Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
SPANDANA SPHOORTY FINANCIAL (NSE: SPANDANA) Q4 2026 Earnings Call dated May. 05, 2026
Corporate Participants:
Mr. Venkatesh Krishnan — MD & Chief Executive Officer
Analysts:
Sripal Doshi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to spandana Suti Financial Limited Q4 and FY26 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 this conference, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Venkatesh Krishnan, MD and CEO Spandana Sulti Financial Limited for his opening remarks.
Thank you and over to you sir.
Mr. Venkatesh Krishnan — MD & Chief Executive Officer
Welcome to this call and it’s a pleasure to be in your midst yet again. I’m sure some of you must have felt elated looking at the election results yesterday, while some of you may have felt gloomy, but one thing for sure that all of you should feel equally happy looking at our results for the last quarter we managed to disburse around 500 crores a month during the last quarter which was up against the 400 quarters per month that we used to disburse in Q3 which again was against the 300 crores in Q2 per month.
Our AUM at 4400 crores showed a 12% growth year quarter on quarter and the share of new customers last quarter was about 45% which comprised both new to credit as also new to Spandana and our overall customer base stands at little over 11 and a half lakhs. Our X bucket collection efficiency at 99.7% showed a similar trend across the five major states that we are present which is Bihar, Karnataka, Andhra, Madhya Pradesh and Odisha. Our new book which is the sourcing effective 1st of April 2025 stands at 80% and we managed to collect nearly 65 crores last quarter from our pool of 90 plus customers.
So this was a second consecutive quarter wherein we managed to collect upwards of 65 odd crores. The lender overlap which is Spandana plus 3 stood at about 4.8% with 34% being only Spandana customers, 37 being Spandana plus 1 and 25 being Spandana plus 2. We are adequately capitalized capital adequacy at 35% and our cost of marginal borrowing at 12% for last quarter comprised of 44% bank funding. Our opex came down to about one hundred and sixty one crores last quarter as compared to one hundred and ninety five crores and we had for the first time after six quarters had a PAT of 5 crores against a loss of 95 crores in the previous quarter.
Some of the things that I said in my last call, which also incidentally was my first call after joining Spandana in November that we were planning to move to a new LOS platform being developed by Perfios. It has started moving and hopefully we should have our first product which is the individual loan product, either before the end of this quarter or early next quarter. And the JLG migration might happen sometime in October, November types so it’s moving in the right direction. That should give us a lot of flexibility and agility in terms of the platform that we have.
Our micro lab portfolio in our group company and the subsidiary stands at about 322 crores which we definitely wish to grow in the times to come. That’s a good portfolio that we have. One of the things which is rarely spoken about is the customer satisfaction score. We started focusing heavily on customer satisfaction and our score which was about 22% in Q3 has gone up to 71%. We’re still not very happy. We’re aiming for a 95% score either before the end of this quarter or early next quarter wherein we want to ensure that all our customers who try to reach out to us get the response on time.
Incidentally, in the last quarter There was only one case which was resolved outside of TAT of 21 days that RBI speaks to know otherwise. All other customer complaints queries were resolved well within the tag on the merger front. The process has begun, might take another five, six months. We are working on it. So the CFL merger is definitely in due course. It’s going to happen. We’ve been hearing about the El Nino and fertilizer issue. So a lot of queries keep people keep asking, you know, how is it going to impact the portfolio?
Well, it’s something which is seasonal, which is expected, anticipated but we are trying to be cautious in terms of how we source new customers and especially focus more on ensuring that our collection efficiency both in the X bucket as also in the one plus bucket sharper focus so that as and when a situation does arise and which should be a passing cloud, we are adequately prepared with that. Let me pass on the mic to my colleague Ashish who’s the CFO for him to give you further financial details.
Thank you.
Operator
Spandana Namaskar. Good evening to all of you. Thanks for joining the call. I will cover the highlights, try to divide it into sections which are relevant. So let me cover some business drivers. AUM closing was 4420 crores which is higher compared to last quarter 3948 crores. This is after 8 quarters. We have seen an increase in the AUM and the aum increase was 12% quarter on quarter.
Mr. Venkatesh Krishnan — MD & Chief Executive Officer
What is
Operator
The better part of this is 80% of the AUM now is constituted under the new guardrails under the new BRE and giving us a collection efficiency of 99.7%. And this is not over a period of two months. This is of eight months of seasoning with which we are, you know, looking at this kind of collection efficiency. So that’s very heartening to see from the portfolio quality. Getting into some more details, Hex bucket collection efficiency has been seeing improvement for us month after month. For the quarter ending March 2026 it was at 99.7% against 99.3% for the previous quarter.
In terms of our AUM which is into 1 to 90 DPD, that has come down now to 1.3% against the 2.5% which we have seen in the previous quarter. The GNPA stood at 3.8% versus 4.2% in December. The NNPA is now down to 0.73 against the 0.92% compared to the December quarter. We continue to maintain sufficiently provided in our books at greater than 80%. In terms of moving and giving you some highlights on borrowings and liquidity, we have borrowed 1272 crores during the quarter. The total borrowings since the rights issue we have done is at 3116 crores.
This is since August 26th. Actually from a liquidity standpoint we have been maintaining very sufficient amount of liquidity. As at March 31, 2026 it was at 1438 crores. Accordingly the capital adequacy is also very strong. You know car stood at 35.9% with a net worth of 2130 crores as of 31st of March. Giving you some financial highlights on financial performance for the Q4 portfolio originated like I have explained is at 80% during the FY26 with a net CE of 99.7. Portfolio quality given the AUM mix is shifting towards the newly originated portfolio has seen lot of improvement yield for the quarter.
You know got positive impact because of this movement into, you know, better portfolio mix. So it is at 22.8% compared to 22.4% in Q3. We have seen marginal cost of borrowing reduce during the quarter by 120 basis points. It is stacking about 12%. NIM contracted to 9.9% compared to 11.1% largely on the impact of cost of borrowings which we have seen in the previous quarter. Our P pop has strengthened. We were at 39 crores for Q4 compared to 8 crores reported for, you know, Q3 FY26. Like you have noticed and Minky explained, this quarter we have reported 8 crores of PBT compared to the loss of 125 crores in the last quarter.
With this we will take a pause and open the floor for any questions or clarifications that you may require.
Mr. Venkatesh Krishnan — MD & Chief Executive Officer
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may
Questions and Answers:
Operator
Press Star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press Star and two participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Sripal Doshi from Equirus. Please go ahead.
Sripal Doshi
Hi sir. Thank you for giving me the opportunity and congrats on getting back to the growth path. On the loan book side, my first question was on the yield side and also on the cost of fund side. Given the tight liquidity in the market, how are you seeing the cost of fund moving for us especially, I mean while we have gone through our own journey as well. So how do you see that cost of fund moving in FY20 and what are we sort of estimating that to shape up during the year? And on the yield side, what is our incremental yield for let’s say 4Q and what is our blended yield target also at book level for FY27.
Operator
So I’ll take that question Sripal. You know, the cost of borrowings should be, you know, stacking up in the similar levels more, more around, you know, 12.5 on a blended basis? Largely because we do see that, you know, there will be some impact on the, on the cost of borrowings because of the liquidity crunch you are explaining. However, we believe that as our business, you know, kind of strengthens and improves, we should not see a large amount of escalation in the cost of borrowing. So overall for the year we believe it should be below 12.5%.
From an yield standpoint, the current pricing that we have on the loans is ranging between 23% to 26%. Depends on where the customer is in the vintage with us. My disbursement deal, if I have to, you know, give you that number, that is around 25.2, 5%. However it is presently at 22.8 largely because of there is a GNPA and there is a book which has flowed into GNP or whatever so it gets impacted. But as we progress I believe we should inch up closer towards the ideal yield during FY27.
Sripal Doshi
Got it. Thanks for that detailed answer. The second question was on the customer base. So that has been shrinking for us the last almost 6, 7/4. So what has been our new customer acquisition during 4Q and where do we see that customer base ending for FY27 end? Because I mean while we have seen unique customer share increasing and also we are aligning ourselves with the guardrails requirement, when do we see this customer base growth coming back?
Operator
So you know, if you look at and if you go back to our commentary, we have been explaining that the focus would be to, you know, add new customers to the Spandana base and improve the productivity at the loan officer level and there is a headroom which is available which we will, you know, kind of continue to chase. If you would have noticed, we have added about 1.2 lakh new borrowers during the quarter against 63,000 odd in the last quarter. So there has been a clear focus on this aspect. I think by the next financial year end our goal Is to add another 7 lakh new borrowers during the financial year which should take us after the, let’s say dropouts or whatever to closer to 1.6 million borrowers from the present 1.1 million that we have.
So I think that’s largely the trend that is likely to play out.
Sripal Doshi
Got it. Okay, that’s very helpful. And thirdly, last question on the growth side if you could highlight where do we see the FY27 loan book shaping up in terms of the growth as well as what sort of a profitability should we see? We have seen PBT at least coming in green so where do we see when we see that PAT also of FY27N level.
Mr. Venkatesh Krishnan
So last quarter as I said we averaged about 500 crores of dispersal and you want to retain at that level for at least next 3, 4 months and then aim for 550 to about 600 crores as we progress and keep a sharper eye on the collection efficiency as well. So if all goes well we should be closer to about 6 and a half thousand crores AUM by FY27. And for profitability, no guidance but yes, we aim to be in the black
Sripal Doshi
And then with this 6,500 crore disbursement in terms of loan book absolute like we are at closer to 4,400 crore. So with this 6,500 crore, where do we see the closing loan book or let’s say the loan growth for the full year
Mr. Venkatesh Krishnan
I spoke of, you know, March 27th we are likely to exit that six and a half thousand crores of AUM.
Sripal Doshi
Okay, okay. Sorry, I thought that was dispersion. Sorry, my bad. Okay, got it. Thank you so much sir for answering my question. I’ll come in the queue for more questions. Thank you.
Operator
Thank you. Ladies and gentlemen, if you wish to ask questions, you may please press star and one. Our next question comes
Mr. Venkatesh Krishnan
From the line of Pratish the money, an individual investor. Please go ahead.
Operator
So my question is like one year back the industry entirely had faced a challenge. So I want to understand what kind of entity level measures and what kind of industry level measures have actually led to the new portfolio giving a collection yield of more than 99% tax bucket. That’s my first question.
Mr. Venkatesh Krishnan
So as far as the industry is concerned, the guardrails issued by the SROs are being followed in total effective 1st of April. Which is also reflecting in how the industry book is behaving. Whether it is a three lender norm or the 2 lakh indebtedness FYR. And more importantly, one of the SRO is also doing a third party evaluation of various lenders to ensure that they are well within the guardrails and any divergence is getting reported to the company for action. No response. Getting reported to the board and in some cases even getting reported to the regulator.
As far as concerned, we went a little stringent as compared to the guardrail itself. So Today for instance, 98% of the disbursements that I did, the customers were regular. So I don’t lend to customers who are 30 plus on the day of disbursal and ensuring that the focus remains tight on only giving to those customers who are exhibiting adequate behavior. That we believe is very important. And of course we all keep talking about sharper focus on recoveries. But we are also going one step forward, trying to do something which is difficult to do, but we have started doing it.
For instance, if a customer were to not honor their installment on the demand date the very next day, we are trying to reach out to the customer saying that you need to honor or we try to meet the customer and we are trying to ensure that this is regimented as a process so that I know of what’s happening on the ground on a daily basis in terms of Recovery, which is more important because dispersals will keep happening, not to worry. So these two controls at our end should help us ensure that we build a very robust book as we go along in this journey.
Operator
So if I were to compare these current measures to maybe March 25, how is it broadly different as in terms of disbursement? As you said right now, if it’s a 30 day plus customer then you are avoiding disbursing to them. So was this a practice which was also followed in March 25 or what increments from March 25 or prior to the entire crisis were
Mr. Venkatesh Krishnan
Implemented?
Operator
Hi Pratish, this is Ashish this side. So see the question is, you know, whether the industry was following the norm or not. We have adopted this sometime in January in terms of, you know, not disbursing to a 30 plus borrower. However, if the customer was getting loans from, let’s say the industry at large, irrespective of their, you know, staging with across the loans, then you know, the behavior could not have been improved which is what SROs have done, stepped in and made it a full blown, you know, a guardrail which has to be adopted by each and every lender in the space.
And today nobody is lending beyond 60 days. Our spandana follows 30 days. So that’s, that’s where we are right now.
Mr. Venkatesh Krishnan
Okay, got it. One last question sir. In terms of AI
Operator
Implementation, is there anything that has come up, like, for example LNT Finance, I think they speak about implementing AI in determining customer cash flows and all of that. But there are few other MFI companies which are not yet comfortable. So where are we among them?
Mr. Venkatesh Krishnan
There are two, three areas wherein we are exploring at this point in time the larger energies towards migration of our ALOES platform to the current one to perfeos which when implemented is definitely going to make a difference. MIS automation is something wherein we are looking at. And second is the customer satisfaction, the in house call center that we have. There is a scope for doing an AI project, very simple one but in our quest to reach to a 95% CSAT that’s an area again we are looking at.
Apart from that there could be one of the areas in it wherein we could explore some of those AI initiatives. But largely this year is going to be the migration to the new platform.
Operator
Actually I meant in terms of analyzing cash flow. Like for example, is it possible or like. I’m just generally asking that since there’s so many online UPI transfer companies right now, PTM etc and they have database of so many MSMEs, etc, is it possible to legally purchase data from them and kind of process that in the AI system and then decide whether lending to them is profitable or not? Is that a practice that’s happening?
Mr. Venkatesh Krishnan
If you’re talking from a lending perspective, the kind of controls that we have is more than sufficient. We don’t need to have any buying of data. So for instance, one of the other things that we are doing is bot calling today. When customers bounce or we are in the 90 plus, we are using a bot call which is quite advanced and that itself is helping us. And then of course, over and about the bot call, you can always reach out to customers through the manual calling. But for the dispersal purposes, I don’t think we need to buy anything from the marketplace.
There are enough and more customers available in the marketplace today.
Sripal Doshi
Okay, got it. Thank you.
Operator
Thank you, ladies and gentlemen. To ask a question you may please press star and one. Our next question is from the line of Aviral Jain from Asegular Gulf. Please go ahead.
Mr. Venkatesh Krishnan
So you sound muffled.
Operator
Is it better now?
Mr. Venkatesh Krishnan
A little, sir.
Operator
So thank you. Thank you for taking my call. Good question. I have a fundamental question given what whatever the industry has gone through in the last two years and what we observed was the GLG attendance discipline had gone, there was a lot of door knock and frontline attrition was very sky high, 4 to 5% or sometimes 6 to 7% a month. How do you see the border behavior and fundamentally scalability of the microfinance model basis which Spandana has been built and there are many other companies. So what is obviously Nord has gone through in the last two years, but till the end of FY24 versus as you see the ongoing situation today, is there fundamental changes that you need to make in terms of loan officers coverage per borrower, borrower selection and what is the borrower behavior on the ground in terms of adhering to the best practices as laid out by the borrower or the fundamentals?
Mr. Venkatesh Krishnan
The business has been evolving over the years and what held good a couple of years ago is no longer valid and may not be valid three years down the line. And it’s a very dynamic world. We did not talk about digital repayment three years ago. Today, for instance, at Pandana, my average is about 22%, 20 to 22%. Now if customers are paying me online and if I expect them to attend meeting center just for the sake of attending, it’s not going to happen. So there is always going to be a conflict between meeting center and digital repayment.
What we need to think through is how do we engage with our customers, be in touch with them and money comes through online because we have to increase this. If we have to be more agile and we have to be more OPEX optimization, we can’t be doing all these things going meeting center, collecting cash. So we have to educate the customers, we have to ensure that the customers money remains in the bank account. Because hundred percent of our customers have a bank account, that’s for sure. Because we are disbursing the money into their accounts.
So if they have a bank account then why should they pay cash? Okay, so that, that’s an education series we are thinking, you know, we are also been discussing with the SROs to say that can we have some sort of a target aim to take it to about 50% to ensure that as an industry we stand to gain. So meeting center will undergo a change. The way we have been assessing our customers will also undergo a change. For instance, we’ve been talking about using data analytics to say or data science to understand what sort of a customer we need to lend to.
Otherwise it becomes very simple. You know, this is the age group, hardly any income that we are talking of, group, so on and so forth. Is there some smart analysis we could do to say that this sort of borrowers tend to repay much better than the others so that over the next three, four months we are going to work on certain data science to understand how does it fit into our existing database and which will help us decide what sort of customers we need to source going forward or which markets for that matter.
Or for that matter, different markets may have different policies or processes.
Operator
So are you saying that the joint liability group sort of. No longer it’s just for the namesake because it’s actually coming out to individual borrower behavior and how they, how you’re able to engage with them and how they hopefully repay digitally.
Mr. Venkatesh Krishnan
See, it was always like this. It is now getting little more pronounced being talked about. Never for once, 10 years ago when I was handling this, I’ve seen customers the group repaying one or two installments of the defaulting borrower. But I’ve never seen a group even 10 years ago which said okay, for the next 18 months or 24 months we will honor just because this lady has migrated or she’s not in a position to repay. So it was never there. But it’s now getting more pronounced, more being talked about.
Yes. Still the women are coming together. They will help you to say that this lady has migrated to this village. I know her contact number. So those things remain, the fabric remains. But see, the ability of one member or other members to pay for the defaulting member also is beyond reach today because the EMI have gone up because of the ticket sizes. What used to be a 400500 rupee EMI, today it’s about 18002000 rupees. So if a lady has not paid for three installments and to three different institutions expecting others to pay, it’s highly improbable.
Operator
Sure, fair enough. And is there further. Coming back to Spanna’s operations, two more questions I have. Is there further OPEX OPEX optimization that is possible in your operations? From 195 crores last quarter it was down to 160 odd crores. But obviously this is a distributed borrower base that you have. So you cannot really look at loan officer sort of efficiency from a loan under management perspective. But given the size and the scale and the disbursement that you are targeting, what’s the optimal opex that you would want to work with on an absolute number basis and then two years, three years down the line as a percentage of your basis
Mr. Venkatesh Krishnan
In the medium term it should come down to about 7, 8% of x2 au. And in the near term can 160 come down. That’s what we are aiming for. I can’t say no. Definitely there is a room, but I need to ensure that I don’t cut corners. These are optimization in the normal course without compromising on efficiency and growth and other factors. But there is room which we will also ensure that it will be seen in the quarters to come.
Operator
So till such time we reach almost 8000 crore AUM. As in I’m just taking off. A 78% opex would mean 660650 odd crores of opex annually. So your system is today built for say 8000 crore AUM where till such time you wouldn’t have to increase your opex. Maybe try to optimize from where you are today downwards. Is that a fair assumption?
Mr. Venkatesh Krishnan
The opex up to 8,000 crore opex in terms of some people in the front line, I may have to add other opex I don’t need to. For instance, head office is adequately capacitized. I don’t need to open branches because I’ve got 1250 branches in the Sedi state. And even if I take a 10 crore assumption, you know, I’m well equipped for 12,500 crores of AUM. But I may accelerate more headcount in the front line in my quest to increase my volumes or reach certain numbers much before time. So otherwise I don’t need to add on to any fixed cost at the head office levels.
Operator
And finally on the new borrower acquisition, either new to credit or new to Spanna or existing, how is the rejection rates now? It used to be as high as 70, 80% till about two quarters back. So is there overall landscape getting better that you are able to source better customers who are able to pass through the credit filters? So what has changed from your working style and also from a macro environment perspective that keeping the quality of the book as good, you’ll be able to accelerate your disbursements.
Mr. Venkatesh Krishnan
Rejections continue to be in the range of 60 to 65% and it may remain so for a while now what will happen is some of these customers who for what are the reasons, could not pay, defaulted with no adverse intent, you know, it was just their capacity may come back into the mainstream in about two, three years like it happens in the stock market as well. So like for instance, customers who defaulted during COVID times, many of them have got regularized and they are even paying to most of the institutions.
So as I said, you know, the market has got a lot of customers. Of course most of the players are going to be focusing on these customers who are still availing of finance through the unorganized sector. But we’ll also have the crore, crore and half customers who went out of the system in recent times. Many of them will come back at a later point in time through some behavior which gives us the confidence that we can again look at them.
Operator
And given your rejection rates are still 60 to 65%, are you able to source more with the same frontline loan officer network that you have?
Mr. Venkatesh Krishnan
So last quarter, as I said, our sourcing of new customers was 45%. 10% was NTC, another 35% was NTS. NTC requires a little more effort. So that’s what we are now promoting our people to say that focus on those customers. Customers. What are the different ways of acquiring new to credit customers. But 50, 55% of the customers have to be new in our quest to build a portfolio.
Operator
And on the ticket size, size, ticket size wise, what changes have you made? What we realized is cycle three or cycle four borrowers or borrowers who’ve been there with you for three, three, four years and have been good in their repayment behavior, certainly you should play big with them. I’m just making a very general statement. So what have been the learnings and what has been implemented born out of those learnings.
Mr. Venkatesh Krishnan
It’s a very apt statement that you’ve made as we go along. In our sixth cycle, sixth or seventh cycle we give as high as 1 lakh 70. But that’s a very small share of our overall portfolio, maybe 2, 3, 4%. But average ticket size continues to be 60,000 rupees. But yes, as, as we go along, you know when you acquire new customers new to credit is always going to be 50, 60 types. When you acquire new to SP or existing customers the ticket sizes will go up. So it’s always going to be hovering between say 60 and 80, 85.
Sripal Doshi
Okay, that’s it from, from my side. Thank you so much.
Operator
Thank you. Thank you ladies and gentlemen,
Mr. Venkatesh Krishnan
You may press star and one to ask a question. Our next question comes from the line of Rudraksh Raheja from I thought Financial Consulting. Please go ahead.
Operator
Yeah. Thank you for the opportunity. Sir. Sir, I wanted to ask on the individual loan portfolio under Chris Financial, how are we doing on that side?
Mr. Venkatesh Krishnan
So Crips Financial has two portfolio, one is individual loans and the other is Microlap. Microlab I said is about 322. This will be about 260 odd. But we are launching different individual loans in the month of June or July which is going to be a better underwritten product wherein there’ll be a personal visit by a credit officer, questions being asked, band being collected, 100% enash, repayments on and so forth. So once that is launched we will do a pilot in certain states or certain branches within Spandana and these are setting certain milestones.
Once those milestones are reached we will give it to Chris as well and they will then start sourcing individual loans as per the new criteria.
Operator
Understood. And what about the existing GMPAs in that book?
Mr. Venkatesh Krishnan
In the Chris Financial book?
Operator
Yes, yes. So the numbers have come down. Last quarter it was about 11.45 the GNPA. This quarter it is at 6.5 done one arc transaction in the entity and also you know the connection efficiencies have started improving so leading to both these things. You know the current GNP is at 6.5.
Mr. Venkatesh Krishnan
Understood sir, understood. And survey, do you see this number going like stabilizing?
Operator
I think the right way to look at it is how is the new book behaving? Because we have made some to the underwriting and we are likely to make more changes on the underwriting like Venki was just explaining. And the new book is performing pretty under the new underwriting. This thing it is performing pretty strongly. However, the changes were made sometime in November. So going forward, you know, this number should obviously, you know, start coming down
Mr. Venkatesh Krishnan
To much manageable levels.
Operator
Understood. Sir, answer. If I recall correctly, Microlab was somewhere around 1% on GMP levels. Are we still around those levels or something has changed?
Mr. Venkatesh Krishnan
That’s correct. So Microlap is still around 1.2% in terms of GMPA. That’s the number.
Operator
Understood, sir. Understood. And sir, you mentioned that we’ll launch a pilot for individual loan where officer will go and evaluate and all in this model. Sir, from my limited understanding, the problem arises due to additional operational expenditure because of catering each and every customer on a one to one basis. So sir, how do we plan to control that part of this product?
Mr. Venkatesh Krishnan
The individual loans is still going to be offered between 23 and 26%. Okay. And so at this point in time, the initial working that you have done, if you’re able to keep our delinquencies or the collection efficiency at 99.5% also, it is still profitable.
Operator
Understood sir. Understood. And
Mr. Venkatesh Krishnan
Ticket price is going to be between 1 and 4 lakhs.
Operator
Got it, sir. So are we targeting some different income class with this product? Because.
Mr. Venkatesh Krishnan
So we are targeting customers who have an enterprise who are running a business. We are not going to find for starting a new business. We are going to find for working capital. So a person needs to have a definitely a shop or something which is visible with a stock which has sales.
Operator
Understood. And will be targeting tier 2, 3 cities. Under this or
Mr. Venkatesh Krishnan
Wherever we have branches in the same branch, we are going to offer them the facility to say when you graduate either you can go in for a group loan or you can go for individual loan if you have an enterprise. And then you will also over time look at new to spend on our customers who have got a track record elsewhere to be offered an individual loan. Again, this is the criteria that we have defined.
Operator
Got it. So important. Another question on the guidance part. So you said 6,500 crores by year end FY27. If I recall correctly, some calculations indicated that we could reach 9 to 10,000 crores by FY28. Would that still be a correct assessment?
Mr. Venkatesh Krishnan
Yes.
Operator
Okay. So that translates into more or less like 40, 45% book growth on an annual basis. So keeping that in mind, what are the levels of X bucket collection efficiency that we are targeting that we will be comfortable along with this level of growth?
Mr. Venkatesh Krishnan
Any level of growth. I can’t compromise on collection efficiency, especially in the eggs bucket. It has to be 99.5. I can understand some months hovering between 99.3 and 99.5, some months going up to 99.6 irrespective of the book size. No, I can’t compromise on collection efficiency.
Operator
So 99.5 is what we would like to maintain going forward.
Mr. Venkatesh Krishnan
That’s right. So which means that 0.5% flows yearly, 6% flows. Even if you collect 50% back, your credit cost can hover between two and a half to 3%, which is acceptable.
Operator
Understood, sir. Perfect. Perfect. Thank you so much, sir.
Mr. Venkatesh Krishnan
Welcome. Thank you. Our next question is from the line of Avital Jain from Secular Gov. Please go ahead.
Operator
Yes, on that individual loan production, I’m just assuming that you would still have a stronger filter of the customer not having total indebtedness or not having any loans other than its permanent and would that be also backed by some collateral or it would be uncollateralized loan, unsecured loan,
Mr. Venkatesh Krishnan
Unsecured, fully unsecured
Operator
And customer indebtedness in terms of having other lenders
Mr. Venkatesh Krishnan
Overall remains within the 2 lakh guideline that MFIN has fixed. But as I said, you know, our product offers 1 to 4 lakhs. We will see. But as of now for the pilot, we are ensuring that we maintain the indigenous cap of 2 lakhs.
Operator
But this would not qualify as an MFI loan. I am assuming
Mr. Venkatesh Krishnan
That’s true. Yes.
Operator
So you, you need not adhere to the SRO guidelines. I’m just saying that the discipline break right once. Obviously you will have your internal underwriting benchmarks and rules. But there is no SRO oversight. Right. On such kind of loans.
Mr. Venkatesh Krishnan
Absolutely.
Operator
So here the income levels are likely to be higher than 3 lakhs. Also because such customers we will evaluate from our perspective of, you know, what kind of businesses, what kind of cash flows do they have. So they may, to start with, they may not fit the definition of, you know, microfinance of household income. These are slightly more, let’s say affluent compared to, you know, the customers we service in the microfinance space.
Mr. Venkatesh Krishnan
And what would be the
Operator
Loan tenors here in terms of door to door and average?
Mr. Venkatesh Krishnan
I think the maximum is three years, three to four years. But average it should be about 24 months.
Operator
And is there some, any other player that you have modeled yourself after for this sort of loan? I know as and without calling it out. But who does this on an individual basis and these are rural customers. Assuming because you would use your existing branch network to source these customers. But is that very prevalent amongst organized lenders or this is largely being catered to for higher ticket size requirement by local money lenders amongst your borrower base.
Mr. Venkatesh Krishnan
Quite a few institutions have started on a no case. We are not the first. But has it gained a lot of momentum? The answer is no.
Operator
Yeah, as in so would it be fair to say that the overall organized industries size for this segment may not be even 10,000 crores across lenders today? 10,000
Mr. Venkatesh Krishnan
Crores is too big a number. Yeah, I don’t think so.
Sripal Doshi
Sure.
Operator
Thanks. Thank you. We have no further questions. Ladies and gentlemen, I would now like to hand the conference over to the management for closing comments. Over to you sir.
Mr. Venkatesh Krishnan
Thanks a lot once again for participation and it really feels nice to be new on mist. The efforts are on to ensure that after six quarters of painfully painstaking efforts we are back in the black. And from here on we should retain the momentum and grow the book sustainably, which is very important and ensuring that we stick to all the guidelines. And Spandana is again back in the reckoning. People start respecting Spandana. Of course the respect was always there. The lenders have been very supportive even during trying times.
But it should move couple of notches up in terms of how it has been doing business in recent times. Thanks a lot.
Operator
Thank you on behalf of Spandana Swuti Financial limited that concludes this conference. Thank you all for joining us. You may now disconnect your lines.