Motilal Oswal Maintains Buy Rating, Sets Target Price at Rs 280 for Spandana Sphoorty

Spandana Sphoorty Posts Strong Q4 FY26 Earnings

Spandana Sphoorty, a leading microfinance company, has reported its fourth quarter (4Q) earnings for the fiscal year 2026 (FY26). The company's profit after tax (PAT) for the quarter stood at approximately INR 53 million, a significant improvement from the loss of INR 86 million projected by Motilal Oswal Financial Services (MOFSLe).

Despite a decline in net interest income (NII) by 48% year-over-year (YoY) to approximately INR 1.1 billion, which was 21% lower than estimated, the company's operating expenses decreased by 23% YoY to approximately INR 1.6 billion, or 17% lower than expected. This led to an operating loss of INR 100 million, a significant improvement from the operating loss of INR 670 million in the previous quarter.

The company's credit costs, net of recoveries, resulted in provision write-backs of INR 180 million, leading to an annualized credit cost of -2%. This is a significant improvement from the previous quarter's credit cost of around 6.6% and the previous year's credit cost of approximately 36.2%.

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Outlook and Recommendations

The stock trades at 1x FY27 price-to-book value (P/BV). Motilal Oswal Financial Services expects Spandana Sphoorty to deliver a compound annual growth rate (CAGR) of 39% in disbursements and 38% in assets under management (AUM) over FY26-FY28E, leading to a return on assets (RoA) of 4.3% and a return on equity (RoE) of 15% in FY28E. As a result, the research firm has reiterate its Neutral rating with a target price of INR 280, based on 0.9x March 2028 estimated book value.