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Shares of Spandana Sphoorty Financial Ltd plummeted 17 per cent in Tuesday’s trade after the MFI reported a net loss of Rs 216 crore for Q2
Spandana Sphoorty Shares Fall 17% Today
Shares of Spandana Sphoorty Ltd fell as much as 17 per cent on October 29 after the microfinance (MFI) lender reported a net loss of Rs 204 crore for the quarter ended September 30, 2024, compared to a net profit of Rs 116 crore in the year-ago period.
Total income fell by 4% YoY to Rs 707 crore during the quarter. Net interest income (NII) rose by 9% to Rs 341 crore in Q2 FY25 over Q2 FY24.
Pre-provision operating profit (PPOP) declined by 12% to Rs 228 crore in Q2 FY25 from Rs 258 crore in Q2 FY24.
Impairment charge on financial instruments for the September24 quarter was Rs 516 crore, which is significantly higher as compared with the impairment charge of Rs 90 crore recorded in the same period last year.
Accordingly, the company reported a pre-tax loss of Rs 289 crore in Q2 FY25 as against a pre-tax profit of Rs 168 crore in Q2 FY24.
GNPA ratio was at 4.86% as on 30 September 2024 as against 2.60% as on 30 June 2024. NNPA ratio stood at 0.99% as on 30 September 2024 as against 0.53% as on 30 June 2024. Provision coverage ratio as on 30 September 2024 was at 79.66%.
Disbursements for the quarter were Rs 1,514 crore as compared to Rs 2,512 crore in Q2 FY24, decline of 40% on YoY basis. AUM as on 30 September 2024 was Rs 10,537 crore, up 8% YoY.
Shalabh Saxena, CEO and managing director, said: “Microfinance sector has been facing multiple headwinds over the last two quarters. The operations that were initially impacted by long drawn elections and intense heat wave during summers of 2024 were further disrupted by heavy rainfall and floods in certain states during the months of July to September 2024.
What Should Investors Do Now?
Given two consecutive stressed quarters and low visibility, Nuvama downgraded the stock to ‘Hold’ from ‘Buy’. JM Financial also downgraded the stock to ‘Hold’, with a revised target price of Rs 500, valuing at 0.9 time FY26E book value per share.
Spandana Sphoorty shares fell 14.44 per cent to Rs 393.70 apiece on BSE. With this, the stock is down 64 per cent year-to-date. While JM Financial believes the additional steps taken by Spandana to control its credit costs would be beneficial over the medium term, it remain vigilant on the asset quality of the existing book.
“We now forecast losses of Rs 43.90 crore in FY25E and profit of Rs 430 crore in FY26E (against Rs 770 crore earlier),” it said.
With the ongoing MFI stress, a sharp rise was observed in GS2 and GS3 loans. GS2 loans rose sharply to 6.2 per cent from 3.2 per cent QoQ, while GS3 rose to 4.9 per cent from 2.6 per cent. The deterioration in asset quality can be attributed to borrowers taking more loans including non-MFI loans after taking disbursement from Spandana, high attrition and declining attendance in centre meetings, Nuvama said.
“Borrowers with Spandana plus four lenders, which was 5.3 per cent at the time of disbursement has risen to 13.8 per cent as they have availed loans from others after taking disbursement from Spandana. Borrowers with indebtedness of > Rs 0.2mn from 4.5 per cent of total. CE has fallen sharply from 97.5 per cent to 93.7 per cent,” Nuvama said.
The Spandana Sphoorty Financial management expects asset quality to improve in Q4FY25. It has put new guard rails, Nuvama said.
“For new borrowers, it Spandana has decided that will not be the fourth lender. It is also investing in intensifying collection efforts. PCR stood steady at 80 per cent. Spandana continues to offer a maximum ticket size of Rs 80,000,” Nuvama said.
Spandana’s gross NPA during the July-Sep quarter stood at 4.86 per cent, compared to 2.6 per cent, while Net NPA stood at 0.99 percent from 0.52 per cent in June. Provisions during the quarter increased by 468 per cent on-year to Rs 491.8 crore.
Brokerage firm Motilal Oswal has maintained its ‘buy’ recommendation on Spandana Sphoorty with a revised price target of Rs 540, down from Rs 580 earlier.
In the past 12 months, the counter has fallen 57 per cent. In comparison, Nifty rose 28 per cent during this period.
