With a rise in stress in the microcredit segment, Microfinance Institution (MFI) Spandana Sphoorty Financial Ltd (SSFL) has stopped onboarding customers who have had no prior credit history. It has also put on hold the acquisition of new members—those with prior credit history with other borrowers—in a few states as a measure to improve asset quality.
Shalabh Saxena, chief executive officer and managing director, in a statement to the stock exchange (BSE), said it was a challenging quarter (Q1FY25). The long-drawn (seven-phase) general elections, severe heat wave across the country, and higher attrition in select geographies posed a challenge to the quality of the portfolio.
MFI’s gross Non-Performing Assets (Net NPAs) rose to 2.6 per cent in Q1FY25 from 1.63 per cent a year ago. Sequentially, they were up from 1.50 per cent at the end of March 2024 (Q4FY24).
The net NPAs inched up marginally to 0.53 per cent in June 2024 from 0.49 per cent a year ago. Sequentially, they were up from 0.30 per cent in March 2024, according to an analyst presentation filed by SSFL with the exchange (BSE) over the weekend.
SSFL said the company added two lakh new customers during Q1FY25, showing a decline of 23 per cent year on year (Y-o-Y) basis. The decline was largely due to challenges including the heat wave and general elections. The net collections efficiency declined to 94 per cent in Q1FY25 from 98.1 per cent a year ago. Sequentially, it fell from 96.5 per cent in Q4FY24.
The impairment on financial instruments, money set aside as provision for stressed loans, grew multi-fold to Rs 212 crore in Q1FY25 from Rs 29 crore in Q1FY24 and Rs 94 crore in Q4FY24. The rise in credit cost due to the rise in delinquencies hit the bottom line. Its net profit declined to Rs 56 crore in Q1FY25 from Rs 119 crore a year ago. Sequentially, net profit declined from Rs 129 crore in Q4FY24.
The assets under management rose by 32 per cent year on year (Y-o-Y) basis to Rs 11,723 crore at the end of June 2024, it said.
Referring to the effect of general elections, SSFL said the activity in Uttar Pradesh, Bihar, Madhya Pradesh, Maharashtra, and Odisha was impacted. It encountered operational challenges because of restricted movement of customers and employees.
In the backdrop of severe heat waves, there were challenges in enforcing the Joint Liability Group model due to low customer turnout at centre meetings. High attrition was reported in key states like Madhya Pradesh, Maharashtra, Rajasthan, Telangana, and Gujarat. This affected timely customer service, according to the presentation.
It has introduced technology-enabled monitoring systems for supervisors to ensure better control and improve portfolio quality. “We expect the business to be normalised by the second half of the year,” it added.
First Published: Jul 28 2024 | 5:29 PM IST
