Latest news with #Spandana
Business Upturn
4 days ago
- Business
- Business Upturn
Jefferies flags weak MFI disbursements; says asset quality recovery could take 1–2 quarters
By Markets Desk Published on June 6, 2025, 08:22 IST Jefferies has flagged concerns over recent trends in the microfinance (MFI) sector, noting that fourth quarter FY25 disbursements fell 38 percent year-on-year, though they rose 12 percent quarter-on-quarter. This resulted in a 3 percent quarter-on-quarter and 14 percent year-on-year fall in assets under management. Overdue loans (31–180 days) showed marginal improvement, declining from 6.4 percent in December to 6.2 percent in March. However, Jefferies believes asset quality normalisation could take one to two more quarters. The sector is also navigating new MFIN 2.0 norms, with some risks from state elections. Jefferies noted that Spandana, Fusion, and CreditAccess Grameen have a higher share of customers with four or more loans, while Bandhan Bank could fare better in this environment. Disclaimer: The views and target prices mentioned in this article are as stated by Jefferies. They do not represent the opinions or recommendations of this publication. Readers are advised to consult their financial advisors before making any investment decisions. Markets Desk at
Mint
5 days ago
- Business
- Mint
Can this microfinance lender lead the industry's turnaround in FY26?
The microfinance industry remains a tough sector to navigate. While it offers higher interest spreads, rising defaults during economic slowdown make it a tricky business to be in. This vulnerability resurfaced once again as the post-pandemic credit boom lost momentum in FY25. Initially driven by low interest rates, credit growth began slowing as borrowing costs rose and economic activity weakened. This shift strained borrower repayment ability, increased asset quality stress, and severely hit profitability across the sector. To limit further damage, many lenders opted to write off bad loans and reset their books. The intent was to enter FY26 with a cleaner slate, as the industry looks ahead to a potential recovery. Also Read: Russia-Ukraine war escalation: Impact on the Indian stock market Spandana Sphoorty took a similar approach. In FY25, it wrote off loans worth ₹1,618 crore—a move that dented profits. However, with most of the clean-up now behind it, it is positioning itself for a turnaround in FY26. So, where does Spandana stand after this reset? AUM contracts Let's start with assets under management (AUM), which declined sharply by 43% year-on-year to ₹6,819 crore in FY25. Disbursements also fell 48% to ₹5,605 crore, as Spandana adopted a cautious lending stance. This is evident from the AUM per branch, which fell from ₹7.3 crore in March 2024 to ₹3.8 crore in March 2025. This conservative approach directly contributed to the drop in the overall loan book. The management said FY25 was one of the most challenging periods for the microfinance industry. Multiple headwinds—including higher borrower leverage, weakening of the Joint Liability Group model, deteriorating borrower discipline, and sociopolitical interference—forced lenders to tighten credit norms and proceed with greater caution. The impact of this is also visible in customer numbers, which fell from 3.3 million in March 2024 to about 2.5 million by March 2025. However, now the company remains confident of reviving growth in FY26. It plans to grow its AUM book by 20%, driven by a similar increase in disbursements, most of which is expected in the second half of FY26. The company now plans to lend to quality borrowers—who currently account for 51% of its borrower base as per internet lending regulations—to support the future growth. Asset quality worsens Not just AUM, but asset quality stress also increased—a trend often seen in times of stress in the microfinance industry. Spandana impairment cost—unrecoverable loans—rose from ₹259 crore (in FY24) to ₹1986 crore in FY25. Also Read: Analysts and investors have soured on Asian Paints. Can it prove them wrong? Gross non-performing assets (GNPA) increased by 4.1 percentage points to 5.6%, while net NPAs rose by 0.9 percentage points to 1.2%. On the positive side, Spandana continues to maintain a healthy provision coverage ratio of 80%. The management attributed much of the stress to elevated field-level attrition, which hurt operational efficiency and contributed to rising delinquencies. To strengthen collections, the company has now deployed around 700 loan officers, who will focus on recovery from 90+ day old loans and the write-off pool. Early recovery signs Despite a challenging year, Spandana is starting to see early signs of recovery. Gross collection efficiency declined from 94% in Q1 to 90.9% in Q4FY25. But the company highlighted an improving trend in net recovery from bad assets. Net collection efficiency for loans overdue by more than 90 days (called X-Bucket) improved from 96.4% (Nov-24) to 98.6% in March 2025. Interestingly, branches with a weekly repayment model reported even higher collection efficiency of 99.3% in March. As a result, Spandana now plans to scale up its weekly-model branches, which are showing better collection performance. The company believes improving collections to about 99% helps support profitability going forward. Recovery from 90+ day past-due accounts has also picked up meaningfully, rising from ₹11 crore in Q1FY25 to ₹52 crore in Q4 FY25. In total, Spandana recovered over ₹90 crore in the last fiscal. In FY26, the company expects a further recovery, aided by a dedicated team and the early arrival of the monsoon, which typically supports rural cash flows. Strict credit filters to address borrower leverage Lender overlap—the proportion of borrowers taking loans from three or more MFIs, including Spandana, has also shown signs of improvement. Lender overlap declined from 23% (Feb-25) to 20.3% in April 2025, indicating some relief on the leverage front. Also Read: These five private banks in India have the lowest NPAs. Should you invest? To tackle the issue further, Spandana has decided on stricter credit filters. It will now cease lending to borrowers with overdue loans exceeding 60 days with any regulated entity, where the loan amount exceeds ₹3,000. Additionally, it will also avoid lending to borrowers who have availed a loan in the past 12 months, effective June 2025. Profitability severely hit While green shoots are visible, elevated stress levels kept credit costs high, which impacted profitability in FY25. The company's total income declined by just 3% to ₹2,424 crore, indicating a relatively stable topline. Net interest income also fell by 5% to ₹1,228, as the net interest margin contracted by 1.3 percentage points to 12.8%. However, the bigger concern was on the operating front. Pre-provision operating profit dropped sharply by 35% to ₹608 crore, as the cost-to-income ratio rose to 60.6% from 43.5% in FY24. This situation was further aggravated by impairment, which rose from ₹259 crore (FY24) to ₹1,986 crore (including write-offs of ₹1,618) in FY25. As a result, the company moved from a profit of ₹501 crore in FY24 to a net loss of ₹1,035 crore in FY25. Needless to say, the return ratios—return on assets and return on equity—turned negative. Capital position stays strong Spandana's net worth declined from ₹3,707 crore to ₹2,633 crore due to the heavy loss in FY25. However, its capital adequacy remains well above regulatory norms, with a capital-to-risk-weighted assets ratio (CRAR) of 37.1% as of March 2025, well above the RBI's mandated 15%. Liquidity healthy; rights issue planned The company's liquidity position continues to offer comfort. It reported a cash balance of ₹2,030 crore as of March 2025, enough to meet short- and medium-term requirements. Additionally, shareholders approved a ₹750 crore capital raise in March 2025, and the company plans to raise further capital in Q2 FY26 via a rights issue, with promoter participation, which signals confidence in a potential turnaround. Valuation factors in stress Spandana's share price has declined 64% in the last one year, currently trading at ₹262. This correction has largely priced in many of the concerns, with the stock now valued at a price-to-book (P/B) multiple of 0.7x, significantly below its 10-year median P/B of 1.5x. Going forward, a sustained recovery in key metrics—particularly in asset quality, disbursement growth, and collection efficiency—will be crucial to re-rating, with most of this expected to unfold from the second half of FY26. Madhvendra has over seven years of experience in equity markets and has cleared the NISM-Series-XV: Research Analyst Certification Examination. He specialises in writing detailed research articles on listed Indian companies, sectoral trends, and macroeconomic developments. Disclosure: The writer does hold the stocks discussed in this article. 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 educational purposes only.
Time of India
30-05-2025
- Business
- Time of India
Spandana Sphoorty suffers net loss, auditors flag concerns over frauds
Kolkata: Spandana Sphoorty Financial on Friday reported a Rs 434 crore of net loss on consolidated basis for the fourth quarter ending March 31, while the independent auditors flagged concerns over possibilities of misstatement due to likely fraud which may involve collusion and override of internal control. This was Spandana group's third quarterly net loss in a row, as the lender is facing intense asset quality stress. Its gross non-performing assets ratio jumped to 5.63% at the end of FY25 as compared with 4.85% three months back and 1.5% a year ago. The company had reported a net profit of Rs 129 crore in the fourth quarter of FY24. "The heightened delinquencies contributed to elevated impairment cost and resulted in a net loss of Rs 434 crore for Q4FY25," interim chief executive Ashish Damani said. The company ended the fiscal with an annual net loss of Rs 1035 crore against Rs 501 crore profit in the preceding fiscal. Live Events "The microfinance industry faced unprecedented challenges due to a combination of external and structural headwinds," the company said in its note to stock exchanges. The note was signed by chairperson Abanti Mitra and Damani. Managing director and chief executive officer Shalabh Saxena resigned from his position on April 23. His sudden resignation raised suspicion that there is something more to it than meets the eye. ET on April 25 reported that Spandana said to be under the Reserve Bank of India's lens for unreported frauds and cash balance mismatches at the branch level. "The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control," independent auditor BSR & Co said Friday, in its report accompanied with the company's quarterly and annual financial statement. "We exercise professional judgment and maintain professional skepticism throughout the audit," the auditor said. Spandana's consolidated assets under management shrank 43% year-on-year to Rs 6819 crore at the end of March from Rs 11973 crore a year back. The group disbursed merely Rs 365 crore during the fourth quarter, less than one-tenth of Rs 3970 crore of disbursement it did in the year-ago period. The group's operational stress was further intensified by increased field-level attrition, contributing to higher delinquencies, gross slippages and elevated credit costs. "These factors, which emerged in Q1 and persisted through the year, significantly impacted field operations, disrupted center meetings, and hindered the timely delivery of services to borrowers including timely collections," the company said.
Economic Times
30-05-2025
- Business
- Economic Times
Spandana Sphoorty suffers net loss, auditors flag concerns over frauds
Kolkata: Spandana Sphoorty Financial on Friday reported a Rs 434 crore of net loss on consolidated basis for the fourth quarter ending March 31, while the independent auditors flagged concerns over possibilities of misstatement due to likely fraud which may involve collusion and override of internal control. ADVERTISEMENT This was Spandana group's third quarterly net loss in a row, as the lender is facing intense asset quality stress. Its gross non-performing assets ratio jumped to 5.63% at the end of FY25 as compared with 4.85% three months back and 1.5% a year ago. The company had reported a net profit of Rs 129 crore in the fourth quarter of FY24. "The heightened delinquencies contributed to elevated impairment cost and resulted in a net loss of Rs 434 crore for Q4FY25," interim chief executive Ashish Damani company ended the fiscal with an annual net loss of Rs 1035 crore against Rs 501 crore profit in the preceding fiscal. "The microfinance industry faced unprecedented challenges due to a combination of external and structural headwinds," the company said in its note to stock exchanges. The note was signed by chairperson Abanti Mitra and Damani. ADVERTISEMENT Managing director and chief executive officer Shalabh Saxena resigned from his position on April 23. His sudden resignation raised suspicion that there is something more to it than meets the on April 25 reported that Spandana said to be under the Reserve Bank of India's lens for unreported frauds and cash balance mismatches at the branch level. ADVERTISEMENT "The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control," independent auditor BSR & Co said Friday, in its report accompanied with the company's quarterly and annual financial statement."We exercise professional judgment and maintain professional skepticism throughout the audit," the auditor said. ADVERTISEMENT Spandana's consolidated assets under management shrank 43% year-on-year to Rs 6819 crore at the end of March from Rs 11973 crore a year back. The group disbursed merely Rs 365 crore during the fourth quarter, less than one-tenth of Rs 3970 crore of disbursement it did in the year-ago group's operational stress was further intensified by increased field-level attrition, contributing to higher delinquencies, gross slippages and elevated credit costs. "These factors, which emerged in Q1 and persisted through the year, significantly impacted field operations, disrupted center meetings, and hindered the timely delivery of services to borrowers including timely collections," the company said. (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
13-05-2025
- Business
- Time of India
Spandana Sphoorty plans change in Articles of Association to ease fundraising
Kolkata: Microfinance company Spandana Sphoorty Financial has proposed to amend certain articles of the Articles of Association of the company to align the same with the Companies Act, 2013. The company has sought shareholders approval for the same. The e-voting would take place between May 13 to June 11. "It is proposed to change certain articles of the Articles of Association of the company to align the same with the Companies Act, 2013 and the rules made thereunder, and SEBI regulations/directives as amended. These articles are related to fund raising by the company," Spandana said Monday in a regulatory filing to stock exchanges. The amendment would help Spandana issue shares not only for cash, but for services as well. For example, the company can buy property by allotting shares to the property owner, people aware of such regulations said. "The company shall, subject to the applicable provisions of the Act, compliance with law and the consent of the board, have the power to issue share equivalents to any person (whether or not the share/ security holders of the company) on such terms and in such manner as the board deems fit including their conversion, repayment, and redemption whether at a premium or otherwise,' Spandana said Live Events ETMarkets WhatsApp channel )
