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Spandana Spoorthy Q3FY25 results clearly reflect ongoing stress in the microfinance sector

ICICIdirect Research 24 Jan 2025 DISCLAIMER

Spandana Spoorthy’s Q3FY25 results clearly reflect ongoing stress in the microfinance sector, with disappointing numbers. The company reported provisions of ₹666 crores (~7.5% of AUM), which significantly impacted profitability, resulting in a net loss of ₹440 crores for the quarter (after a loss of ₹216 crore).

AUM de-grew 14% YoY and 15% QoQ to ₹8936 crore, with Q4FY25 expected to remain benign. GNPA increased from 1.61% in Q3FY24 to 4.85% in Q3FY25. While provision coverage (i.e provision against bad loans) is maintained at 80%, major concern continues to remain on uncertainty on further pain slipping from the current book.

In Q3FY25, the lender wrote-off ₹626 crore, worth of bad assets, however, proportion of overleverage borrowers continues to remain elevated at ~29.8% of AUM, thus emanating concerns regarding future slippages.

Networth has declined from ₹3506 crore in Q2FY25 to ₹3010 crore in Q3FY25, thereby eroding book value. Board has approved capital raising of upto ₹750 crore.

While extent of further pain from the could be predicted with certainty, situation continue to remain concerning. Thus, we suggest to avoid any bottom fishing in the stock until asset quality issues find a bottom anticipated in next 2-3 quarters

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