Buy Spandana Sphoorty; target of Rs 1200: Motilal Oswal

Motilal Oswal's research report on Spandana Sphoorty

At its analyst/investor meet, Spandana Sphoorty’s senior management team outlined the company’s vision for FY28 and talked about its strategies for distribution, risk management, liabilities, technology and people’s practice. The management targets to achieve AUM of ~INR280b by FY28 and a customer base of ~6.2m. It plans to scale up its branch network to ~1,950 (~1520 now) and increase its employee strength to ~21k (~12K now). It has guided for credit costs of 4.5% and RoE of >18%, along with CRAR of ~25% (Refer Exhibit 11).

Outlook

Spandana trades at 1.5x Sep’25E P/BV. Given the strong opportunity in the microfinance sector, we think that the company is poised for a further rerating if it executes well on its stated goal of quality growth. Maintain BUY with a TP of INR1,200 (premised on 1.8x Sep’25E BV).