Spandana targets Rs 10,000 crore AUM by March 2028, may raise capital

Spandana Sphoorty Financial Limited is targeting at least Rs 10,000 crore in assets under management (AUM) by March 2028 and may seek fresh capital around mid-2027 if the plan advances as intended. Management linked the funding timetable to execution while saying it would avoid the 40% growth pace that can create later stress.

What is Spandana's AUM target and deadline?

Spandana is targeting at least Rs 10,000 crore of AUM by March 2028. Management described this as its near-term aim when asked whether a sustainable AUM growth rate should be closer to 15% or 25%, adding that the implied percentage growth could appear high because the company is starting from a lower base.

The target is a medium-term operating objective rather than quantified annual growth guidance. Management said the wider microfinance sector, currently about Rs 3.4 lakh crore, should grow over the next three to four years, but characterised that expansion as calibrated. It said sector growth could range from 10% to 25%, depending on the company and its position in the market.

Management explicitly contrasted its approach with chasing 40% growth. It said rapid expansion can create problems and that 40% growth can lead to a 60% decline, framing its plan around productivity, recoveries and building revenue before adding costs. That makes collection performance a condition of pursuing the March 2028 AUM objective.

Spandana's nearer-term outlook had not changed as of the end of October. Management said it remained where it expected to be by March 2027 despite tighter guardrails and additional collection work in Maharashtra. It said forecasts could change if conditions change, but it had not revised them at that point.

When may Spandana raise fresh capital?

Spandana may seek its next capital raise around the middle of 2027 if its growth plan proceeds as management intends. The timing came in response to an analyst's question about whether a 4x leverage level would prompt a capital raise, but management did not specify a fixed leverage trigger.

The timing is conditional rather than a committed issuance schedule. The analyst referred to funds called from partly paid-up rights and low leverage, while management linked a possible mid-2027 raise to progress against the plan. It did not disclose an instrument, amount, price or prospective investor group for any transaction.

Management discussed 4x gearing in its return framework. It said that in a business-as-usual (BAU) environment from fiscal year 2027 (FY27) onwards, return on assets (ROA) of 3.5% to 4% could correspond to return on equity (ROE) of about 14% to 15% with 4x gearing. These were management aspirations, not formal earnings guidance.

The funding discussion followed a period when management said access to finance varied across the microfinance industry. It said many mid-sized and small microfinance institutions could not obtain funding because banks were selective during the relevant scheme period. Spandana said its incremental cost of debt was 10.6% including that scheme and 10.8% without it.

What portfolio mix will support Spandana's growth?

Spandana expects joint liability group (JLG) loans to remain the largest component of the combined portfolio as other products expand. Management said JLG loans would represent 60% to 70%, cash loans about 20%, individual loans 1% to 2%, and micro loans against property (micro-LAP) 8% to 10% in a post-merger scenario.

The parent company currently makes only qualifying assets, with 100% of its loans in that category, according to management. Criss Financial, its subsidiary, provides a combination of individual loans and micro-LAP. Management said micro-LAP could grow, but JLG lending would remain the largest category unless the qualifying-assets requirement changes further.

Customer leverage controls are also part of the expansion design. Management said its rule engines apply a maximum fixed-obligation-to-income ratio (FOIR) of 50%, as mandated by self-regulatory organisations (SROs). It said Spandana is generally a first, second or at most third lender and does not expect to breach that limit except for possible isolated system errors.

Portfolio seasoning remains relevant because the newer book has lower reported stress than the overall book. Management said gross non-performing assets (GNPA) were 2.6%, while GNPA in loans disbursed from April 1, 2025 was 0.5%. Loans move into technical write-off after 455 days, calculated as 90 days past due plus 365 additional days without collection.

What could affect Spandana's March 2028 plan?

Collections and local weather-related income disruption are the main near-term uncertainties management identified for Spandana's plan. Management said a clearer picture of drought-related stress would emerge by December and January, while acknowledging that some customers could delay instalments if their incomes are affected.

Maharashtra was the only state where Spandana had identified branches requiring particularly close monitoring at the end of October. The company has 127 branches in the state and had classified them into A, B, C and D groups to determine actions for each category. Management said it would apply a similar approach if stress emerges elsewhere, including Karnataka.

Management pointed to recoveries from delinquent customers as evidence of repayment intent, saying it was collecting between Rs 12 crore and Rs 14 crore from customers more than 90 days past due. It also said government support and direct benefit transfers can help households meet basic needs, but did not forecast the eventual credit-cost effect of drought conditions.

Credit-cost visibility is not yet precise. Management reiterated gross credit cost of 2.5% to 3%, depending on collections and recoveries, but said net credit-cost guidance could be premature amid conditions in some states. The sale of a GNPA book at a subsidiary reduced reported GNPA, although management said GNPA would still have declined quarter on quarter without that transaction.

Conclusion

Spandana's disclosed roadmap combines a Rs 10,000 crore AUM target for March 2028 with a potentially conditional capital raise around mid-2027. Management's framework is not solely volume-led: it relies on JLG loans remaining 60% to 70% of the portfolio, FOIR capped at 50%, a BAU ROA aspiration of 3.5% to 4% from FY27, and continued emphasis on recoveries.

The next indicators are whether Spandana remains on its March 2027 forecast and whether conditions become clearer by December and January in Maharashtra and other affected areas. Investors will also watch gross credit cost within the stated 2.5% to 3% range, progress toward the March 2028 AUM target, and whether that execution leads management to pursue capital around mid-2027.