Spandana Sphoorty to raise Rs 4,000 cr in bonds in FY23, eyes to double AUM

MFI will focus on seven states for incremental AUM of Rs 6,000-7,000 crore

Private equity firm Kedaara Capital-backed microfinance institution Spandana Sphoorty Financial Ltd (SSFL) plans to raise about Rs 4,000 crore through bonds in FY23 to support business growth. It has set a target to grow assets under management (AUM) to Rs 15,000 crore by FY25 from Rs 6,581 crore in March 2022.

It resumed business (disbursements) in Q4FY22 after facing disruptions in Q3FY22 due to the abrupt resignation by erstwhile managing director Padmaja Reddy.

The board has approved a proposal to raise an amount of not exceeding Rs 4,000 crore through non-convertible debentures (NCDs). They could be issued in one or more tranches through a private placement route, said non-banking finance company (NBFC) in filing with BSE.

As for growth, Spandana has identified seven additional states  including Gujarat, Rajasthan, Haryana, Uttar Pradesh, Bihar and West Bengal -- with favourable metrics for quick scale up of microfinance book. It is looking for an incremental AUM of Rs 6,000-7,000 crore from these states and continue to grow organically in the existing states, said its new MD and and Chief executive Shalabh Saxena.

Scaling up growth would entail higher investments and expenditure. Spandana Sphoorty's cost to income ratio (C\I ratio) rose 32.9 per cent for FY22 from 21.9 per cent in FY21. It is expected to rise further to 43.7 per cent in FY23 due to increased investments towards growing the business and would moderate to 35.7 per cent in FY25. The branches in its network are expected to rise to 1,500 in FY25 from 1,010 at the end of March 2022 and up from 1,010 in March 2020.

On the issue of tweaking the changing business model, the company's executives said in an analyst's call that it does not want to make any knee-jerk reaction and does not intend to disturb the existing model. Anything new would be done in a calibrated manner.