Buy Spandana Sphoorty; target of Rs 280: Motilal Oswal

Motilal Oswal is bullish on Spandana Sphoorty recommended buy rating on the stock with a target price of Rs 280 in its research report dated August 16, 2025.

Broker Research

August 21, 2025 / 15:32 IST

Buy

26 Aug, 2025 12:21

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Motilal Oswal's research report on Spandana Sphoorty

Spandana Sphoorty’s (SPANDANA) 1QFY26 loss stood at ~INR3.6b (vs. a loss of INR4.3b in 4QFY25). 1Q NII declined ~70% YoY to ~INR1.3b (~8% miss). Operating loss stood at INR587m (PQ: operating profit of INR251m). Total borrower count declined ~18% QoQ to 2m. Opex rose ~10% YoY to ~INR2.1b (inline), resulting in a cost-income ratio of ~140% (PY: ~40% and PQ: ~90%). Credit costs stood at ~INR4.2b, resulting in annualized credit costs (as a % of average loans) of ~34% (PQ: ~36% and PY: ~8%). Technical write-offs stood at INR5.8b (vs. INR6.5b in 4QFY25). As a prudent measure, the company recognized additional credit costs of INR1.3b for the quarter due to technical write-off. Excluding this, impairment costs would have been INR2.9b. Recovery from the 90dpd account was INR410m in 1QFY26 (vs. INR520m in 4QFY25). Spandana indicated that disbursements in Jul’25 were nearly equivalent to the total disbursements in 1QFY26, with momentum strengthening further in Aug’25 as MTD-Aug’25 was tracking better than the corresponding period run-rate in July. Management anticipates a significant acceleration in both AUM and disbursement growth from 2HFY26, even as 2Q is still expected to remain challenging.

Outlook

We model AUM to decline ~20% in FY26 and expect profitability only in FY27 now. We expect credit costs for SPANDANA to remain elevated in 2QFY26, with AUM growth likely to remain subdued in FY26. While there are no nearterm catalysts, we reiterate our BUY rating on the stock with a TP of INR280 (based on 1.1x Mar’27E P/BV), given that SPANDANA now trades at an undemanding valuation of 0.9x Mar’27E P/BV.

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