During Tuesday’s trading session, the shares of a rural-focused NBFC and a microfinance lender fell 18.4 percent to hit a new 52-week low at Rs. 375.6 on BSE, after reporting a loss of Rs. 216 crores in Q2 FY25, down from a profit of Rs. 56 crores in Q1 FY25 and Rs. 125 crores in Q2 FY24.
With a market cap of Rs. 2,723.8 crores, at 11: 23 a.m., the shares of Spandana Sphoorty Financial Limited were trading in the red at Rs. 382, down by nearly 17 percent, compared to its previous closing price of Rs. 460.15.
What’s the news:
The fluctuations in the share prices were observed after Spandana Sphoorty Financial Limited (SSFL) announced the financial results for Q2 FY25, through the latest filings with the stock exchanges on Monday post-market hours.
For Q2 FY25, SSFL reported consolidated revenue from operations of Rs. 686 crores, reflecting a marginal decline of around 3 percent QoQ from Rs. 710 crores in Q1 FY25, but an increase of about 12 percent YoY from Rs. 610 crores in Q2 FY24.
It recorded a loss of Rs. 216 crores in Q2 FY25, a significant drop from a profit of Rs. 56 crores in Q1 FY25 and Rs. 125 crores in Q2 FY24.
Additionally, SSFL reported net interest income (NII) of Rs. 341 crores for Q2 FY25, which reflects a quarter-on-quarter decline of about 20 percent from Rs. 425 crores in Q1 FY25, while showing a year-on-year increase of roughly 9 percent from Rs. 312 crores in Q2 FY24.
As of Q2 FY25, the company’s Assets Under Management (AUM) reached Rs. 10,537 crores, reflecting a year-on-year increase of 8 percent from Rs. 9,784 crores, but a decline of 10 percent QoQ from Rs. 11,723 crores.
Rationales for muted results:
The management of SSFL mentioned that the microfinance sector has faced multiple challenges over the past two quarters. Initially affected by prolonged elections and intense heat waves during the summer of 2024, operations were further disrupted by heavy rainfall and floods in certain states from July to September 2024.
Additional issues, such as higher-than-normal attrition level, localised initiatives like the Karza Mukti Abhiyan, and increasing borrower leverage, have also impacted the sector.
In light of these factors, Spandana adopted a cautious and selective approach to lending during the quarter, prioritizing portfolio quality and the needs of existing customers.
As a result, while income increased by 10 percent YoY to Rs. 707 crores and NII rose by 9 percent YoY to Rs. 341 crores, elevated delinquencies affected impairment costs, leading to a reported loss of Rs. 216 crores.
However, with improvements in the operating environment and various initiatives in place, SSFL expects the situation to normalise in the coming quarters.
Stock Performance:
The stock has delivered negative returns of nearly 58 percent in one year, as well as around 56.5 percent returns in the last six months. So far in 2024, the shares of Spandana Sphoorty Financial have given negative returns of about 66.2 percent.
About the company:
Spandana Sphoorty Financial Limited (SSFL), a non-banking financial company – micro finance institution (NBFC – MFI), is primarily engaged in the business of microfinance providing small-value unsecured loans to low-income customers in semi-urban and rural areas. The tenure of these loans is generally spread over one to two years
Written by Shivani Singh
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