Investor Bets on Turnaround Stocks: High Stakes?

Madhusudan Kela's investment approach, focusing on undervalued companies, is being examined through two recent turnaround plays: SG Finserve and IRIS RegTech. SG Finserve, a supply chain lender, saw its stock surge 17,400% since August 2021, reaching Rs 700 by August 2026. Despite this impressive growth, its Price-to-Earnings ratio of 29x and a Return on Equity of 10% suggest a potentially overvalued stock.

IRIS RegTech, a regulatory technology solutions provider, reported a profit of Rs 127 crore in FY26. However, this figure is largely due to a Rs 136 crore one-time gain from an asset sale in September 2025. Excluding this, the core business's earnings and valuation appear less attractive, with a real Price-to-Earnings multiple in the 40s.

While SG Finserve's earnings are real and backed by increasing promoter holdings, its reliance on a single ecosystem and modest returns present risks. IRIS RegTech's future hinges on its recurring revenue streams and ability to scale its core business to meet ambitious revenue targets, despite lower promoter stakes and a smaller operational footprint.

Both investments highlight Kela's strategy of seeking direction of travel over single numbers. The performance of SG Finserve hinges on continued loan book compounding, while IRIS RegTech's success depends on its core operations growing into its projected narrative. Investors are advised to monitor both through FY27.