Buy Spandana Sphoorty; target of Rs 340: Motilal Oswal

Motilal Oswal's research report on Spandana Sphoorty

Spandana Sphoorty’s (SPANDANA) 4QFY25 loss stood at ~INR4.3b (vs. MOFSLe loss of INR4.1b). FY25 loss stood at INR10.3b (vs. PAT of INR5b in FY24). 4Q NII declined ~47% YoY to ~INR2.1b (~11% miss). PPOP declined ~91% YoY to INR251m. Total borrower count declined ~16% QoQ to 2.5m. Opex rose ~7% YoY to ~INR2.1b (~23% lower than MOFSLe), resulting in a cost-income ratio of ~89% (PY: ~42% and PQ: 77%). Credit costs stood at ~INR6b, resulting in annualized credit costs (as % of average loans) of ~36% (PQ: ~32% and PY: ~4%). Technical write-offs stood at INR6.5b (vs. INR6.8b in 3QFY25). Spandana has received shareholder approval to raise up to ~INR7.5b of fresh equity capital. A Board Committee has been formed to oversee capital raise, including a possible rights issue in 2QFY26 with promoter participation.

Outlook

While there are no near-term catalysts, we maintain our BUY rating on the stock with a TP of INR340 (based on 0.9x Mar’27E P/BV), given that SPANDANA now trades at undemanding valuations of 0.8x Mar’27E P/BV.