Spandana Sphoorty Financial spurts after business update

Spandana Sphoorty Financial hit an upper circuit of 5% at Rs 432.40 on bargain hunting after the company said 79% of its 1,006 branches have been operational since 20 April 2020.

Shares of the microfinance lender slumped 26.39% in the past seven sessions to end at Rs 411.85 on 28 April 2020, from its recent closing high of Rs 542.25 recorded on 17 April 2020.

The microfinance lender announced after market hours on Tuesday, 28 April 2020, 794 out of Spandana's 1,006 branches (79%) are in Green zones. All of these have been operational since 20 April 2020. The rest of its branches are expected to open soon, following the lifting of the national lockdown. Almost none of Spandana's branches are in Red zones, given the company's rural footprint.

It further said that the company has always been conservative in terms of borrower indebtedness, and focused on more resilient rural borrowers. This has resulted in Spandana having superior asset quality through various industry dislocations, and it expects this one to be no different.

The company said its borrower base is not as significantly impacted by Covid19 compared to most peers due to company's rural focus. Spandan said that 91% of its borrowers are in rural areas, and 57% are engaged in essential services activities such as dairy or agricultural activities - hence their health and cash flows are largely intact, as verified by the company's loan officers post resumptions of operations.

Average ticket size of the company's loans is Rs 23,940 as compared to Rs 37,465 for the industry - this means that the company's borrowers are better positioned to cover a missed installment as against others. It has collected over Rs 13.30 crore in the last one week despite the tight restrictions in operations. It expects significantly more collections in coming weeks, as rest of field staff returns, and the remaining branches open.

For borrowers with genuine cashflow disruptions from Covid19, a new product 'Emergency Covid Loan' will be provided to help them restart their income generation activities and be able to resume meeting their living expenses and debt servicing on a normal basis.

For borrowers who have been servicing their loans regularly, and would be eligible to be upcycled (i.e., only have one or two installments left), fresh loans to be disbursed as normal, Spandan said.

Spandana has received moratorium from most lenders, in line with RBI's Covid-19 regulatory package announcement.

The company has, however, serviced debt obligations of all lenders - both principal and interest for March 2020 and April 2020, despite having the option of a moratorium. Its loan accounts with each and every lender is regular as on date.

After the imposition of the national lockdown, the company has raised approximately Rs 800 crore in form of direct assignment and term loans from marquee institutions such as the State Bank of India and NABARD.

The company is working with various banks under the TLTRO 2.0 program, and with government institutions such as SIDBI and NABARD for further funding.

"It appears that Covid19-related situation has moved in a positive direction for Spandana in the last few weeks, and the company believe that we are better placed than its microfinance industry peers for now. However, the situation and environment continues to be quite dynamic, and is highly influenced by Government actions. The company will hence continue to provide updates on any material developments from time to time, as appropriate," the company said.

Spandana Sphoorty is a fourth largest non-banking financial company - micro finance institution (NBFC-MFI) and the sixth largest amongst NBFC-MFIs and SFBs (small finance banks) in India in terms of AUM with a geographically diversified presence in India. It offers income generation loans under the joint liability group model, predominantly to women from low-income households in rural areas.

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