Target: ₹690

CMP: ₹576.95

We attended Spandana Sphoorty Financial’s business update call and the key takeaways include: Cumulative collection efficiency (April to September 13, 2020) stands at 55 per cent; it collected over ₹1,400 crore versus a demand of ₹3,100 crore since the lockdown; August collection efficiency (ex arrears) stands at approximately 78-80 per cent, management expects it to reach 98 per cent (borrowers) by October; and in State-wise collections — Kerala and Odisha are lagging while Gujarat, Andhra Pradesh, Karnataka, Telangana, Madhya Pradesh are leading.

Spandana is comfortably placed on liquidity — it has raised about ₹1,500 crore since the lockdown at an average cost of borrowing of 9.95 per cent (nearly 10.6 per cent ex assignments.

The company expects industry-level write-offs to remain at 3-4 per cent due to the Covid-19 pandemic. While the around 13 per cent inactive customer base poses near-term risk on asset quality, improving collection across States, diversified operations, adequate provisioning buffer and comfortable capital position (CAR 53 per cent) will ensure it navigates through the current cycle relatively better than peers.