Shares of Spandana Sphoorty Financial Ltd hit their 5 per cent lower circuit limits in Friday's trade after the MFI reported a widening of losses at Rs 440 crore in the December quarter compared with Rs 216.32 crore loss in the previous quarter, thanks to a huge write-off of Rs 680 crore, This was 8 per cent of the MFI's asset under management (AUM). There was a sharp slowdown in disbursals and a spike in opex to address attrition and beef up collections. The comforting factor, Nuvama said, was that the company maintained PCR of 80 per cent and introduced strict guardrails.
For the December quarter, credit cost stood rose to a high 7.95 per cent from 5.2 per cent sequentially.
"We are cutting earnings sharply. The MFI stress is likely to peak in Q1FY26. The board has approved raising of confidence capital of Rs 750 crore with the promoters likely to participate. We are slashing the target price to Rs 335 or 0.8 times FY26 BV from Rs 520 or 0.9 times. Given elevated stress and low visibility, we maintain ‘HOLD’ after the sharp correction," Nuvama said.
The stock fell 5 per cent to Rs 324.65. Spandana Sphoorty Financial has lost 54 per cent of its market value in the past six months and 70 per cent in the past one year.
The forward flow into stage 3 and stage 2 was high at about Rs 600 crore. The company made a big write-off of Rs 680 crore against Rs 260 crore QoQ, leading to a decline in Gross stage 3 (GS3) QoQ. Gross stage 2 though remained elevated at 7.7 per cent.
"Despite elevated stress, the company has maintained PCR of 80 per cent. Gross CE dipped to 92.4 per cent from 93.7 per cent QoQ. The current book net CE has, however, improved from 95.9 per cent in September to 97.8 per cent in December. If the improvement sustains, forward flows will reduce. The mix of Spandana +2 lenders is 20 per cent and Spandana +3 is 14 per cent. The company has introduced strict guardrails. They have stopped lending to new credit borrowers and have not given new loans to borrowers with 30+ DPD," Nuvama said.
Spandana Sphoorty has taken measures to improve recovery and CE. A total of 600 Customer Retention Associates have been deployed for recovery from GNPA and written-off portfolio.
"The Field team is supported by tele-calling agents and data analytics. To boost CE, borrower-to-LO span has reduced from 315 to 249. Field team will have more time for pursuing Portfolio Quality. Focus on driving centre meeting regimen," Nuvama said.