SPANDANA SPHOORTY FINANCIAL (NSE: SPANDANA) Q1 2026 Earnings Call dated Aug. 14, 2025
Corporate Participants:
Unidentified Speaker
Ashish Damani — Interim CEO, President and CFO
Analysts:
Unidentified Participant
Mahrukh Adajania — Analyst
Sucrit Patil — Analyst
Abhijit Tibrewal — Analyst
Ashlesh Sonje — Analyst
Prabal Gandhi — Analyst
Prasanjan Mitra — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Spandana Sphoorty Financial Limited Q1 FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing STAR and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Damani, Interim CEO, CFO and President. Thank you. And over to you sir.
Ashish Damani — Interim CEO, President and CFO
Thank you for joining in this evening with us for this call. Let me take this opportunity to, you know, wish you in advance A very happy 79th Independence Day. Our apologies, I think for some technical challenges. The presentation would have just got uploaded a few minutes back, so I’m not sure if everybody got a chance to, you know, go through the presentation in detail. In any case, I would try to cover all the highlights from the presentation in my opening remarks. Friends, as you all know, we have announced in the last results in fact in Q3 results that we would like to go for, you know, capital raise which was confidence capital that we talked about post the announcement.
We have set the capital raise process in motion and I’m pleased to announce that we have successfully closed the 400 crore rights issue on 11th of August 2025. The issue saw full participation from the promoters and there was a slight agreement from the institutional investors as well. We had seen good participation coming in from retail investors as well. This equity will strengthen Spandana’s capital structure and the car has now improved to 46% on a console basis from 40.8 which is what we had at end of June. Friends, we’ve been maintaining a conservative posture with regard to liquidity given that there have been a challenging external operating environment over past few quarters and you would have noticed that we’ve been maintaining a very, very healthy liquidity to address this concern.
We had 1,731 crore of liquidity at the end of June 25 and we continue to maintain sufficient headroom on this aspect. Microfinance industry is very gradually moving towards stability. I’m sure you would have noticed. You w ould have also checked, I mean if you had a chance that our ex bucket collection efficiency while it dipped slightly in April and May, it reverted back to 98% in June and improved further to 98.5% in July. We have implemented a stricter guardrails 2.0 credit rules from January 2025. While I think some of the peers would have, you know, taken up this starting April 2025. Pandana’s approach has been very selective about, you know, lending to the customers. The new loans disbursed post January 2025 or since April have been performing extremely well owing to, you know, this conservatism that we have built into the business.
In terms of numbers, the current book for you know, whatever was disbursed since January in the last financial year was at 95.6% whereas if you look at the current year disbursements it is trending at around 100% in terms of, you know, current book. We are taking number of steps to strengthen our processes and we are also taking number of steps towards improving collections from the overdue buckets. We have been maintaining more than 500 strong dedicated collection team which is engaged with the customers to recover these overdue amounts. You will notice in the presentation that we have collected 41 crores in the current quarter as well compared to 52 crores from the overdue buckets.
We have also initiated efforts focused on engaging with the customers through tele calling, engaging them by sending SMS with digital links so that they can make payments directly. Typically the customers who do not engage are migrated and that is where these SMS with the payment links are very useful and helpful. We have started sending this on a regular interval basis. In addition we are also initiating some legal actions like sending notices or by filing wherever necessary. There have been some encouraging moment that we have seen post these actions. While recovery efforts are going on in the field.
Our teams are also working hard to bring in product process and technology level changes to ensure stronger controls with regard to underwriting of new loans. We have done multiple announcements in the customer journey including introduction of liveliness checks at various stages, compulsory house visits which are now corroborated with technology in terms of validation and through geotagging. We are also doing welcome calling to ensure that the customer aware. We have introduced E signing to improve the entire documentation process around the loans. We have also made some changes in our SOP like accepting bank statements that are, you know, at least 90 days in operation, increasing cooling off period between two loan products, doing upfront CB checks to enable faster processing of loans.
All these changes we believe will help us not just simplify processes but increase customer convenience while at the same time ensure quality onboarding and underwriting. Our data analytic efforts are also focused in on identifying pool of existing customers to extend loans to regular update in the system is being done to drive focused approach at a field officer level in terms of engaging with customers who are eligible for further loans. We have disclosed in our presentation about 50% of our existing customers and some dormant customers are eligible for fresh loans and as per our stricter internal lending norms, about 85% of these identified customers have less than 1 lakh as credit exposure while 65% of them also have a vintage of over two years with us, thereby providing us with a sufficient right to play and build a strong long lasting relationship with them.
Let me move on to the regular business update and cover some numbers for you. As explained earlier, our efforts during the quarter were directed towards improving systems process with a focus on efficiencies and better credit underwriting. Our disbursement for the quarter is thereby was trending low at 280 crores. However with key parts of our plan, systems and processes improvements in place we are confident and we have also started seeing increase in the pace of disbursements with July number alone recording disbursements of 265 crores against the 280 crores disbursed in the entire quarter of Q1. AUM at the end of Q1 was at 4,958 crores.
A drop of 27% quarter on quarter. As you all understand AM is the outcome of disbursements and we are confident once the operating environment stabilizes and our you know systems are rolling we will be able to grow a quality book very quickly. Let me cover some highlights on the portfolio quality. You notice that the environment has been stabilizing and top five states numbers have been provided in the trend has been provided in the presentation. You will notice that we are seeing an improving trend in the top five states for collection efficiency on the X bucket.
We continue to maintain our provisioning at 80% which we believe is among the highest in the industry. GNPA stands at 5.49%, a decrease of 14 bips quarter on quarter. Standalone GNP however was flat at 4.88%. Likewise our NNPA for the quarter was at 1.15%, 62 bps over number of the March numbers. Standalone NNPA was however at 0.96 which is flat with a comfortable liquidity position of about 2,030 crores at the beginning of the quarter and a muted disbursement. Our funding requirements were met through available liquidity during the quarter and we had a very strong closing liquidity position of 1731 crores.
Q1FY26 Financial Performance Let me just give you quick highlights around this. The net Interest income for the quarter was 113 crores over 425 crores reported in Q1 of last year. NII was lower by 43% over the last quarter. The decline in NII was primarily due to the decline in AUM and the interest reversals that we have seen. On account of flows, our P pop was negative 59 crores. However, with disbursements improving and continued rationalization in our operations on the cost side, we expect that PPOP to turn positive in the coming quarters. Yield on the portfolio was lower at 19.4% for the quarter as against 20.7 in the previous quarter.
The decline in the yield is primarily on account of the reversals again and should get corrected as the disbursements start picking up. The company reported a net loss of 360 crores for the quarter on account of higher provisions. Additional credit cost of 131crores recognized on Q1FY26 due to technical write off. Excluding this, the impairment cost would have been at 291 crores. We see FY26 as a year of rebuilding. We are relooking at every system and process for improvements. While our disbursements were low during the quarter, the performance of the loans disbursed during this period with the new credit rules provide us with the confidence for the way forward.
While we’ll continue to maintain a cautious stand, we are also aware of of the need of our customers for the working capital. And all these requirements shall be met as long as the customers comply with the credit rule engine that we have set out. With this, I’ll close my opening remarks here and open the floor for questions.
Questions and Answers:
operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and then one on their touchstone phone. If you wish to remove yourself from the question queue, you may press Star and then two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles again. To register for a question, please press Star and then one. Our first question comes from the line of Maruk Adijania from Nuama. Please go ahead.
Mahrukh Adajania
Yeah, hi. I had a couple of questions. Firstly, that you’ve shown a slide of forward flows. A chart on forward flows. So they’re still higher than April. When do you see the forward flows easing? And when do you see a return to profitability?
Ashish Damani
Hi Maruk. Thanks for the questions. So, forward flows. Yes, you’re right. The forward flows for the GNPA bucket has been higher which is 89%, 85%. But if you look at what will drive this really is, you know, the flows from the top have to, you know, being curtailed. We have seen improvement in our current bucket and it stacks at about 98.5% in July. This will limit the flows into the delinquent, I mean into 1 to 30 or subsequent buckets. Once you have a palatable number, I am sure we will start seeing much more better collection efficiencies in you know, the subsequent buckets as well.
Right now it is a overwhelming number which is stacking up in, in these buckets and that’s why the percentages which we can hold back or which we can reverse are, are hovering around that 30%.
Mahrukh Adajania
This is likely to continue for say one to two quarters. Will it improve by the fourth quarter? What’s your best assessment?
Ashish Damani
Yeah, I think it will take one more quarter but from third quarter onwards we should see a better performance on all the, all the buckets.
Mahrukh Adajania
The forward flows will ease in all buckets.
Ashish Damani
That’s right.
Mahrukh Adajania
And what would your disbursement target, if any be for the full year and you know, if at all you have any um, growth guidance.
Ashish Damani
So we’ve talked about the AM growth last quarter as well. We are looking at you know, around 20% as a number for the full year growth. Having said that this is the environment has been evolving and we would like to be cautious while things are still evolving. However, existing customers, we will definitely meet their requirements. Like we have explained in the presentation, 50% of the borrowers are eligible as we speak even when we apply all the stricter norms on the on the credit rule. So we have sufficient player to, you know, build a book and I think we should be able to achieve this 20% growth number as guided.
Mahrukh Adajania
Okay, thank you.
operator
Thank you. Before we take the next question, a reminder to all the participants. You may press star N1 to ask a question. Our next question comes from the line of Sukharath D. Patil from Eyesight Fintrade Private Limited. Please go ahead.
Sucrit Patil
Good evening to the Sandana team. And I have a question to Mr. Damani. As Sandana scales in non south markets and deepens digital engagement, how are you thinking about evolving the operations model? Possibly integrating alternate data psychometric scoring or embedded fintech partnerships to underwrite new borrower cohorts and reduce seasonality linked volatility? Is there a roadmap to build a more predictive Pan India credit engine beyond the traditional microfinance.
Ashish Damani
Thanks Sukhrit for the question. We have done a lot of analysis internally and we have worked with even the credit bureaus to understand if there is a suitable credit scoring model or credit scores which can be, you know, used to do the underwriting. Unfortunately, the regression analysis kind of throws up no pattern as such. Even at the highest scores you have a bad rate which is very high and there are new to credit customers who show actually much better performance. So it’s a mixed kind of analysis that we’ve been able to see. I think the right way to look at it is it has to be a combination of credit score and some of the other aspects which are nuance to let’s say the activity geography, which, which will have to go into this.
So not immediately but in future definitely we will like to have a scoring model which is in house developed taking into account all of these aspects.
Sucrit Patil
Thank you very much. Thank you very much, Mr. Damani and best of luck.
Ashish Damani
Thank you.
operator
Thank you. A reminder to all the participants, again, if you wish to register for a question, you may press star and then one participants, you may press star and one to ask a question. Our next question comes from the line of Abhijit Tibriwal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah. Good evening everyone. Thank you for taking the question. Ashish was just trying to understand two things here. First things first, I mean while there are many players today in the MFI industry who have started to call out that operationally the things have normalized. Right. And what we are seeing today in those companies today is more, I would say the P and L pain from the last few quarters and which you also highlighted that the current bucket collection efficiency for the newer disbursements are holding up well. I remember in your opening remarks you suggested almost 100%.
So what I’m trying to understand is From, I don’t want to use the word legacy, but basically whatever the old book which is there, right. For how many quarters in your assessment is the pain going to linger for us? And I remember a previous participant also asking you that in your internal assessment, when is it that we can start reporting a positive P pop and a positive path?
Ashish Damani
Yeah, so I’ll answer the first one. You know, I think one more quarter is what we believe there has to be. There will be a pain. If you look at our lending and you know this is, this will hold true for most of the microfinance entities. The weighted average maturity of the loans will hover around. For Spandana, it is at presently at 6.7 because the disbursements have been low but on a normalized basis. Also it is never beyond, you know, nine and a half, 10 months. So technically speaking, any pain or any churn of the book should not take more than, you know, four quarters.
And I think we are already down three quarters in the pain. So that way for the churn to happen, it should not take more than a quarter from here is my understanding. And in terms of profitability, yes, like I said, one more quarter is what we see as pain, but thereafter we should see better numbers for Spandana.
Abhijit Tibrewal
Got it. And so I remember in your opening remarks again you made a remark around FY26 will be a year of rebuilding. And I remember speaking to you about this earlier that I mean very clearly, right from that peak of close to 12,000 crores in AUM, I mean we’ve seen very sharp decline, right? So like you rightly said, I mean second quarter the AUM could come down further. But third quarter onwards, which is second half of this fiscal year onwards, you are expecting we’ll start rebuilding. When I say we’ll start rebuilding from there onwards, do you expect that at least qq, we will start reporting a growth in aem?
Ashish Damani
Growth in the aem. Yes, yes, that’s right.
Abhijit Tibrewal
That’s the right, that’s the right interpretation. And lastly, sir, I mean again earlier in the call you said we are still guiding for a 20% AUM growth this year. That would essentially mean disbursements have to normalize and really accelerate in the second half for us to deliver a 20% growth in AUM. Is that how you are basically thinking about it? And a subpart to this question where you said that maybe one more quarter of pain and third quarter onwards things can start normalizing. So when we say start normalizing in a normalized scenario, what would credit costs be like? And sir, why I ask is today when we speak to leaders like you, right, everyone has a different view on the MFI industry.
There are leaders who are seeing that the JLG is not working. Then there are leaders in the MFI industry who say that, hey, the JMG model is still very much working. It needs to be tweaked a little bit given how things are, given how borrowers are. So what is your assessment? And in this new normal, which in your assessment will start from third quarter, what could be likely Credit costs?
Ashish Damani
Yeah, so I can answer the credit cost question. For a BAU basis for the current year, it is still evolving. So I would not like to you know, reflect on that. But on a BAU basis, the new normal for microfinance industry should be anywhere between 2.5 to 3% in terms of credit cost. There’s a new normal. And the reason for this, I think, Abhijit, is largely because the reality somewhere in between, while the joint liability has weakened, it is still something that needs to be used as a tool to have right operating cost and to have the right model in terms of, you know, servicing the large customer base, which microfinance, you know, kind of services.
So things have evolved, changed over time. Things like, you know, digital collections have picked up. Even for Spandana, it is now trending at around 14% compared to, you know, what used to be more like 3 to 4%. So things are evolving and things. And that’s why I think two and a half, 3% would be the new normal.
Abhijit Tibrewal
Got it, sir. And so if I can just squeeze in one last question for franchises like us. Right. I mean, given that the EUM has run down. Right. The OPEX continues to remain elevated, which are essentially fixed costs, the employees that we have on board. Right. So I’m just trying to understand till the time that AUM scales up, right. How are we thinking about OPIX in the near term, maybe the next couple of quarters. Is there an intent to kind of, let’s say, when people leave, right. There’s a normal attrition, so we just let it be right and not replace them. Right.
Ashish Damani
You’re right. Sorry, sorry to stop you there. But I get the question. How is that we are going to look at productivity and overall employee cost to play out in the near future? If that’s the question. Abhijit. Yes, I think if you look at our last three quarters, we were at 19,808 as number of employees went down to 18,382 in March, went down to 15,574 in June of 25. So we are focusing on, you know, operational efficiencies on the ground. We have also merged about 81 branches and we will look at more improvements on the, the footprint and you know, align it with the, with the rundown in the AUM that we have seen.
So yes, operating cost is one of the areas where the focus is and if there is an attrition, we will, you know, we will be very watchful in terms of, you know, replacing or backfilling the employee base in only those geographies where there is a, there is a need to from a productivity matrices perspective.
Abhijit Tibrewal
Got it. So this answers all my Questions. Thank you very much and I wish you and your team the very best.
Ashish Damani
Thanks.
operator
Thank you. Our next question comes from the line of Ashlesh Sonj from Kotak Securities. Please go ahead.
Ashlesh Sonje
Hi sir. Good evening. The first question is on slide number six in your presentation where you show lender overlap. Out of this 21% which is exposed to spandana plus three or more, how much of this would be already delinquent in zero plus.
Ashish Damani
21? Sorry, I don’t have that number handy. But just to give you a similar data point, the spandana plus three borrowers over a period of time have contributed about 30% in our GNPA in the past. So they definitely are far more delinquent compared to the rest of the buckets for this standing 21%. We’ll just come back to you but we have given another slide where it gives us idea into what kind of percentage of customers are let’s say delinquent across Pandana base. So 13% of the customers are over 30. When we look at, you know, the Spandana book and the rest of the customers who are, let’s say in Spandana plus three but are very likely to be, you know, and continue to be in current bucket.
As far as you know, our book is concerned, 96% of the rest of the book is current with us.
Ashlesh Sonje
Understood. Sir, in your opening remarks you spoke about the cooling off period. Can you shed more more details on that?
Ashish Damani
So earlier we used to give customer loan after six months of the first loan. Now we wait for 12 months before we give the second loan.
Ashlesh Sonje
And what is the typical contracted maturity of that loan for you?
Ashish Damani
We have 85% of our loans are for two years and roughly 15% of the loans are for 12 and 18 months.
Ashlesh Sonje
This cooling off period refers to the period after which the borrower becomes eligible for a replacement loan. Effectively.
Ashish Damani
That’s correct. That’s correct.
Ashlesh Sonje
Those are all the questions I had. Thank you.
Ashish Damani
Thanks Ashleesh.
operator
Thank you. A reminder to all the participants, if you wish to register for a question, you may press star and one. Now participants, you may press Star and one to ask a question. Again to ask a question, you may press Star and one. As there are no further. Sorry, we have a last minute registration coming from the line of Mr. Abhijit Tibriwal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah. Thank you for allowing me a follow up. Ashi. Sir, if I can ask you just two more questions. First thing is, I mean how is our board thinking about succession now since the time Shalaps left. What is the progress that the board has made in case you can share some thoughts around it. Right. At least how are we approaching that? Right. If there is anything at all that you can share.
Ashish Damani
Yeah, sure. Abhijit, I think the board has been looking at this particular thing in great detail. And I think they initiated the process sometime back. So in next 30 to 45 days we should be able to know get this concluded.
Abhijit Tibrewal
Got it. And so right now, I mean the inclination is to get someone external or are there also internal candidates in the frame?
Ashish Damani
So the we’ve discussed this last quarter and the board will look at both internal as well as external candidates and you know, look at what is. What is the best for the enterprise too.
Abhijit Tibrewal
Got it. Got it. And lastly sir, I mean again if you could just refresh all our memories with regards to Kedara’s holding. Right. I remember they were invested from a fund. They were also invested in another housing finance company from that fund which they’ve already exited now. Right. So it could just refresh all our memories. How they placed on that. That will be very useful for all of us.
Ashish Damani
So kedara holds about 48.12%. And 41% comes from, you know, the fund. The old fund, Fund one of Kedara. And the rest, you know, comes from Fund 3. And that’s where they stand. And they continue to hold that post. The rights issue as well. So very much intact in terms of, you know, their holding.
Abhijit Tibrewal
Got it. Great. Thank you so much.
operator
Thank you. Our next question comes from the line of Anand Kumar Ella, an investor. Please go ahead.
Unidentified Participant
Thanks for taking my question. In July, the disbursements.
operator
Anand sir, we had lost your audio in between. If you can repeat your question once again. Thank you. Anand sir, we had lost your audio in between. If you can repeat your question once again please.
Unidentified Participant
Okay. Can you hear me now?
operator
Yes, it is slightly better. Please go ahead.
Unidentified Participant
Sorry for that network. The point I was trying to ask was. In July the disbursements are 268 crores. How are the first two weeks? In August the disbursements took out.
Ashish Damani
Hello, Anandji. Yes. The trend has been better than what we have seen in July. For the first two weeks. I think we are still not close to our BAU or potential. I think we will take one more month. And from September onwards we should see a very normalized kind of disbursements.
Unidentified Participant
Okay. Thank you. That was the only question that I had.
operator
Thank you. The next question comes from the line of Prabhul Gandhi from InCred, AMC please go ahead.
Prabal Gandhi
Hello. Am I audible? Hello?
Ashish Damani
Yes Prabhul, you are honorable.
Prabal Gandhi
Hello.
operator
Yes, Prabhul. Sir, your line is audible. Please proceed with your question.
Prabal Gandhi
Okay, thank you. So just one question. When we see the slide number six, Reza mentioned that asset quality of loans disbursed under guardrail one has delinquency of 4.4%. So even within, even after implementation of stricter norms for us we are still seeing delinquencies as high as 4.4%. So any comments there?
Ashish Damani
I think that was guardrail one which has been given out there. And at that time I’m not sure if the industry was following all the norms. So there is a possibility, you know that while we would have selected the customer, the customer went into, you know, Spandana plus three or higher and subsequently the, you know, the performance was not as good as what we see now. That’s the long and short of it.
Prabal Gandhi
Sir, can you share any data points with respect to see the new disbursements that we have done last six months which indicates that the delinquencies there are either lower than the industry or lower than what we have seen historically. Something that you consider on that, I think we’ve.
Ashish Damani
That’s the information on that slide 6 which you are referring to. If you see whatever we have disbursed in this financial year, all the loans are stacking up at 100% and last quarter if you have to look at, that’s the other number where we have said card risk 1 plus.
Prabal Gandhi
Okay. And secondly when we see the percentage of 3 plus lenders despite some 10 billion provisions in last two quarters, that number is quite sticky for us at 21, 22%. So ideally that number should have come down. Since we have written off so aggressively. Why is that number not coming down for us?
Ashish Damani
I think that number the underlying is number of borrowers that are standing on a date. Since there are a lot of customers who have closed their loans with us and have become dormant, doesn’t form part of denominator or numerator here. If I were to add that then yes, this number like you rightly said would have come down.
Prabal Gandhi
Meaning we have closed the loans for good customers.
Ashish Damani
Yeah. Yes, customers have closed their loan by repaying all the amounts. However subsequent loan was not given to them at this point in time. They remain dormant with us. And as and when we start giving them loans or disbursed to them, you know this number will start improving. Moreover, in future when we’ve just started new to credit customers with us. And once we start adding these customers new to credit, the denominator and this 21% number will, you know, change accordingly.
Prabal Gandhi
Understood. Thank you. All the best, Ashish.
Ashish Damani
Thank you.
operator
Thank you. Our next question comes from the line of Prasanjan Mitra from rco. Please go ahead.
Prasanjan Mitra
Just one question from me. What are the ways that we are tracking the new portfolio? Basically, just to understand if there is a way that we are looking at the old and the new portfolio separately, let’s say the last three or six months, whatever we have disbursed, are they tracking significantly different matrices as compared to the old?
Ashish Damani
No. So the tracking part is same. I think the origination or the credit appraisal when we did, like we have mentioned, had much stricter norms which cuts across both the guardrail matrices as well as some internal matrices on geography, on how the center behaves and some of the aspects which come from the field. So all put together is how we have, you know, kind of looked at the origination part was very different from what we would have done in the past.
Prasanjan Mitra
And from an asset quality matrices, is there a, you know, are we tracking better kind of quality on those on the recent portfolio? I mean, is there a way to determine if what we are doing is working?
Ashish Damani
That’s right. So that Slide 6, which we just discussed with the earlier participant, if you please refer to that the loans which have been disbursed in, let’s say, fourth quarter were trending at 95.6% current book. And if you have to look at what has been disbursed in this financial year, it has, it is trending at 100%.
Prasanjan Mitra
Understood. Okay, thank you, sir.
operator
Thank you. Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments.
Ashish Damani
Thank you once again to all of you for joining us here this evening at Spandana. The entire management team is thankful to you for the consistent feedback that you’ve been providing. We all look forward to your continued support. And lastly, the team will always be available for any further queries or clarifications that you may have. Thank you once again.
operator
Thank you on behalf of Spandana Sphoorty Financial Limited, t hat concludes this conference. Thank you all for joining us and you may now disconnect your lines.