the promoters of the APL Apollo group, Rahul and Rohan Gupta, took control and turned it into something else entirely: a non-banking finance company built to lend across the APL Apollo supply chain. Dealers, distributors, suppliers and transporters in that ecosystem now borrow working capital from it.
Kela came into the list of shareholders in March 2025 when he picked up over 9.5 lakh shares, roughly a 1.7% stake through a bulk deal on the exchange. With a current market cap of about Rs 4,616 cr, the company is now in the business of Investing Activities, Investment Research, Investment Banking and Wealth Management.
Let us look at the five-year picture, to try and find out what caught Kela’s attention.
| Financial Year | FY21 | FY22 | FY23 | FY24 | FY25 | FY26 | 5-Yr CAGR |
| Sales/Rs Cr | 2 | 2 | 41 | 190 | 170 | 334 | 178% |
| Financing Profit/Rs Cr | 2 | 1 | 25 | 105 | 111 | 172 | 144% |
| Net Profit/Rs Cr | 2 | 1 | 18 | 79 | 81 | 128 | 130% |
Please note that for an NBFC, financing profit (income after interest and operating costs) does the job that EBITDA does for other firms.
Decoding the 130% Profit Mirage
Now before you jump to any conclusions, please note that FY21 was a near-dormant base, before the FY23 pivot into lending. Hence the huge (or inflated) CAGR numbers that you see in the CAGR column. So, the rupee path is the honest way to read this. Net profit went from Rs 18 cr in FY23 to Rs 128 cr in FY26. On a standard five-year basis, the net profit growth reads 130%, but that figure lives and dies on the tiny starting point.
The recent quarters keep building. Net profit was about Rs 42 cr in the March 2026 quarter and about Rs 54 cr in the June 2026 quarter. The loan book has been doubling in some quarters, and management has talked about a book of Rs 4,000 cr in FY26 and Rs 6,000 cr in FY27. In July 2026 the company tied up with BharatPe for digital lending and set up a new alternative investment fund arm.
The clearest green flag is the promoters themselves. Their holding has climbed from about 48% a year ago to nearly 57% by June 2026, a jump of roughly four percentage points in the latest quarter alone. When the people who run the business keep buying, it usually means they see more ahead.
Valuation Reality Check: Paying 29x for a 10% ROE
The share price of SG Finserve was around Rs 4 in August 2021 and as of closing on 3rd August 2026 it was Rs 700 which is a jump of 17,400% in 5 years.
However, it must also be considered that the company was not logging any substantial numbers before the 2023 pivot into financial services. Which is why you can see the big upward wing after 2023 in the chart above.
As for the valuation, the share is trading currently at a PE of 29x which is higher when compared to the current industry median which is 21x. The 10-year median PE for the company is 28x while the industry median for the same period is 22x.
Paying 29x Earnings for a 10% ROE
Now the part the profit line does not shout about. For all the growth, the ROE (return on equity) is only about 10%. That is modest for a lender, and the stock trades at three times its book value and close to 29 times earnings. You are paying a rich price for a 10% return, which only makes sense if the loan book compounds fast for years.
The company also pays no dividend, its borrowings have jumped from about Rs 1,387 cr to Rs 2,704 cr in a year, and operating cash flow is deeply negative. That last point is normal for a lender in growth mode, since every new loan eats cash, but it means the growth is funded by fresh borrowing, not by cash the business throws off. The accounts also suggest the company may be capitalising some of its interest cost, which is worth watching.
There is one more risk that is easy to miss. Most of the lending flows through a single group ecosystem. That concentration is the reason the growth has been so fast, and it is also the reason a slowdown at APL Apollo would land straight on this book.
#2 IRIS RegTech: The Rs 136Cr One-Off Masking Core Growth
Formerly known as IRIS Business Services, the company is now rebranded as IRIS RegTech Solutions, which sells regulatory technology. Think software that helps banks, regulators, stock exchanges and central banks file and read compliance data, much of it built on the XBRL standard. Madhuri Kela holds about 5.2% of it, a little over 10 lakh shares, which puts the family among its larger public shareholders.
This one has a proper turnaround underneath it, and it is not the one the trailing profit number points to. Look at the real operating story across the five years.
| Financial Year | FY21 | FY22 | FY23 | FY24 | FY25 | FY26 | 5-Yr CAGR |
| Sales/Rs Cr | 57 | 61 | 74 | 102 | 110 | 128 | 18% |
| EBITDA/Rs Cr | 11 | 7 | 10 | 15 | 19 | 10 | -1.9% |
| Net Profit/Rs Cr | 4 | 1 | 4 | 9 | 13 | 127 | 100%* (Turnaround) |
EBITDA here is operating profit before other income. The company lost money for years before this, from FY16 to FY19. So, the real turnaround is the quiet grind you see above: losses turned into steady profit, sales roughly doubled in five years, debt was cleared to almost nothing. The business now earns a ROCE (return on capital employed) of about 11% and a return on equity almost 90%.
There is one catch, however, for which I have added an asterisk, and it is a big one. If you look at the FY26 profit, it reads around Rs 127 cr, and the stock looks cheap on that basis. It is not. Almost all of that profit is a one-time gain. In the September 2025 quarter the company booked an exceptional gain of roughly Rs 136 cr from selling its tax technology business and its IRIS Logix arm to a UK buyer, Sovos. The accounts capture about Rs 117 cr of that as other income in that single quarter. Strip it out and the core business earned a fraction of the headline figure.
Why a 4x P/E Ratio Could be a Valuation Trap
The share price of IRIS RegTech was about Rs 129 in August 2021 and as of closing in 3rd August 2026 it was Rs 255, which is almost a 100% jump in 5 years.
As for the valuation, the share is currently trading at a PE of just 4x, which tempts you to think the stock is a steal. On the real, recurring earnings of the business, the multiple is however higher, comfortably in the 40s. The cheap-looking number is a mirage created by an asset sale. Anyone screening on trailing earnings alone will misread this stock completely.
The one-off also masks a real wobble. In the first half of FY26 the core operating margin collapsed to under 1%, because the company was spending heavily on sales and product while the tax business was being carved out. The margin recovered to about 14% by the December 2025 quarter, so the dip looks like an investment phase rather than a breakdown. Still, it is a reminder that the everyday business is lumpy and small.
The Road to Rs 500 Crore: Can the Real Business Catch Up?
The forward-looking picture however has genuine promise. Recurring, subscription-style revenue is now more than half of sales and grew about 22% in FY26. The order wins read well: work tied to the Qatar Central Bank through Accenture, a multi-year Qatar tax authority contract, a seven-year regulatory reporting project with NEC for a Gujarat financial hub regulator, and an ESG reporting mandate in Brazil. The company is nearly debt free, has opened a UAE arm, and is talking about a revenue target of Rs 500 cr over the next few years, roughly four times where it is now.
Two red flags still deserve a mention. Promoter holding is low at about 35% and has drifted down over the past few years, which is not what you want to see. And the everyday business, one-off aside, is still a small player fighting for margin. A clean ten-year median price-to-earnings figure is not meaningful here either, because of the loss years earlier in the decade and the profit distortion now, so there is no honest single number to anchor to.
The Kela Playbook: Momentum vs. Genuine Scale
When you look at the two side by side, SG Finserve is the cleaner profit story. Its earnings are real, growing and backed by promoters who keep raising their stake. The worry is price, not honesty. You are paying a premium multiple for a business that still earns a modest return on equity, and the whole thing leans on one industrial ecosystem. The uptick depends on the loan book compounding for several more years without a credit hiccup.
IRIS is the more subtle case. The genuine turnaround already happened, quietly, over five years. The recent profit explosion is mostly an accounting event, not a leap in the business. The stock is not cheap the way the screen makes it look. But the recurring software base, the debt-free balance sheet and the order pipeline give it a real second act, if management delivers on the Rs 500 cr ambition and the margins hold.
For anyone watching Kela, the lesson is the one his own record keeps teaching. A turnaround is not a single number on a screen. It is a direction of travel. On SG Finserve the direction is clear and the debate is about price. On IRIS the reported profit hides more than it reveals and the real question is whether the everyday business can grow into the story. How both play out through FY27 will be worth watching closely. Add these stocks to a watchlist and keep a track on them.
Disclaimer:
Note: We have relied on data from http://www.Screener.in and http://www.trendlyne.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, he was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein.