Detailed Narrative
Strong Turnaround in Q3 FY26 Driven by New Book Performance
Spandana Sphoorty Financial Limited reported a significant turnaround in Q3 FY26, achieving positive PPOP of ₹8 crores compared to a loss of ₹40 crores in the prior quarter. This improvement was largely attributed to the strong performance of the new loan book, originated post-April 1, 2025, which now constitutes 58% of the overall book and boasts a 99.8% collection efficiency as of December. Disbursements saw a robust 27% sequential jump to ₹1,188 crores, indicating renewed business momentum.
Margin Expansion and Asset Quality Improvement
The company's Net Interest Margin (NIM) expanded significantly to 11.1% in Q3 FY26 from 8.4% in Q2 FY26, despite a 40 basis points increase in borrowing costs to 12.6%. This was supported by an improved yield of 22.4% (up from 19.6% QoQ) as the higher-yielding new book replaced older assets. Asset quality also showed marked improvement, with standalone Gross NPA reducing to 2.6% from 4.97% and standalone Net NPA to 0.5%. The 1-90 DPD bucket decreased to 2.5% of AUM from 5.5% in the previous quarter.
Strategic Initiatives for Sustainable Growth
Management outlined several strategic initiatives, including the proposed merger of its subsidiary Criss Financial, which holds a ₹650 crore book, with the parent company within the next 6-9 months to enhance operational efficiency. The company is also transitioning to a new LOS platform (Perfios) and plans to reduce non-productive branches from 1,500 to 1,250. A pilot launch of an individual loan product is also under consideration, aiming for a more diversified portfolio.
Robust Fundraising and Liquidity Position
Spandana successfully raised ₹1,700 crores during Q3 FY26, a substantial increase from ₹160 crores in the previous quarter, reflecting strong lender confidence. The company maintains a healthy liquidity position with ₹1,626 crores in cash and bank balances at the end of December. Management expects bank funding to increase from the current 42% of borrowings to 60%, especially with the potential rollout of the credit guarantee scheme.
Outlook on AUM Growth and Credit Costs
The company targets an AUM of ₹9,000-10,000 crores by FY28, with the new book expected to comprise 90% of the total AUM by the end of FY26. Management anticipates a business-as-usual credit cost of 2.5-3% in the future and projects net slippages of approximately ₹50 crores for FY27. The aggressive write-off approach (180 days plus) for ₹214 crores this quarter is expected to conclude, reverting to the policy of 455 days.
Focus on Productivity and OPEX Optimization
To enhance productivity, the company is aiming for a stable loan officer count of 4,800-5,500 within the next one to two quarters, with improved efficiency expected as 90+ collections are handled by a separate team. OPEX has seen a consistent reduction, from ₹884 crores two years ago to ₹790 crores last year, and further to ₹720 crores this year, with further scope for optimization. Management's immediate objective is to achieve break-even in the next quarter through a combination of revenue growth and cost/credit cost reduction.