Spandana Sphoorty Financial

Microfinance lender Spandana Sphoorty Financial IPO ( intends to raise about Rs 1,200 crore. Spandana IPO comprises a fresh issue of Rs 400 crore and an offer for sale of 93,56,725 equity shares, including an anchor portion of 42,08,886 equity shares. Spandana IPO represents 22% of its post issue paid-up share capital

Spandana IPO Details

Issue PeriodAugust 5, 2019 – August 7, 2019
Issue DetailsFresh Issue of Equity shares upto Rs.400 Cr
 + Offer for Sale of upto 9,356,725 Equity Shares
Issue Size (Rs. Cr)Rs. 1,200.94 Cr
Price BandRs.853 – 856
Bid Lot17 Equity Shares 
Issue Structure : 
QIB50% of the offer 
NIB15% of the offer 
Retail35% of offer- 4,910,368 Equity Shares-Rs.420.33 Cr
GCBRLMsAxis Capital, ICICI Securities, IIFL Holdings, JM Financial
BRLMsIndusind Bank, Yes Securities
RegistrarKarvy Fintech Pvt Ltd

About Spandana

  • Spandana Sphoorty Financial Limited  was incororated in 2013 and is a leading, Rural Focused NBFC-MFI with a geographically diversified presence in India
  • Spandana Sphoorty is the 4th largest micro finance institution (MFI).
  • It has gross AUM of Rs. 4,437 crore (FY19) and 92% of this is lent in rural areas.
  • Spandana Sphoorty has about 2.46 million active borrowers.
  • has 7,060 employees across 929 branches in 16 states and 1 union territory. Out pf these 929 branches, the company has 149 branches in Orissa, 149 in Madhya Pradesh, 136 in Karnataka, 111 in Maharashtra and 83 in Chhattisgarh. Further, 20.01% of AUM came from Madhya Pradesh, 19.98% from Odisha, 13.48% from Karnataka, 10.77% from Maharashtra and 8.70% from Chhattisgarh.

Spandana Sphoorty Financial Ltd. : Financials

Particulars/ Rs Cr201920182017
Gross AUM~4,437.283,166.791,301.54
AUM Growth (%)40.12%143.31%6.78%
Disbursement4,969.283,857.652059.17
Disbursement Growth (%) 28.82%87.34%14.83%
Revenue from Operations1,043.10587.31377.06
Net Interest Income623.28335.72221.07
Profit Before Tax473.47282.745.59
Profit after Tax311.9187.95443.41
Net Profit Margin29.90%32.00%117.60%
Equity Share Capital59.6329.7628.45
Reserves1,829.801,360.88899.12
Net worth1,889.441,390.64927.57
RoNW (%)16.51%13.52%47.80%
Net Asset Value (Rs.)316.84467.33326.04
Face Value10  
EPS (Rs.) as stated53.4642.52216.93
IPO Price856
Post issue Equity64.31
EPS post issue48.50
PE Post issue17.65
NAV Post Issue356
P/BV post issue2.40

Spandana IPO: Assessment

  • Spandana Sphoorty Financial offers income generation loans under the joint liability group model, predominantly to rural women from low income strata.
  • Spandana Sphoorty Financial was severely impacted due to the AP Microfinance Ordinance 2010, which enforced many restrictions on the operations of MFIs. 
  • Kedaara Capital Investment Managers Ltd took control of the company in 2017 through its special purpose vehicle, Kangchenjunga Ltd, (consortium of Kedaara Capital, George Soros, Quantum, Ontario Teachers’ Pension Plan and US fund Maple Mountain Holdings) which helped the company successfully exit CDR post the 2010 AP MFI crisis
  • Microfinance loans are unsecured and are susceptible to various operational, credit and political risks
  • Spandana received good response from Anchor Investors. The offer was subscribed by 18 anchor investors which include names like Well Fargo Emerging Markets Equity Fund, Bajaj Allianz Life Insurance, Goldman Sachs India and ICICI Prudential Life Insurance, Edelweiss Alternative Investment Opportunities Trust, HSBC Global Investment Funds-Asia Ex Japan Equity Smaller Companies and Avendus Absolute Return Fund.
  • Post-issue, the P/BV works out to be 2.4. Other than CreditAccess Grameen with P/BV at 3.02, the ratio of other MFIs is much lower, Satin Credit care (1.4), MFI cum Small Banks Ujjivan Financial Services (1.79), Equitas Holdings( 1.45)
  • Post issue promoters shareholding will stand at 62 %.
  • Spandana IPO looks promising considering its good growth in the past and a strong backing but the present market conditions, internal and external environment are a major deterrent.
  • Spandana IPO is not seeing any demand in the grey market at present.
  • I am not likely to apply for Spandana IPO. May put 1-2 applications if QIB response is quite good on Day 3 .

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering and Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.