3 min read Last Updated: July 28, 2024 | 05:33 PM IST
Due to increasing stress in the microcredit sector, microfinance institution (MFI) Spandana Sphoorty Financial Ltd (SSFL) has stopped onboarding customers with no prior credit history. It has also suspended taking on new members who have credit history with other borrowers in several states as a measure to improve asset quality.
In a statement to the BSE, CEO and Managing Director Shalabh Saxena said the current quarter (Q1FY25) was a tough quarter as protracted (seven-phased) general elections, heatwaves across the country and higher attrition in certain geographies posed challenges to the portfolio quality.
MFIs’ gross non-performing assets (net NPAs) rose to 2.6 per cent in Q1FY25 from 1.63 per cent in the same period last year. On a quarter-on-quarter basis, it rose from 1.50 per cent at the end of March 2024 (Q4FY24).
Net non-performing loans rose marginally to 0.53 per cent in June 2024 from 0.49 per cent a year ago. On a quarter-on-quarter basis, it rose from 0.30 per cent in March 2024, according to an analyst presentation filed by SSFL to the Board of Directors of the Banking and Securities Exchange (BSE) late last week.
SSFL announced that it gained 200,000 new customers in the first quarter of FY2025, a 23 percent decrease year-on-year. The decrease was mainly due to challenges such as the heatwaves and general elections. Net collection efficiency declined to 94 percent in Q1FY2025 from 98.1 percent a year ago. Quarter-on-quarter, it declined from 96.5 percent in Q4FY2024.
Impairments of financial instruments, i.e. funds set aside as provisions for bad loans, increased several-fold to Rs 2,120 crore in Q1FY2025 from Rs 290 crore in Q1FY24 and Rs 940 crore in Q4FY24. Higher credit costs due to rising delinquencies hit the bottom line. Net profit fell to Rs 560 crore in Q1FY2025 from Rs 1,190 crore a year ago. Quarter-on-quarter, net profit declined from Rs 1,290 crore in Q4FY24.
Assets under management rose 32% year-on-year to Rs 1,172.3 crore as at end-June 2024, the company said.
Regarding the impact of the general elections, SSFL said its operations in Uttar Pradesh, Bihar, Madhya Pradesh, Maharashtra and Odisha were affected. It faced operational challenges due to restrictions on the movement of customers and employees.
Amidst the heatwaves, there were challenges in implementing the Shared Responsibility Group model due to low customer participation in 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.
The company is implementing a technology-enabled monitoring system for supervisors, strengthening controls and improving the quality of its portfolio. “We expect operations to normalize by the second half of the year,” it added.
First Published: 28 July 2024 | 05:29 PM IST
