Spandana Sphoorty Financial shares down 14% today; here's target price

Shares of Spandana Sphoorty Financial Ltd plummeted over 14 per cent in Tuesday's trade after the MFI reported a net loss of Rs 216 crore for the September quarter. Nuvama Institutional Equities has cut its target price on the stock by 42 per cent to Rs 520 from Rs 900 earlier, citing MFI stress that is likely to continue in Q3 with respite likely only in Q4FY25.

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.