4 Even while sailing through these tough times, our strong resolute
helped us deliver value for all our stakeholders.
This approach, backed by our undeterred grit and spirit to bounce back,
pushed us to propel onto a steady growth orbit.
With our firmly rooted values and belief in our mission of serving low-
income households and individuals, we steadfastly kept growing to improve the quality of
life for our customers.
Dear Members,
With immense pleasure, I present to you the first annual report of
Spandana Sphoorty Financial Limited, post our listing on the Indian stock exchanges on
August 19, 2019. I am glad to share that our Company extended its growth trajectory to
reach a Consolidated AUM of f 68,291 Mn as on March 2020 (year-on-year growth of 56%).
With this, we clocked the highest AUM in our history. The year witnessed multiple external
events which impacted the NBFC industry in general and MFIs, in specific cases. While
these exogenous events have created certain hurdles for the NBFC industry, Spandana has
displayed a proven track record of emerging stronger and, as a result, more resilient time
and again.
Reaching new summits
We expanded our operations to Haryana in FY 2019-20, in addition to the
existing presence in 16 states and 1 union territory. The branch network grew by 85,
taking the total from 925 branches at the end of FY 2018-19 to 1,010 at the end of FY
2019-20. More importantly, Spandana entered 16 new districts, taking our total district
count to 280 as on March 31, 2020. This was in line with our philosophy of penetrating
deeper in our operating areas and serving most of the potential borrowers. The branch
expansion was supported by the addition of 1,430 Loan Officers, taking their total count
to 6,103 as on March 31, 2020.
On August 19, 2019, Spandana successfully completed its public listing
on the Indian stock exchanges via an Initial Public Offering (IPO). Due to events such as
the abrogation of Article 370 and 35A, the stock market indices were turbulent and sharply
fell by 38% on an annualized basis,
a month prior to our listing date. Despite such challenging market
conditions, the IPO was subscribed 1.05 times. The ~f1,200-Cr issue received bids for
1,03,27,585 shares against 98,22,367 units on offer.
We endeavour to become a one-stop-shop for our borrowers'
financial requirements. This led us to launching and expanding a new product known as Blue
Lemon, a consumer goods financing product. Besides, we have always put a special emphasis
on technology integration to make our systems and processes more efficient and convenient,
to eventually make our systems and processes leaner.
Another focus area for our Company was to improve efficiency at the
field level, considering a significant expansion of the branch network. Often, expansion
and efficiency are not spoken about in the same breath, however, we managed to tick all
the boxes on both the counts. Operational improvements resulted in beating our own record
for the lowest Opex ratio (operating expense to average AUM) in the industry at 3.9% as on
March 31, 2020. Nevertheless, I strongly believe there is immense scope to further improve
this ratio, as the productivity of lower AUM per branch and AUM per borrower improves as
compared to the industry.
To our credit, we recorded our highest-ever total revenue and profits
before tax during FY 2019-20 of f 14,695.1 Mn and f 6,184.5 Mn, respectively. Continuous
focus on bringing down the borrowing costs also contributed to this performance. Today, we
have 32 lender partners as compared to 3 partners around three years ago. Their incredible
support has exceeded our expectations.
In our experience, elections have a very limited impact on microfinance
operations in general. Every single year, there
are elections at multiple levels of governance - Panchayat, Mandal,
Municipality, State, and Central, among others. However, there has been negligible to
marginal impact on the industry across the 20+ years of microfinance operations in India.
As a result of a consistent focus on operations and various system-based controls, our
asset quality continues to be an industry-defining one. The GNPA and NNPA as on March 31,
2020 was 0.36% and 0.07%, respectively.
Braving the rough seas
Following the Central Government's announcement of a complete
lockdown from March 24, 2020, we closed down all our branch and head office operations. We
suspended collections and other operations not only for compliance with the order but also
to ensure the health and safety of our employees. Guided by the Covid-19 Regulatory
Package announced by the Reserve Bank of India, we extended the moratorium to our
borrowers. 95% of our borrowers are situated in the rural areas (which fortunately had
relatively lesser Covid-19 impact), and 57% engage in ‘essential services' like
dairy or agricultural activities. Hence, their cashflows and repayment capabilities
remained largely intact. The average loan outstanding per borrower for us is f 26,610 v/s
f 37,465 for the industry - a clear indication of our borrowers' better position in
terms of repayment. Later, according to the order issued by the Ministry of Home Affairs
on April 15, 2020, 79% of our branches became operational by April-end, in compliance with
the regulatory guidelines on businesses, and social distancing, among others. We were the
first in the industry to recommence operations on April 20, 2020.We started with
approximately 30% field staff, gradually increased it to approximately 50% by Apri end and
92% by the third week of May 2020. The field staff educated the borrowers on the impact of
the moratorium and started collecting from those unwilling to avail it. By May-end, all
our branches became fully operational.
Even while sailing through these tough times, our strong resolute
helped us deliver value for all our stakeholders. This approach, backed by our undeterred
grit and spirit to bounce back, pushed us to propel onto a steady growth orbit. With our
firmly rooted values and belief in our mission of serving low-income households and
individuals, we steadfastly kept growing to improve the quality of life for our customers.
Our lenders have shown unceasing faith in us, even amidst such
challenging times. They continued lending to us through various modes including direct
assignments, even during the lockdown. Based on our healthy financial condition, a rating
agency has upheld our rating with a stable outlook.
A note of gratitude
We thank our borrowers for continuously preferring us for their
financial requirements. We are glad to be able to positively impact the lives of more than
2.5 Mn households. This motivates us to further reach out to more people. We can't
thank our employees enough for all the hard work and dedication they show in the field
while being the face of
Spandana. We are also thankful to our lenders and investors who
continuously support us in furthering our financial inclusion goal.
Fostering a spirit of entrepreneurship and helping the overall value
creation process, we endeavour to continue serving women to help them realize their
dreams. This goes a long way in participating in nation-building while supporting our goal
of uplifting the quality of our borrowers' lives. Because, when women prosper, the
society prospers and the overall welfare of the state happens.
With my best wishes and my prayers that you and your family stay safe.
Padmaja Reddy
Founder & Managing Director