Spandana Sphoorty Financial Limited — Q3 FY26 earnings call

Call held 27 Jan 2026

Management summary

Spandana Sphoorty Financial Limited reported a mixed Q3 FY26, achieving a positive Pre-Provisioning Operating Profit of ₹8 crores after several quarters. The company saw strong performance in its new book with 99.8% collection efficiency and a 27% QoQ jump in disbursements to ₹1,188 crores. Asset quality improved significantly with standalone GNPA reducing to 2.6% and NNPA to 0.5%. However, the quarter ended with a net loss of ₹95 crores due to write-offs and a one-off labor code cost, and the subsidiary Criss Financial continues to face asset quality challenges. Strategic initiatives include merging Criss Financial, adopting a new LOS platform, and targeting sustainable growth.

Highlights

  • New book (sourced from April 1, 2025) constitutes 58% of overall book, with 99.8% collection efficiency as of December.

  • Disbursements jumped 27% QoQ to ₹1,188 crores.

  • PPOP (Pre-Provisioning Operating Profit) was positive at ₹8 crores for the quarter, after 2-3 quarters of being in the red.

  • Lenders reposed faith, raising ₹1,700 crores in Q3.

  • Standalone GNPA reduced to 2.6% from 4.97% last quarter; standalone NNPA down to 0.5%.

  • NIM expanded to 11.1% from 8.4% in the previous quarter.

Concerns

  • Reported a net loss of ₹95 crores for the quarter, stemming from write-offs and the impact of a new labor code cost (₹8.4 crores consolidated).

  • Criss Financial (subsidiary) has 10% gross NPA, particularly in individual loans.

  • Attrition at the ground level has been high, though expected to improve.

Key financials

2 periods

Headline

  • Collection Efficiency (New Book)
    99.8%
  • AUM (post write-off, Dec 31)
    ₹3,948 Cr
  • Standalone GNPA
    2.6%
    QoQ -47.7%
  • Standalone NNPA
    0.5%
  • Cash and Bank Balance (Dec 31)
    ₹1,626 Cr
  • Cost of Borrowing
    12.6%

Q3

  • Disbursements
    ₹1,188 Cr
    QoQ +27%
  • NIM
    11.1%
    QoQ +32.1%
  • Yield
    22.4%
    QoQ +14.3%
  • PPOP
    ₹8 Cr
  • Net Loss
    ₹-95 Cr
  • Write-offs
    ₹214 Cr
  • Borrowings raised
    ₹1,684 Cr

What they filed

Q1 FY27: revenue down 5.3%, net profit up 103.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue682 552 415 300 230 −66%234 −58%260 −37%284 −5%
Net profit-216 -440 -434 -360 -249 −15%-95 +78%5 +101%12 +103%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • M&A Criss Financial Merger · Announced · AUM ₹650 Cr

    Avoid separate management, legalities, challenges, and costs; qualifying asset criteria change allows more flexibility within parent.

    The other thing that we are proposing to do is merge our subsidiary, which is the Criss Financial, with the parent. Criss, has been doing individual loans as also loans against property, which is about a Rs. 650 crore book. But considering the fact that now with the qualifying asset criteria having come down from 75% to 60%, and even if you take about 10%-15% of cash, we have certain room to do any sort of business other than the qualifying asset within Spandana itself. So, rather than having a separate management with separate legalities and challenges and costs, we are trying to merge it, which might take about 6 to 9 months, but hopefully that should get completed within the coming financial year, considering that it's a 100% subsidiary of the parent Spandana.
  • Liquidity Cash ₹1,626 Cr Raised ₹1,684 crores in Q3 FY26, contributing to healthy cash and bank balance.
    At the end of December, we had 1,626 crores of cash and bank balance which is very healthy. Rs. 1,684 crores is what we have raised during the quarter compared to Rs. 160 crores in the previous quarter.

Guidance & targets

Business Growth

  • AUM Business Growth · FY28 · Medium confidence ₹9,000-10,000 crores
    if you ask for a ballpark figure, we are expecting roughly about somewhere close to between Rs. 9,000 crores to Rs. 10,000 crores of AUM by FY'28.

    — Venkatesh Krishnan

  • Disbursement Run Rate Business Growth · Ongoing · Medium confidence ₹500 crores/month, then ₹550-600 crores/month
    So, we are looking at Rs. 1,500 crores to begin with. It is more important to do a sort of a sustainable business. And we want to stabilize at about Rs. 500 crores a month and then take it to about Rs. 550 crores-Rs. 600 crores as the months pass by.

    — Venkatesh Krishnan

  • LAP Book AUM Business Growth · Next couple of years · Medium confidence ₹1,000 crores
    We are trying to see how to grow that book more, as I said, from the current Rs. 300 crores to about Rs. 1,000 crores.

    — Venkatesh Krishnan

Asset Quality

  • Collection Efficiency (New Book) Asset Quality · Ongoing · High confidence >99.5%
    We hope that as our new book which is originated in the current BRE or the new BRE continues to increase to 90%, like Venki explained, this number will be sustained over 99.5% across the set of loans.

    — Ashish Damani

  • Credit Cost Asset Quality · Future (business as usual) · Medium confidence 2.5% to 3%
    we are likely to have a 2.5% to 3% kind of a credit cost is what we are assuming in future.

    — Ashish Damani

  • Net Slippages Asset Quality · FY27 · Medium confidence ₹50 crores
    So, we expect about Rs. 220 odd crores of, these are all numbers, Rs. 227 crores or Rs. 225 crores of gross slippages and net of about Rs. 50 odd crores in FY'27.

    — Venkatesh Krishnan

Business Mix

  • New Book Percentage of AUM Business Mix · End of this financial year · High confidence 90%
    this new book which is sourcing starting 1st of April 2025, after the introduction of the guardrails by the SRO, that book constitutes about 58% of the overall book, which we expect it to be about 90% by end of this financial year.

    — Venkatesh Krishnan

  • Qualifying Assets Percentage Business Mix · Ongoing · High confidence 60%
    The qualifying assets has to be always at 60%.

    — Venkatesh Krishnan

Operational Efficiency

  • Loan Officer Count Operational Efficiency · Coming one or two quarters · Medium confidence 4,800-5,500
    So, on the loan officer count, we are looking at somewhere between 4,800 to 5,500 as a stable factor.

    — Venkatesh Krishnan

Profitability

  • Pre-Provisioning Operating Profit (PPOP) Profitability · Next quarter · Medium confidence Break-even
    So, to answer your query, we should try and break-even next quarter. That is our immediate objective considering that this quarter and the last quarter was PPOP positive.

    — Venkatesh Krishnan

What to watch in Q4 FY26

Pre-Provisioning Operating Profit (PPOP)

Next quarter (Q4 FY26)
Current ₹8 crores (positive in Q3 FY26)
Target Break-even

Why it matters

Achieving break-even PPOP is a key step towards overall profitability after several quarters of losses.

So, to answer your query, we should try and break-even next quarter. That is our immediate objective considering that this quarter and the last quarter was PPOP positive.

Risks & concerns

  • Asset quality issues in Criss Financial (subsidiary)

    high

    Criss Financial has 10% gross NPA, particularly in individual loans, which is being addressed through a merger and dedicated collection teams.

    Analyst acknowledged

  • High attrition at ground level

    medium

    Attrition has been high, but management expects it to improve as business conditions get better and recovery focus reduces.

    Analyst acknowledged

  • Regulatory scrutiny on aggressive growth in the MFI sector

    medium

    Regulators are not enthused with 25-30% growth, leading the company to adopt a watchful and sustainable approach to growth.

    Management acknowledged

  • Impact of new labor code costs

    low

    A one-off cost of ₹8.4 crores (consolidated) was incurred due to the new labor code, impacting Q3 net loss.

    Management acknowledged

Q&A highlights

7 direct
January collection efficiency and disbursements, specifically Andhra Pradesh. Direct
January thus far on disbursement and collection efficiency looks better than December. And as far as Andhra Pradesh is concerned, if you look at the numbers, October was something like a little over 97%, which went up to 99% in November, came down to about 98.9% in December. More or less, it is going to be a little around the 98.9% or 99% collection efficiency. So, things are improving and should improve in the months to come.

Provides immediate post-quarter operational update, indicating continued improvement in key metrics.

Asked by Rajiv Mehta

Funding for growth and bank loan traction. Direct
The bank loans currently contribute about 42% of our overall borrowings and should go up as the quarters pass by and the results keep improving, especially considering that the PSU banks are still out of the fray currently. We have been funded by private banks and foreign banks, but should see again, especially after the credit guarantee scheme is out, we need to see what are those contours but hope that the PSU banks come into the fray. And once that happens, our share of bank funding, I think should go up from the current 42% to about 60%.

Details funding mix, future reliance on PSU banks, and potential for increased bank funding, crucial for growth.

Asked by Rajiv Mehta

Applicability and strategy regarding the Credit Guarantee Fund for Micro Units (CGFMU) scheme. Partial
So, CGFMU, the way the scheme is that in a business as usual environment, if then your credit costs are going to be, say, sub 3%, it doesn't make sense because of where it is in this plan. And unfortunately, since we went through the rough, you know, there is no point in taking it now, but we are definitely trying to see if it could be studied well and try and take it in the new financial year. And especially we also want to see the credit guarantee scheme and then take a call vis-à-vis what are the kind of costs involved and what are the kind of benefits we anticipate.

Clarifies the company's cautious approach to CGFMU, indicating it might not be immediately beneficial given their current credit cost trajectory, but they are evaluating it for the next fiscal year.

Asked by Sarvesh Gupta

High gross NPA (10%) in the subsidiary Criss Financial and resolution plan. Direct
So, that book CFL, which is a Criss Financial, has two lines. One is the individual loans, which is about roughly Rs. 350 crores and about 300 crores is the loans against property. There are two things which is causing this so-called, the losses that you spoke of. In loans against property, we need to really bring down our cost and improve our productivity. To a great extent, the cost will be taken care of when we do the merger. And in the case of individual loans, the impairment has been relatively high, which again, we are trying to now put a special team and try and ensure that a couple of months, the focus intensifies so that we can improve the collection efficiency and then look at increasing the disbursal.

Addresses a specific asset quality concern in the subsidiary, outlining a strategy involving merger and focused collection efforts.

Asked by Sarvesh Gupta

Total DTA (Deferred Tax Asset) amount and timeline for consumption. Direct
This is Ashish, Sarvesh. So, total DTA is roughly about Rs. 700 crores. The timeline, the tax authorities allow you to consume that in eight years. We see that we will sufficiently cover that. That's how it has been recognized.

Provides clarity on a significant accounting item and management's confidence in utilizing it, addressing potential investor concerns about its recoverability.

Asked by Sarvesh Gupta

Recovery from the NPA pool and future expectations. Direct
The overall NPA pool is upwards of Rs. 2,500 crores. It's about Rs. 2,700 crores. And we have kept three quarters for us between this quarter and another three quarters to collect as much as possible. So, we are aiming for anywhere between Rs. 20 crores to Rs. 25 crores a month.

Quantifies the remaining NPA pool and provides a monthly recovery target, giving insight into future income from stressed assets.

Asked by Sarvesh Gupta

High rejection rates in the MFI industry and Spandana's strategy for growth (existing vs. new customers). Direct
The rejections currently hover at around 60%. It is indeed high and it may remain so for the next couple of months because of the impact of all that has happened over the last 6-9-12 months. That said, the ratio of new-to-credit plus new-to-Spandana on one side and existing customers is about 40-60. And as we go along, when I travel, I keep meeting various money lenders and they're all thriving. So, we have not reached the saturation point to say that there are no new customers in the marketplace, but you got to find them. So, there are enough and more customers which are there at least for the next couple of years, and you got to get them into the mainstream. So, effort is required, but 40-60 or a 50-50 share of existing customers versus new customers, whether to credit or to Spandana is definitely possible.

Addresses a key industry challenge (high rejection rates) and outlines the company's balanced approach to customer acquisition for growth.

Asked by Abhijeet Tibrewal

OPEX reduction and break-even timeline. Direct
We will work hard, you just pray. It will happen. So, OPEX has been coming down Rs. 884 crores two years ago to came down to about Rs. 790 crores last year to about 720 crores this year, trying to bring it down further. There is scope. So, it's a combination of increasing your revenue and bringing down your cost and your credit cost. That's how you bring in profitability.

Confirms management's focus on further OPEX reduction and links it directly to achieving profitability, providing a clear path forward.

Asked by Rajiv Mehta

3 min read 7 chapters

Detailed narrative

Q3 FY26 Performance Overview

Spandana Sphoorty Financial Limited reported a positive Pre-Provisioning Operating Profit (PPOP) of ₹8 crores in Q3 FY26, a significant improvement from a loss of ₹40 crores in the previous quarter, marking the first positive PPOP in 2-3 quarters. Disbursements saw a robust 27% quarter-on-quarter increase, reaching ₹1,188 crores. Despite these operational improvements, the company recorded a net loss of ₹95 crores for the quarter, primarily due to write-offs and a one-off impact of ₹8.4 crores from new labor code costs.

Asset Quality and Collections

The company's asset quality showed significant improvement, driven by the performance of its new book. The new book, sourced from April 1, 2025, now constitutes 58% of the overall AUM and boasts a collection efficiency of 99.8% as of December. Overall pan-India collection efficiency improved to 99.3% in December from 98.7% in September. Standalone Gross Non-Performing Assets (GNPA) decreased to 2.6% from 4.97% last quarter, and Standalone Net Non-Performing Assets (NNPA) reduced to 0.5%. The company also recovered ₹65 crores from the 90+ DPD bucket in Q3.

Funding and Liquidity

Lenders demonstrated renewed confidence in Spandana, leading to the successful raising of ₹1,700 crores in Q3, a substantial increase from ₹160 crores in the previous quarter. The company maintained a healthy liquidity position, with ₹1,626 crores in cash and bank balances at the end of December. Bank loans currently account for 42% of overall borrowings, with an expectation to increase to 60% once PSU banks re-enter the fray, especially after the Credit Guarantee Scheme is rolled out. The cost of borrowing increased by 40 basis points to 12.6% in Q3.

Strategic Initiatives and Transformation

Spandana is undertaking several strategic initiatives to enhance efficiency and drive sustainable growth. These include merging its 100% subsidiary, Criss Financial (which has a ₹650 crore book), with the parent company, a process expected to take 6-9 months. The company is also transitioning to a new Loan Origination System (LOS) platform developed by Perfios, aiming to leverage technological advancements for better customer engagement and operational efficiency. Additionally, there are plans to optimize branch network by merging non-productive branches, targeting a reduction from 1,500 to 1,250.

Growth Outlook and AUM Targets

Management aims for sustainable growth, targeting an AUM of ₹9,000-10,000 crores by FY28. The new book is projected to reach 90% of the total AUM by the end of FY26. Monthly disbursements are targeted to stabilize at ₹500 crores and then increase to ₹550-600 crores. The company is also exploring the launch of an individual loan product and plans to grow its Loans Against Property (LAP) book from ₹300 crores to ₹1,000 crores in the next couple of years.

Subsidiary Merger and LAP Business

The decision to merge Criss Financial, which primarily deals with individual loans and loans against property, is driven by the recent change in qualifying asset criteria (from 75% to 60%) and the desire to streamline operations and reduce costs associated with a separate management structure. While the individual loan portfolio within Criss Financial has experienced high impairment, the LAP book is performing well with a Gross NPA of just over 1%. Focused efforts are being directed towards improving collections in the individual loan segment before increasing disbursals.

Operational Efficiency and Cost Management

The company is actively working on reducing its operating expenses (OPEX), which have decreased from ₹884 crores two years ago to ₹720 crores this year. This cost reduction, combined with improving revenue and managing credit costs, is expected to drive profitability. Management aims to achieve break-even PPOP in the next quarter (Q4 FY26). The loan officer count is expected to stabilize at 4,800-5,500 in the coming quarters, which will contribute to improved productivity as the business momentum picks up.

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