Spandana Sphoorty looks to steady ship after over 4 months of uncertainty

The MFI, backed by private equity fund Kedaara Capital, experienced a jolt in November 2021 after Padmaja Reddy, founder and managing director (MD), quit abruptly.


financial services | Microfinance | microfinance institutions

Abhijit Lele  | 

After over four months of uncertainty, troubled microfinance institution (MFI) Spandana Sphoorty Financial (SSFL) is looking for stability and growth with full-time chief executive officer (CEO) and chief financial officer (CFO) coming on board over the weekend.

The MFI, backed by private equity fund Kedaara Capital, experienced a jolt in November 2021 after Padmaja Reddy, founder and managing director (MD), quit abruptly.

Also, many exits from the information technology team adversely affected operations.

Shalabh Saxena has joined as MD and CEO and Ashish Damani as president and CFO of the MFI, SSFL informed BSE.

However, these appointments were not without hick-ups.

In November 2021, IndusInd Bank had raised objections, citing alleged violation of terms of contract with the company it was working with, namely its wholly-owned subsidiary Bharat Financial Inclusion (BFIL).

The MFI had roped in Nitin Prakash Agrawal as interim CEO and Amit Mittal as interim CFO to run the show till the full-time CEO and CFO came on board.

In the aftermath of events in November, the Hyderabad-based MFI put disbursements on hold to put the house in order.

It resumed disbursements in the fourth quarter with the aim to lend Rs 1,000 crore till March 2022.

Its assets under management (AUM) shrunk from Rs 8,157 crore in March 2021 to Rs 6,695 crore in December 2021.

The uncertain situation about the management was flagged by rating agency CRISIL. It placed the company’s long-term bank line on “rating watch with developing implications” in November 2021.

The rating agency called the low stability in its senior management a weakness.

Over the last three years, a churn in the senior management team remained high — especially for important positions such as CFO and chief risk officer.

Counting Spandana’s strength, it said the MFI has established a market position and long-track record with regional diversity in asset base. It added that the company also has sound risk management policies and healthy capitalisation.

These strengths are partially offset by average resource profile, inherent susceptibility to socio-political issues and the modest credit risk profiles of borrowers.

SSFL posted a net profit of Rs 39.7 crore in the quarter ended December 30, 2021, against a net loss of Rs 30.3 crore a year ago. The MFI had also reported a net loss of Rs 58.8 crore in the quarter ended September 2021.

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