The financial services firm Motilal Oswal published the latest research report on Spandana Sphoorty Share Price Target, assigning a ‘buy’ rating to the stock. The comprehensive analysis also provides valuable insights into the company’s financial health.
Motilal Oswal is Bullish on Spandana Sphoorty and has recommended a ‘buy’ rating on the Spandana Sphoorty Share Price Target of Rs 1,200. Let’s take a closer look at their recommendations for the Spandana Sphoorty Share Price Target set by Motilal Oswal.
Spandana Sphoorty Share Price Target
At the recent analyst/investor meet, Spandana Sphoorty’s senior management presented a detailed vision for the company’s growth by the financial year 2028. The key points discussed included strategies for expanding distribution, enhancing risk management, managing liabilities, and improving technology and human resources practices.
The management has set ambitious targets for the company by FY28. They aim to achieve an Asset Under Management (AUM) of approximately INR 280 billion and expand their customer base to about 6.2 million.
To support this growth, the company plans to increase its branch network to around 1,950 branches (up from the current 1,520) and boost its employee strength to approximately 21,000 (from the current 12,000). Furthermore, the company aims to maintain credit costs below 2%, achieve a Return on Assets (RoA) of over 4.5%, and ensure a Return on Equity (RoE) of more than 18%, alongside a Capital to Risk (Weighted) Assets Ratio (CRAR) of about 25%.
The projected AUM of INR 280 billion by FY28 suggests a Compound Annual Growth Rate (CAGR) of roughly 23% from FY25 to FY28. This growth is expected to be driven primarily by new customer acquisitions, with a focus on maintaining smaller ticket sizes (capped at approximately INR 80,000) and closely monitoring the total debt of each customer.
Spandana anticipates that 75-80% of its disbursements and collections will transition to a weekly model by FY28, compared to the current 7%.
The company plans to continue growing through the Joint Liability Group (JLG) model and may introduce individual retail lending, though it will constitute less than 5% of the AUM mix.
The current lending rate spread is around 12.2%, which the management considers reasonable. Spandana has maintained stable lending rates for the past four quarters and plans to pass on the benefits of lower borrowing costs to customers.
The management does not intend to take insurance coverage for its microfinance loans, as their credit cost expectation of less than 2% does not justify the insurance premiums, which are typically more beneficial for credit losses greater than 5%. However, the company will consider building management overlay and counter-cyclical provision buffers at an appropriate time.
Kedaara, the private equity promoter of Spandana, plans a smooth exit strategy, ensuring the company is in a better position than it is currently.
- CMP — Rs. 1,017
- Target — Rs. 1,200 (+18%)
- Type — Buy
- Date — 12 December 2023
- Report — Read Full Report
Shareholding Pattern
| Shareholding | Sep-23 | Jun-23 | Sep-22 |
|---|---|---|---|
| Promoter | 60.4 | 62.4 | 63.0 |
| DII | 13.0 | 8.4 | 8.6 |
| FII | 18.7 | 21.3 | 13.1 |
| Others | 7.8 | 7.9 | 15.3 |
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