Summary
Spandana Sphoorty Financial Limited - Q3 FY26 Earnings Call Summary Tuesday, January 27, 2026
Event Participants
Executives 2 Ashish Damani (President & CFO), Venkatesh Krishnan (MD & CEO)
Analysts 8 Abhijeet Tibrewal, Ankur Kumar, Chintan Shah, Rajkumar Vaidyanathan, Rajiv Mehta, Sagar Shah, Sarvesh Gupta, Vatsal Parag Shah
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| AUM (Consolidated) | ₹3,948 crores | -2.5% QoQ; impacted by ₹214 crores technical write-off despite 1.8% gross growth. |
| Disbursements | ₹1,188 crores | +27% QoQ; driven by improved confidence in new book collection efficiency. |
| Collection Efficiency | 99.8% | Refers to new book (post-April 2025); overall X-bucket improved to 99.3% from 98.7%. |
| Net Interest Margin (NIM) | 11.1% | +270 bps QoQ; expansion driven by higher yields and lower interest reversals (₹14 cr vs ₹33 cr). |
| Yield on Portfolio | 22.4% | +280 bps QoQ; reflects shift toward new book (58% of AUM) carrying 25.3% blended lending rate. |
| GNPA (Standalone) | 2.6% | -237 bps QoQ; significant reduction primarily due to technical write-offs and recoveries. |
| NNPA (Standalone) | 0.5% | -40 bps QoQ; maintained high PCR with 80% provisioning on Stage 3 assets. |
| Cost of Borrowing | 12.6% | +40 bps QoQ; increase due to higher reliance on capital markets and private bank funding. |
| CRAR | 35%+ | Sustained healthy capital position following portfolio contraction and write-offs. |
Geographic & Segment Commentary
- Core Microfinance (JLG): Represents the bulk of operations with a strategic shift toward the “new book” (sourced post-April 2025), which now constitutes 58% of AUM. Collection efficiency here is 99.8%, with 80% of branches following a monthly collection cycle.
- Criss Financial (Subsidiary): Comprises a ₹650 crore book split between Individual Loans (₹350 cr) and LAP (₹300 cr). While LAP is performing well (GNPA ~1%), the Individual Loan segment has faced high impairment, leading to a temporary slowdown in disbursements to focus on collections.
- Key States: Top six states (Odisha, MP, Bihar, Karnataka, WB, and Maharashtra) contribute 60% of AUM. Management plans to expand in Tamil Nadu while remaining watchful in Kerala.
Company-Specific & Strategic Commentary
- Corporate Restructuring: Management proposed merging 100% subsidiary Criss Financial with the parent company to reduce legal costs and utilize the revised 40% non-qualifying asset leeway. The merger is expected to take 6-9 months.
- Digital Transformation: Transitioning to a new Loan Origination System (LOS) developed by Perfios to improve customer tracking and underwriting for a planned pilot of unsecured individual loans.
- Operational Delayering: Reducing branch count from ~1,500 to 1,250 through mergers of non-productive units and delayering regional management to align with the current ₹4,000 crore book size.
- Recovery Focus: Deployed a dedicated 800-member team (scaling to 1,500) focusing exclusively on the ₹2,700 crore 90+ DPD pool, achieving ₹65 crore in recoveries during Q3.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| AUM Growth | ₹9,000 - ₹10,000 crores by FY28 | Target 25-30% sustainable annual growth; avoids aggressive expansion to satisfy regulatory preferences. |
| Credit Cost | 2.5% - 3.0% (Gross) for FY27 | Normalized “Business as Usual” (BAU) levels; net credit cost expected at ~₹50 crores after TWO recoveries. |
| Disbursements | ₹500 - ₹600 crores per month | Immediate target of ₹1,500 crores for Q4 FY26 to stabilize growth momentum. |
| Profitability | Break-even in Q4 FY26 | Management aims for consolidated break-even next quarter following two quarters of positive PPOP. |
Risks & Constraints
| Risk | Context |
|---|---|
| Management Stability | Rating agencies highlighted frequent senior management changes and ground-level attrition as risks to normalization. |
| Asset Quality (Old Book) | Residual stress in the pre-April 2025 book continues to drive slippages (₹152 cr this quarter) and necessitates high write-offs. |
| High Rejection Rates | Rejection rates remain high at 60% due to stricter guardrails and credit bureau checks, potentially limiting rapid customer acquisition. |
Q&A Highlights
Asset Quality & Recoveries
- Question: What is the pool available for TWO recoveries and the target for next year? (Sarvesh Gupta)
- Answer: The NPA pool is ~₹2,700 crores. We aim to recover ₹20-₹25 crores per month over the next year (Venkatesh Krishnan).
Funding & Liquidity
- Question: How is the traction for bank loans and impact on cost of funds? (Rajiv Mehta)
- Answer: Banks currently form 42% of borrowings. We expect this to reach 60% as PSU banks return post-Credit Guarantee Scheme rollout (Venkatesh Krishnan).
Yield & Margin Expansion
- Question: Why did margins expand so sharply this quarter? (Chintan Shah)
- Answer: Primarily due to lower interest reversals (₹14 cr vs ₹33 cr) and the new book lending at 25.3% vs current yields of 22.4%. Yields should move toward 25% over time (Ashish Damani).
Subsidiary Performance
- Question: What is the status of the stress in Criss Financial? (Sarvesh Gupta)
- Answer: Individual loans have high impairment. We are focusing on collections for 1-2 quarters before resuming growth. LAP is healthy with ~1% GNPA (Venkatesh Krishnan).
Key Takeaway
Spandana Sphoorty reported a transitional Q3 FY26, marked by a return to positive PPOP (₹8 crores) despite a consolidated net loss of ₹95 crores due to legacy book write-offs. The company has successfully pivoted toward a “new book” (58% of AUM) which exhibits superior asset quality with 99.8% collection efficiency. Management is executing a structural cleanup involving the merger of its subsidiary Criss Financial, branch consolidation (targeting 1,250 units), and a technology overhaul via Perfios. While the AUM has contracted to ₹3,948 crores following a ₹214 crore write-off, disbursements grew 27% QoQ, signaling a return to growth. With a massive ₹2,700 crore TWO pool for potential recoveries and NIMs expanding to 11.1%, the company is positioned for consolidated break-even in Q4 FY26 and targets a ₹10,000 crore AUM by FY28. Key watch points remain management stability and the successful integration of the subsidiary.
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