About the Company

Spandana is a public limited company registered with Reserve Bank of India (RBI) as an NBFC MFI. Incorporated in 2003, Spandana Sphoorty Financial Ltd is a rural area focused NBFC-Microfinance Institution. It is engaged in offering small-ticket unsecured loans to help the women in the low-income bracket in rural and urban areas.

Q2 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
  Q2FY20 Q2FY19 YoY % Q1FY20 QoQ % H1FY20 H1FY19 YoY%
Sales 360.5 257.3 40.11% 298.87 20.62% 659.42 486.72 35.48%
PBT 187.31 113.51 65.02% 138.67 35.08% 325.97 224 45.52%
PAT 42.5 73.58 -42.24% 90.58 -53.08% 133.08 145.3 -8.41%

 

Consolidated Financials (In Crs)
  Q2FY20 Q2FY19 YoY % Q1FY20 QoQ % H1FY20 H1FY19 YoY%
Sales 366.39 257.32 42.39% 304.86 20.18% 671.25 486.78 37.90%
PBT 191.47 113.54 68.64% 142.7 34.18% 334.18 224.06 49.15%
PAT 45.74 73.61 -37.86% 93.44 -51.05% 139.18 145.36 -4.25%

 

Detailed Results

    1. The company has a stellar quarter with more than 42% growth in YoY revenues.
    2. The PBT for the company rose faster than revenues to grow more than 68% YoY while PAT declined 38% YoY mainly due to inflated deferred tax expenses which were paid in Q2.
    3. The company made disbursements of Rs 1829 Cr in the current quarter which was up 45% YoY.
    4. The gross loan portfolio has risen to Rs 5407 Cr registering a YoY growth of 37%.
    5. The number of branches also expanded substantially to 941 growing 15% YoY.
    6. The company now boasts of an active borrower base of 2.47 million which is also up 16% YoY.
    7. The net interest income for the company rose 57% YoY showing strong growth.
    8. Operating expenses to AUM fell to 4.1% which is a fall of 30 bps YoY.
    9. Pre-tax ROE improved substantially to 35.4% from 27.5% last year.
    10. GNPA was at 0.77% while NNPA was at 0.09%.
    11. The company maintains a healthy cash position of Rs 781 Cr as of 30th Sep ’19. It also has un-availed sanctions of Rs 920 Cr as well.
    12. The company maintains a comfortable liquidity position by maintaining a positive static liquidity gap every month.
    13. The cost of borrowing rose 90 bps YoY to 12.7% in Q2FY20.
    14. Only 10% of customers are from urban regions showing a good presence in rural markets.
    15. 98% of AUM is from the core product of Abhilasha.
    16. The company maintained a CRAR of 50% in Q2.
    17. The geographic distribution of portfolio exposure is well distributed across 15 states with top 3 states constituting <51% of AUM and no district having >1.9% of AUM.
    18. The cost to income ratio has also improved dramatically to 20.3% which is a drop of 460 bps YoY.
    19. The net interest margin has also seen a good rise of 240 bps YoY to 18.6%.
    20. The company has opted for the lower corporate tax bracket because of which there is a total DTA impact on P&L of Rs 192.8 Cr in H1. The actual tax outflow in H1 was only Rs 2.1 Cr.
    21. The average ticket size has risen to Rs 21850 from Rs 18533 a year ago.

Analyst’s View

Spandan Sphoorty is one of the oldest MFIs in India. The company boasts a rich history and experience of weathering a lot of game-changing events in the industry since its inception in 1998. SSFL is one of the few players in the MFI industry which is overwhelmingly skewed towards rural markets where market penetration is low and the size of the market in terms of population is much bigger than the urban geographies where there is a lot of competition already. The company has also done well to reduce its operating costs and improve efficiencies which are evident in their improving operational metrics. The company appears to be on a good growth track given the relatively low competition in its operating areas and the long-standing brand and operational performance. It remains to be seen how the company will cope with the entry of other major MFI players into its existing rural markets and how the management plan to expand the territorial outreach of the company in general. Nonetheless, given its unique market positioning and longstanding presence in the industry, Spandan Sphoorty is a good MFI stock to look out for.

 

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