Spandana targets Rs 10,000 crore AUM and 3.5%-4% ROA from FY27

Spandana Sphoorty Financial Limited is targeting Rs 10,000 crore in assets under management by March 2028 and expects business-as-usual return on assets of 3.5% to 4% from FY27 onward. Management said another capital raise could be needed around the middle of next year if growth follows its plan.

What AUM is Spandana targeting by March 2028?

Spandana is aiming for Rs 10,000 crore of assets under management, or AUM, by March 2028. Venkatesh Krishnan described this as the company’s near-term aim when asked about a sustainable growth rate. He said the implied percentage growth may appear high because of the starting base, but said this was the company’s plan.

Management did not set a specific annual AUM growth rate for Spandana. Instead, Krishnan said the wider microfinance sector, estimated at about Rs 3.4 lakh crore, should grow in a calibrated way over the next three to four years. He cited a potential range of 10% to 25% for companies in the sector, compared with growth rates of 40% or 50% that he said could create problems if lending quality or collections weaken.

The intended product mix shows that joint-liability-group, or JLG, loans are expected to remain central to the AUM expansion. Management said JLG loans would account for 60% to 70% of the portfolio in a post-merger scenario, cash loans for about 20%, individual loans for 1% to 2%, and micro-loans against property, or micro-LAP, for 8% to 10%. The parent company currently originates only qualifying assets, while subsidiary Criss Financial originates individual loans and micro-LAP.

When does Spandana expect to reach a 3.5%-4% ROA?

Spandana expects a 3.5% to 4% return on assets, or ROA, in business-as-usual conditions from FY27 onward. Ashish Damani said management’s immediate objective for the current financial year was to maintain its trajectory through the coming quarters, while FY27 was the point from which it expected the steady-state range to apply.

Management linked the ROA range to a return on equity, or ROE, of about 14% to 15% at gearing of four times. This is management’s stated profitability and leverage framework, rather than a formal FY29 earnings forecast. An analyst raised the possibility of a Rs 500 crore profit level in fiscal 2029, but management did not validate that figure and cautioned that operating conditions can disrupt a mathematically plausible outcome.

The route to the ROA objective relies on productivity, recoveries and cost discipline. Krishnan said the company wanted revenue to be established before costs are added, creating a predictable revenue base before deploying variable costs. Management also said it was pursuing projects to improve productivity, recoveries and cost management, without disclosing a savings target or completion date.

How will Spandana manage credit risk during expansion?

Spandana says its growth plan is subject to lending and collection controls, including a maximum fixed-obligation-to-income ratio, or FOIR, of 50%. Management said its rule engines operate to that limit under self-regulatory organisation requirements, and that Spandana is ordinarily the first, second or at most third lender to a customer, aside from possible isolated system exceptions.

The newer lending book represented a smaller share of stressed loans than the overall portfolio. Management said gross non-performing assets, or GNPA, were 2.6%, while the new book accounted for 0.5% within GNPA. For this comparison, management defined the new book as disbursements made from April 1, 2025, meaning most GNPA was associated with lending originated before that date.

Technical write-offs occur after 455 days, which management described as 90 days past due plus another 365 days without collection. Management had cited gross credit cost of 2.5% to 3% before recoveries, while saying better recoveries could produce nil or marginally positive net credit cost. It declined to provide second-half net credit-cost guidance because market conditions in some states remained uncertain.

When could Spandana raise fresh capital?

Spandana could seek the next leg of capital around the middle of next year if its growth plan progresses as intended. Krishnan gave that conditional timing in response to a question on whether four-times leverage would trigger a capital raise. Management did not disclose a proposed amount, instrument or fixed leverage ceiling.

The potential fund raise matters because four-times gearing is also the assumption used in management’s estimate of 14% to 15% ROE. The company had called money from its partly paid rights issue, according to the analyst’s question, but management did not state how much additional capital would be required to support the Rs 10,000 crore AUM target.

Management said its outlook had not changed as of the end of October. Asked about earlier guidance of Rs 6,000 crore to Rs 6,500 crore of disbursements, more than Rs 6,000 crore of AUM and Rs 675 crore of operating expenditure, Krishnan said Spandana stood where it had expected to be by March 2027. He said operating expenditure was not expected to rise overall, even as savings were redirected toward collections staff and leadership for 90-plus-day overdue accounts.

Conclusion

Spandana’s medium-term framework combines a Rs 10,000 crore AUM target for March 2028 with an expected 3.5% to 4% business-as-usual ROA from FY27. Management’s plan retains JLG loans as 60% to 70% of the portfolio, uses a 50% FOIR limit and connects a four-times gearing assumption with an ROE range of about 14% to 15%.

The next issue is whether growth develops sufficiently to require capital around the middle of next year. Before then, management said the effect of current conditions should become clearer by December or January, while it monitors 127 branches in Maharashtra and maintains the outlook it had stated at the end of October.