Spandana Sphoorty slips 8%, hits 52-week low on disappointing Q1 results

Spandana Sphoorty Financial share price today hit a 52-week low of Rs 643 on the BSE on Monday, July 29. This came after Spandana Sphoorty share price fell 8 per cent in the intraday trade as the financier reported 53 per cent year-on-year (Y-o-Y) decline in its June quarter (Q1FY25) net profit at Rs 56 crore.

Spandana Sphoorty's Q1 profit declined due to higher credit cost. On a sequential basis, net profit was down 57 per cent.

The stock of the microfinance lending institution has fallen below its previous low of Rs 679.45 touched on June 4, 2024. It had hit a 52-week high of Rs 1,243.10 on January 12, 2024. At 02:44 PM, Spandana Sphoorty share price was trading 5 per cent lower at Rs 664.40, as compared to 0.04 per cent decline in the BSE Sensex.

 

The challenges faced during the quarter were reflected by elevated delinquencies and higher credit costs resulting in net profit declining to Rs 56 crore from Rs 119 crore in Q1FY24.

Asset quality was also impacted due to seasonality, further affected due to elections and heat wave. Gross non-performing assets (GNPA) and net non-performing assets (NNPA) at the end of the quarter were at 2.60 per cent and 0.53 per cent, respectively. In Q1FY24, GNPA and NNPA stood at 1.63 per cent and 0.49 per cent, respectively. The company expects the business to be normalised by the second half of the year.

The management said Q1FY25 was a challenging quarter for the company. The long drawn 7 phase general elections, severe heat wave across the country, and higher attrition in select geographies posed a challenge to the quality of the portfolio.

The management, however, noted that July 2024 collection efficiency was better and it will keep improving in the next few quarters. There is no further stress building up, and Spandana is in a reasonable position as far as customer indebtedness is concerned.

That apart, the company’s asset under management (AUM) growth sustained pace at 32 per cent Y-o-Y to Rs 11,723 crore, backed by 37 per cent Y-o-Y uptick in disbursement. Net interest income (NII) increased 47 per cent Y-o-Y, led by AUM growth and 60 bps Q-o-Q improvement in margins at 15.2 per cent.

Spandana reported mixed performance wherein strong operational performance led by AUM growth and improvement in margins was more than offset by elevated provision due to lower collections, ICICI Securities said in a note.

Delivery on strategy to shift to weekly collection and improvement in margins progressing well. However, the nature of asset quality trends (whether temporary amid seasonality, heat wave and elections or structural) remains watchful, the brokerage firm said.

The senior management team of Spandana Sphoorty has its task cut out for the next couple of quarters. However, it has a capable senior management team, which has seen multiple such periods of asset quality stress in the past. While there will be transitory pain, we believe Spandana will navigate these challenges and come out stronger, Motilal Oswal Financial Services said.

The brokerage firm estimates Spandana to deliver FY26 RoA/RoE of 4.3 per cent/16 per cent. It maintains a 'Buy' rating with a target price of Rs 830 (based on 1.2x FY26E BV). Key downside risks, it added, could be poor execution on asset quality increasing the credit cost; and inability to retain talent in the senior/middle management teams.

Spandana Sphoorty is a rural-focused non-banking financial company and a microfinance lender (NBFC-MFI) with a geographically diversified presence in India. The company offers income generating loans under the joint liability group (JLG) model, predominantly to women from low-income households in rural areas.