Spandana Sphoorty stops onboarding customers with no prior credit history

Heat wave, Lok Sabha polls hit collections, asset quality in Q1

With rise in stress in the microcredit segment, microfinance institution (MFI) Spandana Spoorthy Financial (SSFL) has stopped onboarding customers who have had no prior credit history.

It has also put on hold acquisition of new members — those with prior credit history with other lenders— in a few states as a measure to improve asset quality.

Shalabh Saxena, managing director (MD) and chief executive officer (CEO), in a statement to the BSE, said it was a challenging quarter (Q1 FY25).

The long-drawn general elections, severe heat wave across the country and higher attrition in select geographies posed a challenge to the quality of portfolio.

MFIs gross non-performing assets (gross NPAs) rose to 2.6 per cent in Q1 FY25 from 1.63 per cent a year ago. Sequentially, they were up from 1.5 per cent at the end of March 2024 (Q4 FY24).

Net NPAs inched up marginally to 0.53 per cent in June 2024 from 0.49 per cent a year ago.

Sequentially, they were up from 0.30 per cent in March 2024, according to an analyst presentation filed by SSFL with the BSE.

SSFL said the company added 200,000 new customers during Q1 FY25, a decline of 23 per cent year-on-year (Y-o-Y). The decline was largely due to challenges, including the heat wave and elections.

Net collections efficiency declined to 94 per cent in Q1 from 98.1 per cent a year ago. Sequentially, it fell from 96.5 per cent in Q4 FY24.

The impairment on financial instruments, money set aside as provision for stressed loans, grew multi-fold to Rs 212 crore in Q1 FY25 from Rs 29 crore in Q1 FY24 and Rs 94 crore in Q4 FY24.

The rise in credit cost due to growth in delinquencies hit the bottom line. Net profit declined to Rs 56 crore in Q1 from Rs 119 crore a year ago. Sequentially, net profit declined from Rs 129 crore in Q4 FY24.

Assets under management (AUM) rose by 32 per cent Y-o-Y to Rs 11,723 crore at the end of June 2024, it said.

Referring to the effect of polls, SSFL said activity in Uttar Pradesh, Bihar, Madhya Pradesh, Maharashtra and Odisha was impacted. It encountered operational challenges because of restricted movement of customers and employees.

In the backdrop of the severe heat wave, there were challenges in enforcing the joint liability group model. It was due to low customer turnout at the centre meetings.

High attrition was reported in key states like Madhya Pradesh, Maharashtra, Rajasthan, Telangana and Gujarat. This affected timely customer service, according to the presentation.

It has introduced technology-enabled monitoring systems for supervisors to ensure better control and improve portfolio quality. “We expect the business to be normalised by the second half of the year,” it added.