Spandana Sphoorty - Q4 FY21 first take - Elevated credit cost to continue - YES Securities

- AUM growth (5% qoq/19% yoy) marginally below estimate, despite highest-ever disbursements of Rs24.3bn, due to larger-than-envisaged loan write-off of Rs1.66bn (2% of portfolio)

- Growth yet again driven by average ticket size increase (AUM/Borrower up 9% qoq and 25% yoy), as borrower base continued to decline - slightly surprising, as Q4 was fairly normalized period and peers like CREDAG has shown improved new borrower additions

- Collection Efficiency (with arrears) stood at 100% in Q4 v/s 96% in Q3 - PAR 1-30 at 3.6%, 31-60 at 2.0% and 61-90 at 1.6% - GNPL at 3.1% and NNPL at 1.4% (after 2% write-off)

- Total provision on BS stand at Rs4.1bn (5% of AUM) - fully covers the PAR 30 outstanding, also at 5% of AUM - 98% borrowers serviced installments in March (93% paid full)

- Risk remains flow forward of 3.6% PAR 1-30 portfolio and decline in collection efficiency during April-May creating new delinquencies - second wave will also impact rollbacks in overdue and NPL buckets and recoveries from the w-off pool - thus, provisions will remain high FY22

- The co. made Rs0.5bn provisions towards RBI observations on excess pricing (> 10% margin cap) in preceding years - this has been a topic of concern for investors, as other large listed MFIs have not received such observations from RBI

- Liquidity availability was not an issue, but the cost remains high - raised Rs 19bn in Q4, holds liquidity surplus of Rs11bn and has sanction pipeline of Rs20bn

- On March 31, 2021, the Company has invested an amount of Rs. 500 Million in Criss Financial Holdings Limited, a subsidiary of the Company

- High capital adequacy (40%) and normalized profitability are key cushions - valuation undemanding at 1x FY23 - we will review rating and estimates post the call today

Source : Equity Bulls

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