Spandana Sphoorty shares nosedive 17% as brokerages downgrade MFI stock on Q2 net loss

Motilal Oswal has maintained its 'buy' recommendation on Spandana Sphoorty with a revised price target of Rs 540, down from Rs 580 earlier.

Shares of Spandana Sphoorty Ltd fell as much as 17 percent on October 29 after the microfinance (MFI) lender reported a net loss of Rs 204 crore for the quarter ended September 30, 2024, compared to a net profit of Rs 116 crore in the year-ago period.

Nuvama Institutional Equities has cut its target price on Spandana Sphoorty stock by 42 percent to Rs 520 from Rs 900 earlier, citing MFI stress that is likely to continue in in the current quarter with respite likely only in Q4FY25.

Given two consecutive stressed quarters and low visibility, the brokerage downgraded Spandana Sphoorty stock to ‘hold’ from ‘buy’ earlier.

With the ongoing MFI stress, a sharp rise was observed in GS2 and GS3 loans for Spandana in Q2FY25. GS2 loans rose sharply to 6.2 percent, while GS3 rose to 4.9 percent.

The deterioration in asset quality can be attributed to borrowers taking more loans including non-MFI loans after taking disbursement from Spandana, high attrition and declining attendance in centre meetings, Nuvama said.

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JM Financial also downgraded the stock to 'Hold', with a revised target price of Rs 500, valuing at 0.9 time FY26E book value per share. While the brokerage believes the additional steps taken by the company to control its credit costs would be beneficial over the medium term, it remains vigilant on the asset quality of the existing book.

Spandana's gross NPA during the July-Sep quarter stood at 4.86 percent, compared to 2.6 percent, while Net NPA stood at 0.99 percent from 0.52 percent in June. Provisions during the quarter increased by 468 percent on-year to Rs 491.8 crore.

Brokerage firm Motilal Oswal has maintained its 'buy' recommendation on Spandana Sphoorty with a revised price target of Rs 540, down from Rs 580 earlier.

At 10:44 am, Spandana Sphoorty shares were trading over 16 percent lower at Rs 384.90 on the National Stock Exchange (NSE). The stock has tanked around 65 percent so far this year, underperforming Nifty's returns of 12 percent.

In the past 12 months, the counter has fallen 57 percent. In comparison, Nifty rose 28 percent during this period.

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