Spandana Q1 - Core Operating Performance Remains Strong; Elevated Provisions Mar Earnings: ICICI Securities

ICICI Securities Report

Spandana Spoorthy Financial Ltd.’s Q1 FY25 financial performance is a mixed bag with –

• Net interest income growth (ex-DA income) remaining strong at 12% QoQ, as it continues to benefit from net interest margin expansion, resulting in 8% QoQ pre-provision operating profit growth; and

• however, asset quality deteriorating with credit cost inching up to 8% (annualised) due to lower collections.

Collections fell sharply to 94% versus 96.5% QoQ due to election-led operational challenges, heat wave and higher attrition in states such as Madhya Pradesh, Maharashtra, Rajasthan, Telangana and Gujarat which impaired timely customer service.

Management highlighted that it has already initiated several measures to improve asset quality, but a weak Q1 FY25 would likely have an impact on full year AUM growth and credit cost. It lowered FY25 guidance for AUM growth to ~17– 18% versus 25% earlier and increased credit cost guidance to 3.75% versus 2.5% earlier.

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