Spandana Sphoorty Financial Limited , a rural-focused microfinance lender, demonstrated signs of recovery in the second quarter, despite ongoing challenges in the microfinance sector. The company reported a significant increase in disbursements and improvements in collection efficiency, while still grappling with losses from its legacy portfolio.

Key Highlights

• Disbursements surged to ₹934.00 crore in Q2, a 233% increase from ₹280.00 crore in Q1.
• Assets Under Management (AUM) stood at ₹4,088.00 crore as of September 30.
• Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA) were at 4.97% and 0.97% respectively on a standalone basis.
• The company reported a net loss of ₹249.00 crore for Q2.

Improved Operational Metrics

Spandana Sphoorty's X-bucket collection efficiency showed consistent improvement, reaching 98.7% for September, up from 97.9% in June. This trend indicates a gradual stabilization of the company's operations. Notably, about 28% of the portfolio, built under new stricter credit norms, is performing exceptionally well with only 0.1% delinquency at the end of September.

Financial Performance

The company's total income for Q2 was ₹239.00 crore, a 21% decline quarter-on-quarter. Net Interest Income also decreased by 20% to ₹91.00 crore. Despite these declines, the Pre-Provision Operating Profit (PPOP) remained flat at ₹(40.00) crore compared to Q1.

Strategic Measures

As a prudent measure, Spandana Sphoorty recognized technical write-offs amounting to ₹367.09 crore for Q2 and ₹947.67 crore for H1. These write-offs contributed to elevated credit costs and the reported loss for the quarter. The company remains focused on strengthening on-ground recovery initiatives.

Liquidity and Capital Position

Spandana Sphoorty maintains a comfortable liquidity position of ₹1,179.00 crore as of September 30. The company's Balance Sheet remains strong with a Capital Adequacy Ratio (CRAR) of 47.0% and a gearing ratio of 1.5x, positioning it favorably for future growth.

Management Commentary

Mr. Ashish Damani, Interim CEO, President and CFO, stated, "The trends developing in Q2 have been rather heartening after last 15 tumultuous months for microfinance industry. Our focused efforts have resulted in ₹48.00 crore recoveries during Q2. The positive trends during the quarter strengthened our confidence to deepen customer engagement, leading to a sequential increase in disbursements."

Outlook

While the company continues to face challenges from its legacy portfolio, the improved collection efficiency and strong performance of the new portfolio under stricter credit norms provide optimism for future growth. The recent macroeconomic indicators and bountiful rains across India suggest a positive trend in rural credit demand, which could benefit Spandana Sphoorty's operations in the coming quarters.

As the company navigates through this recovery phase, its strong capital position and liquidity buffer are expected to support its growth initiatives and operational resilience in the evolving microfinance landscape.

Spandana Sphoorty Financial , a prominent player in the microfinance sector, has reported mixed quarterly results, highlighting both challenges and improvements in its operations.

Key Financial Highlights

• Net Loss: ₹249.00 crore
• Assets Under Management (AUM): ₹4,088.00 crore (18% decline)
• Disbursements: ₹934.00 crore (233% increase)
• Total Income: ₹239.00 crore (21% decline)
• Net Interest Income: ₹91.00 crore (20% decline)

Detailed Analysis

Widening Losses and AUM Decline

Spandana Sphoorty Financial reported a net loss of ₹249.00 crore for the quarter, primarily driven by elevated credit costs and higher gross slippage. The company's Assets Under Management (AUM) declined by 18% to ₹4,088.00 crore from ₹4,958.00 crore in the previous period.

Surge in Disbursements

Despite the overall challenging scenario, the company witnessed a significant surge in disbursements, which increased by 233% to ₹934.00 crore compared to ₹280.00 crore in the previous quarter. This substantial growth in disbursements indicates a potential recovery in lending activities.

Income and Interest

Total income for the quarter fell by 21% to ₹239.00 crore, while Net Interest Income dropped by 20% to ₹91.00 crore, reflecting the pressure on the company's core earnings.

Asset Quality and Collections

The company's asset quality metrics showed Gross Non-Performing Assets (GNPA) at 4.97% and Net Non-Performing Assets (NNPA) at 0.97% on a standalone basis. However, there were positive signs in collection efficiency, with gross collection efficiency improving to 92.9% and net collection efficiency reaching 92.4%.

Liquidity and Capital Adequacy

Spandana Sphoorty Financial maintains a liquidity of ₹1,179.00 crore and a Capital to Risk-weighted Assets Ratio (CRAR) of 47.0%, indicating a strong capital position despite the current challenges.

Management Perspective

The management highlighted that 28% of the portfolio built under new credit norms is performing well, with only 0.1% delinquency. Additionally, the company achieved ₹48.00 crore in recoveries during the quarter, demonstrating efforts to manage asset quality.

Looking Ahead

While Spandana Sphoorty Financial faces challenges in terms of profitability and AUM growth, the significant increase in disbursements and improving collection efficiency provide some positive signals. The company's focus on building a quality portfolio under new credit norms and its strong liquidity position may support its efforts to navigate through the current difficulties.

Stakeholders will be closely monitoring the company's progress in the coming quarters, particularly its ability to translate the growth in disbursements into improved financial performance and asset quality. The management's strategies to control credit costs and enhance operational efficiency will be crucial in the company's path towards recovery and sustainable growth.