Spandana Sphoorty Financial conducted a conference call on 24 January 2025 to discuss the financial results for the quarter ended December 2024. Shalabh Saxena, MD&CEO of the company addressed the call:

Highlights:

The microfinance industry in India has been going through a challenging phase in the current financial year. A wide set of challenges including borrower leverage, dilution of JLG model, poor center meeting attendance and high attrition continue to impact the sector.

Like Q2FY25, Q3FY25 was challenging as more borrowers turned delinquent and the company deliberately slowed down disbursement to drive portfolio quality and center meeting discipline.

The company provided Rs 666 crore towards NPA provisions costs leading to a Rs 440 crore loss for Q3FY2025.

A joint action by the industry through the implementation of guardrails is expected to help improve discipline in the industry.

The capital position was strong with CRAR of 35.7%, while the gearing was modest at 2.2x. The company is well capitalized to navigate the current times.

The Board has authorized the Company to raise up to Rs 750 crore of confidence capital for future business requirements, at an appropriate time.

Number of initiatives for strengthening controls and processes with the aid of technology are being driven. The company is taking all steps possible to ensure a return to normalcy in the next few quarters.

AUM of the company has declined 14% yoy to Rs 8936 crore end December 2024 from Rs 10404 crore end December 2023.

The company has adopted stringent disbursement criteria in Q3FY2025 and its serving existing customers was prioritized. The disbursements dipped 43% yoy to Rs 1443 crore in Q3FY25 against Rs 2543 crore in Q3FY24.

The GNPA ratio was steady on sequential basis at 4.85% and NNPA ratio at 0.98% end December 2024 compared with 4.86% and 0.99% end September 2024, while rose from 1.61% and 0.48% end December 2023.

The Provision Coverage Ratio has been maintained at 80% end December 2024.

Gross Collection Efficiency was at 92.4% for Q3FY25 compared with 93.7% in Q2FY25. Net collection efficiency was flat QoQ at 90.7% from 90.8% in Q2FY25.

Borrowings for the quarter were calibrated to meet the company’s disbursement and liquidity requirements. The company has mobilized Rs 872 crore in Q3FY25, down 62% compared to Q3FY24 and 45% compared to Q2FY25.

The yield on advances declined 291 bps yoy to 21.1% in Q3FY2025.

The cost of borrowings has declined 8 bps yoy to 12.2% in Q3FY25.

The company has reduced the concentration of top 4 states to 50% from 57%.

The company has introduced a weekly repayment model for new branches.

The customer acquisition slowed down to 3.3 lakh new customers in 9MFY25, compared with 13.9 lakh in FY24 and 8.9 lakh in FY23.

The company is taking initiatives to address staff attrition and improve branch operations.

The company is expanding its dedicated recovery team from 600 to 1000 by March 2025.