Spandana puts 18 Maharashtra branches under special scrutiny

Spandana Sphoorty Financial Limited placed 18 of about 127 Maharashtra branches under special focus at its October 30, 2026 Q2 FY27 call, tightening onboarding rather than halting lending, while 96% of its about Rs 600 crore Karnataka-Maharashtra portfolio was current.

What is Spandana doing in Maharashtra?

Spandana is applying targeted lending and collection controls at 18 Maharashtra branches identified as critical, rather than stopping lending across the state. Management said it divided its about 127 Maharashtra branches into risk categories and developed measures jointly through its policy and risk teams for the branches receiving special attention.

At stressed branches, Spandana is not onboarding customers new to credit, is making norms more stringent for customers new to Spandana, and is requiring existing customers to have repaid on time before receiving a repeat loan. The approach separates existing customers, customers new to Spandana and customers new to credit.

Management said on October 30 that it was not putting growth into a slow or stop mode. It described the response as more careful sourcing with tighter checks and balances, while saying October disbursement and business trends looked good. Recovery work required greater effort in pockets of Maharashtra, but management said collections were holding up at that point in the month.

How large is Spandana's weather-risk exposure?

Spandana's book in Karnataka and Maharashtra combined was about Rs 600 crore, of which management said about 96% was current and 3% was gross non-performing assets, or GNPA. Management identified the two states as areas where stress could emerge amid concerns around El Nino, while saying the portfolio was largely current at the time of the call.

Maharashtra was the state where management identified some collection issues and began branch-level action. In contrast, management said Andhra Pradesh, Telangana and Karnataka did not present much of an issue as of October 30. It also said rains in Odisha, Andhra Pradesh and Telangana had occurred only over the preceding weekend and were too recent to assess.

Spandana does not lend for farming, according to management. It said its microfinance institution, or MFI, customers may have agriculture-allied activities or several income sources, but its loans do not finance cultivation. Management said borrowers in rural areas commonly undertake multiple activities during the year, while maintaining that the Maharashtra situation required continued observation.

Has Spandana's asset quality improved before this scrutiny?

Spandana reported lower delinquency and non-performing loan ratios in Q2 FY27 than in Q1 FY27, although management said an asset reconstruction company, or ARC, transaction contributed to the reported GNPA reduction. Consolidated GNPA was 2.5% at September 30, 2026, compared with 3.6% at the end of June, while net NPA declined to 0.5% from 0.68%.

The ARC transaction involved Spandana's subsidiary selling a GNPA book, Chief Financial Officer Ashish Damani said. He said GNPA would still have fallen quarter on quarter without the sale, but not as sharply as reported. On an absolute basis, he said gross provisions increased by Rs 15 crore in Q2 FY27.

Spandana attributed the broader portfolio improvement to strengthened underwriting and customer onboarding over the preceding two years. Management said its 31-to-90-day delinquency bucket had reached 0.4%, compared with 9.8% at an earlier point, while GNPA had reduced to about 2.6% from a 5% peak. Those comparisons do not determine the outcome at the 18 Maharashtra branches.

Is Spandana still expanding lending despite Maharashtra concerns?

Spandana is still expanding its loan book, reporting Q2 FY27 disbursements of Rs 1,481 crore and assets under management, or AUM, of Rs 5,364 crore, up 10% quarter on quarter. Of quarterly disbursements, 54% went to new customers, 11% to reactivated dropout borrowers and 35% to existing customers that met its guardrail principles.

The company added 1.5 lakh borrowers in Q2 FY27, after about 1.35 lakh in the preceding quarter and 1.13 lakh two quarters earlier. Management said 96% of the MFI portfolio had been originated under its strengthened underwriting framework. That mix explains why its Maharashtra measures concentrate on new-to-credit onboarding and repayment behaviour before repeat loans rather than a statewide lending suspension.

Spandana reported a 24.9% yield in Q2 FY27, compared with 24.6% in Q1, and a 10.6% marginal borrowing cost, down 260 basis points from Q3 FY26. Net interest margin, or NIM, increased to 13.6% from 12.5% in Q1. Profit after tax was Rs 18 crore, compared with Rs 12 crore in Q1, after a one-time Rs 7.9 crore deferred tax asset reversal connected with the proposed Criss Finance Limited merger.

When will Spandana know whether drought is affecting collections?

Management said November should provide the first signals and December or January should offer clearer evidence of how drought-related conditions are affecting collections and sourcing. It said the assessment remained at an early stage on October 30 and cautioned that press and social-media coverage did not establish the magnitude of any eventual impact.

Spandana referred to Kerala's 2018 floods, when management said affected borrowers took about three to four months to recover. Management did not present that experience as a forecast for Maharashtra. It said one or two more months were needed to determine whether the collection pressure becomes more significant or remains manageable through tighter sourcing and recovery efforts.

Conclusion

Spandana's response is a targeted risk-control measure covering 18 branches, rather than a withdrawal from Maharashtra or a halt to group-wide lending growth. The company entered the period with 96% of its about Rs 600 crore Karnataka-Maharashtra book current, while Q2 FY27 AUM rose 10% quarter on quarter to Rs 5,364 crore and reported GNPA fell to 2.5%.

The next disclosed milestones are November collection signals and management's expected December-January assessment of conditions in Maharashtra. Management also expects regulatory approval for the Criss Finance Limited merger in three to four months, and its progress on that plan could affect the timing of the deferred tax asset reversal and the post-merger business structure.