Spandana Sphoorty Financial Ltd. share price target

Spandana Sphoorty’s (SPANDANA) 4QFY25 loss stood at ~INR4.3b (vs. MOFSLe loss of INR4.1b). FY25 loss stood at INR10.3b (vs. PAT of INR5b in FY24).

Spandana Sphoorty (SPANDANA)’s 3QFY25 loss stood at ~INR4.4b (vs. est. loss of INR4.6b), driven by elevated credit costs. 9MFY25 loss stood at INR6b. We expect the company to report another loss quarter in 4QFY25 as well.

Spandana Spoorthy’s (Spandana) Q1FY25 financial performance is a mixed bag with NII growth (ex-DA income) remaining strong at 12% QoQ, as it continues to benefit from NIM expansion.

Spandana Spoorthy’s (Spandana) core operating performance in Q4FY24 continued to be robust with AUM growth at 15% QoQ primarily led by new customer acquisition (up 12% QoQ) and sharp reduction in cost of borrowing to 11.7% vs 12.3%, thereby, driving 130bps QoQ NIM expansion, resulting in 11% QoQ growth in PPoP.

Spandana’s 4QFY24 PAT grew 22% YoY to ~INR1.29b (in line), driven by NIM
expansion despite higher credit costs. In 4Q, NII grew 43% YoY to ~INR3.85b
(9% beat). FY24 PAT stood at ~INR5b (vs. INR124m in FY23).

Ended FY24 on a strong note. FY24 was a turnaround year. The balance
sheet grew healthily, with overall AUM registering >40% growth combined
with a consistent decline in the incremental cost of borrowing.

Since the new management took charge in Mar’22, Spandana Spoorthy (Spandana) embarked on a transformation journey to build a long-term sustainable micro-finance business model. Ever since, Spandan’s earnings trajectory kept improving (all the past six quarters) – RoA expanding to 5.5% by Q2FY24, from 2.9% in Q2FY23; RoE expanding to 15% by Q2FY24, from 8% in Q2FY23.

Since the new management took charge in Mar’22, Spandana Spoorthy (Spandana) has embarked on a transformation journey to build a sustainable long-term microfinance lending model. In all 5 quarters since then, earnings trajectory kept on improving and in Q1FY24 its RoA expanded to 5.9% vs 5.1% in Q4FY23, 3.7% in Q3FY23, 2.9% in Q2FY23 and net loss in Q1FY23.

Spana Spandana Sphoorty (Spandana) has embarked on a transformation journey to build a sustainable long-term micro-finance lending model since the management change in Mar’22.

We hosted Mr. Ashish Damani (president & CFO) and Mr. Vishal Sharma (chief operating officer) at our Singapore conference on 23rd May’23. Management highlighted that Spandana Sphoorty’s (Spandana) underlying business trend remains strong and the company is well positioned to sustain its current AUM growth momentum (it delivered 29% YoY AUM growth in FY23).

Spandana Sphoorty’s (Spandana) Q4FY23 / FY23 operating performance is an indication of the new management’s successful execution of redefined business strategies and delivery as per guidance.

Spandana Sphoorty’s (Spandana) Q3FY23 financial performance has to be seen in the context of it sustaining the improving trend across business parameters and delivering as per the guidance. At the same time, it is continuing its efforts on building robust platform to ensure sustainable customer-led growth, containing forward flow in PAR portfolio, rebuilding liability engine and strengthening the management team.

Q2FY23 was a quarter of consolidation for Spandana Sphoorty (Spandana) with focus on.

Spandana Sphoorty’s (Spandana) Q1FY23 financial performance was marred by management’s decision to write-off pre-covid related stress to the tune of Rs7bn. However, credit quality and book performance (post write-offs) appear to be in a much better shape – PAR 31-90 @3.5% and collection in restructured book stood at 80% as on June’22.

FY22 had been an eventful year for Spandana Sphoorty (Spandana), starting with the resignation of its erstwhile MD & CEO which triggered operational instability followed by course correction.