Spandana Sphoorty in Q4 FY26: Growth Returns as Collections Tighten

Spandana Sphoorty Financial Limited ended FY26 with a noticeable change in trajectory. After several quarters of balance sheet contraction and elevated credit costs across the microfinance sector, Q4 FY26 showed the company moving back into growth mode. Assets under management rose 12% quarter-on-quarter to ₹4,420 crore, disbursements accelerated to ₹1,539 crore, and the company reported a profit after tax of ₹5 crore.

The quarter was positioned as a pivot: growth resumed after multiple quarters, collection efficiency moved closer to pre-stress levels, and the recovery engine remained active. Management’s commentary also made it clear that the approach is conservative. The priority is to expand only while keeping X-bucket collection efficiency near 99.5% or higher.

A quarter defined by restart in disbursements

Disbursements increased steadily through FY26 and peaked in Q4. The company disbursed ₹1,539 crore in Q4 FY26, up 30% sequentially from ₹1,188 crore in Q3. This acceleration translated into AUM rising to ₹4,420 crore from ₹3,948 crore.

A key internal marker used by the company is the proportion of the portfolio originated under tighter credit rules introduced in FY26. Spandana stated that FY26 originations account for 80% of its microfinance AUM and that this book is showing 99.7% net collection efficiency. The company also disclosed that around 98% of customers were current at disbursement.

The operating setup has been reshaped for the next growth phase. In FY26, the company rationalised 347 branches through mergers or closures. Branch count reduced to 1,457 as of March 2026, and the employee base reduced to 10,776. Management described the existing branch infrastructure as sufficient for future growth, implying that near-term expansion is expected to come primarily from productivity and customer acquisition rather than network addition.

Financial summary (Standalone/Consolidated as stated)

Collections and recoveries: the anchor behind profitability

Collection efficiency trends were the most consistent positive indicator across the presentation. Spandana reported X-bucket collection efficiency improving to 99.7% in March 2026, compared with 96.9% in April 2025. It also reported that 86% of branches were above 99.5% X-bucket collection efficiency.

The presentation also tracked forward flows from X-bucket to SMA-0 reducing to 0.2% by March 2026. On portfolio quality, the company presented a sharp reduction in PAR 30+ over time. While the table provided in the slides uses multiple PAR measures, the broader message was that the book has stabilised steadily through FY26.

Recoveries remained a large operational focus. The company reported 90+ dpd recoveries of ₹67 crore in Q4 FY26, continuing a rising quarterly trend through FY26. It also stated cumulative recoveries of about ₹274 crore since January 2025 and showed that recovery manpower increased meaningfully during the year.

Spandana highlighted multiple levers used for recovery and collections: legal actions like demand notices, legal notices and Lok Adalat outreach, along with bot calling, external agencies, and digital payment options. Digital collections were stated to be about 14% of FY26 collections, with channels such as QR code collections, SMS payment links and BBPS.

The provisioning stance remained conservative. In the stage-wise table, stage 3 (GNPA) coverage was reported at 80.6% for both consolidated and standalone, and the slide stated that PCR was maintained at around 80%. Impairment also swung sharply in Q4 FY26, with total impairment on financial instruments shown as -₹18 crore in Q4 compared to ₹58 crore in Q3.

Margins and cost structure: improving, but not yet normalised

Yield improved as the portfolio mix shifted toward the newer book. Yield was reported at 22.8% in Q4 FY26 versus 22.4% in Q3. Management also stated that pricing for loans ranges between 23% and 26% depending on customer vintage, and disbursement yield was described at about 25.25%.

Funding costs showed mixed movement. Cost of borrowing for Q4 FY26 was 13.2% versus 12.6% in Q3, but marginal cost of borrowing reduced to 12.0% in Q4 from 13.2% in Q3. Management indicated it expects the cost of borrowing to stay around current levels and guided that the blended annual cost should remain below about 12.5%, despite tight system liquidity.

Net interest margin remained under pressure. NIM was 9.9% in Q4 FY26 compared to 11.1% in Q3. The improvement in profitability in Q4 was therefore more dependent on lower impairments and operating cost reductions.

Operating costs fell sharply in Q4. The presentation showed quarterly operating cost reducing to ₹161 crore in Q4 FY26 from ₹195 crore in Q3, and management stated there is room for further reduction while maintaining execution quality. Management also stated a medium-term target of bringing opex-to-AUM down toward 7% to 8%.

Balance sheet: high capital and liquidity, with focus on funding mix

The company reported liquidity of ₹1,438 crore as of 31 March 2026 and capital adequacy (CRAR) of 35.9% on a consolidated basis. Consolidated net worth was ₹2,130 crore, and gearing was 1.9x.

Borrowing outstanding was ₹3,943 crore as of March 2026. The borrowing mix was described as diversified, with 44% from banks, 19% from NBFCs, 3% from FPIs and 35% from capital markets. The company also disclosed incremental borrowing of ₹1,272 crore in Q4 FY26 and total funding of ₹3,116 crore since the rights issue.

In the annexure, the company presented ALM across maturity buckets and stated that ALM is positive on a cumulative basis with assets maturing faster than liabilities. It also showed a large negative bucket over five years.

Strategy and build-out beyond core microfinance

Spandana’s strategic commentary had three recurring themes: merger integration, technology, and broadening product capability.

First, the merger of Criss Financial Ltd was described as on-track in the presentation. Management stated in the concall that the process has begun and may take another five to six months. The rationale cited includes capital optimisation, balance sheet diversification and operational efficiencies, and the presentation referenced 40% non-MFI headroom.

Second, technology upgrade is underway through a new loan origination system being developed by Perfios. Management expects the first product on the platform, described as the individual loan product, either before the end of the quarter or early next quarter, and expects JLG migration around October to November.

Third, management discussed expanding product offerings. A micro-LAP portfolio of about ₹322 crore was referenced and described as a portfolio the company wants to grow. In addition, Criss Financial is expected to launch an unsecured individual loan product in June or July. The product is described with ticket sizes of ₹1 lakh to ₹4 lakh, priced at 23% to 26%, with stronger underwriting steps including credit officer visits, PAN collection and 100% e-NACH repayment. Management stated the target customer profile is enterprise owners seeking working capital rather than start-up funding.

What to watch from here

Management provided a directional growth roadmap. It stated the company wants to sustain disbursements of about ₹500 crore per month for the next three to four months and then increase toward ₹550 crore to ₹600 crore, while maintaining collection discipline. Management also stated a target to exit March 2027 at about ₹6,500 crore of AUM and emphasised that growth will not come at the cost of X-bucket collection efficiency.

The company’s Q4 FY26 results show a transition underway: growth has restarted, portfolio quality has improved, and profitability has returned, even if at a small level. The next phase will depend on whether the company can scale disbursements while holding collection efficiency near 99.5% and steadily normalising opex-to-AUM as the base grows.