Spandana – Embarking On Self-Sustainable Tech-Enabled Customer-Led Growth Journey: ICICI Securities

ICICI Securities Report

Spandana Spoorthy Financial Ltd., in its Analyst Day, unveiled ‘Vision 2028’ – a roadmap that emphasis on a tech enabled customer-led growth journey and a strong focus on risk management.

Spandana aims to grow its assets under management to Rs 280 billion (implying more than 25% compound annual growth rate between FY23-28) with a customer base of ~6.2 million (implying 22% CAGR).

Vision 2028 also stresses on effective capital utilisation, evident in its near-term return on equity target of 22-24% and sustainable RoE at more than 18% and likely AUM CAGR of ~25% between FY23-28.

Microfinance would remain the core business and shall strictly follow the JLG model with weekly collection. The company also plans to scale the secured business via its wholly-owned subsidiary Criss Financial with LAP and Nano enterprise loans.

It does not intend to enter into individual unsecured loans in the near-future; if at all it does enters this space in the medium term, it would cap maximum exposure at 5% of total AUM.

Retain 'Buy'; target price revised to Rs 1,400 (from Rs 1,100), valuing at 2.5 times (earlier two times earlier) Sep-24E book value per share.

Key risks:

• Stress unfolding higher than anticipated; and operational instability caused by outside interference.

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