Spandana Sphoorty Financial Limited — Credit Ratings, 03-02-2025: Credit Rating

Spandana Sphoorty Financial Limited reported a consolidated net loss of ₹600.9 crore for the first nine months of FY2025, a stark decline from a profit of ₹500.7 crore during the same period last year. Its return on managed assets (RoMA) fell to -6.2%, compared to 4.1% in FY2024. Revenue for the period stood at ₹2,005.4 crore, reflecting challenges like rising asset quality issues—in particular, gross stage 3 assets increased to 5.2% from 1.7% as of March 2024.

The deterioration is attributed to heightened delinquencies due to borrower overleveraging and adverse regional conditions, leading to credit costs soaring to 14.2% (annualized) from just 1.5% the previous year. Collections weakened significantly, with 30+ days past due delinquencies rising to 12.8% from 3.0%.

In terms of operational costs, the company faced escalating expenses in managing its outreach amidst a changing microfinance landscape. The capital adequacy ratio remains robust at 36%, providing a buffer against the challenges faced.

Given the current financial pressures and the ongoing challenges within the microfinance sector, the strategic focus should remain on stabilizing asset quality and managing operational efficiencies. The recent downgrade to a credit rating of A (Negative) highlights these growing risks, calling for cautious sentiment from investors. Considering current performance and the need for improved asset quality, a hold position may be prudent until clearer signs of recovery emerge.