Spandana Sphoorty Financial Ltd (SSPL) experienced a significant decline in its share price, hitting a multi-year low of ₹386.10, as it plunged 16% during intraday trading on the BSE on Tuesday. This drop followed the company reporting a consolidated loss of ₹216 crore for the second quarter ended September 2024 (Q2 FY25), primarily attributed to increased credit costs stemming from a rise in delinquencies.
In contrast, SSPL recorded a consolidated net profit of ₹125 crore during the same quarter last year. Investors looking to buy shares online may find the current situation challenging, given the recent downturn.
The current trading price represents SSPL's lowest point since June 2022. The stock has plummeted 69% from its 52-week high of ₹1,243.10, reached on January 1, 2024. Notably, SSPL's all-time high was ₹1,400, which occurred on November 8, 2019. At 09:50 AM, SSPL was trading at ₹399, reflecting a 13% decline, contrasting with a minor 0.36% dip in the BSE Sensex.
In terms of financial performance, SSPL's net interest income (NII) grew by 9% year-on-year (Y-o-Y), reaching ₹341 crore in Q2 FY25, compared to ₹312 crore in Q2 FY24. However, the company's net interest margin (NIM) took a sharp hit, dropping to 12.8% in Q2 FY25 from 14.1% in the previous year. Additionally, the assets under management (AUM) increased by 8% Y-o-Y, amounting to ₹10,537 crore in Q2 FY25, up from ₹9,784 crore in Q2 FY24.
A significant area of concern for SSPL is the surge in impairment on financial instruments, which skyrocketed nearly six-fold to ₹516.41 crore in Q2 FY25 from ₹90.5 crore in the same quarter the previous year. The disruptions faced during the quarter adversely affected asset quality.
The gross non-performing assets (NPAs) escalated to 4.86% in September 2024, compared to 2.6% in June 2024 and 1.4% in September 2023. Furthermore, net NPAs increased to 0.99% in September 2024 from 0.53% in June 2024 and 0.42% a year earlier.
The microfinance sector has encountered several challenges over the last two quarters. Initially impacted by prolonged elections and extreme heat in the summer of 2024, operations were further hampered by heavy rainfall and floods in various states from July to September 2024.
Additionally, factors such as elevated attrition rates, local initiatives like Karza Mukti Abhiyan, and rising borrower leverage have all influenced the sector's performance, according to management.
In response to these challenges, the management has implemented various measures aimed at improving the situation. This includes enhancing team capacity, reinforcing branch-level controls, adopting technological solutions, refining credit policies, and focusing on the softer aspects of client relations.
The management remains optimistic that with improvements in the operational environment and the initiatives currently underway, conditions are expected to normalise in the upcoming quarters.
SSPL is a rural-focused non-banking financial company (NBFC) and microfinance lender that operates under a geographically diversified model across India. The company primarily provides income-generating loans through a joint liability group (JLG) framework, targeting women from low-income households in rural areas. Those interested in the microfinance sector might want to consider buying shares online, although caution is warranted given the recent volatility.
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