Startup Deep Dive : Spandana Sphoorty Financial — record profit to record loss in 18 months

In FY24, Spandana Sphoorty Financial posted the highest annual profit in its history: ₹501 crore (~$52 million), as per its own results announcement. Eighteen months on, the same lender was booking a net loss of ₹1,035 crore for FY25, its assets under management down 43% and its chief executive gone within the year.

Spandana is one of India’s oldest microfinance institutions, listed on the NSE and BSE, lending small, collateral-free sums to low-income women across rural and semi-urban India. It has been declared near-dead once already, in 2010, and clawed back to a stock-market listing in 2019. The FY25-FY26 slump is not a new story for Spandana so much as a familiar one repeating on a national scale, as the entire microfinance sector re-learned what happens when growth outruns underwriting.

Quick facts

What they do

Spandana Sphoorty Financial is a Hyderabad-headquartered, NSE/BSE-listed non-banking finance company classified by the Reserve Bank of India as an NBFC-MFI. It lends small, unsecured sums, typically a few tens of thousands of rupees, to women in rural and semi-urban India who have no collateral and limited access to formal banks. Loans are extended through the joint-liability-group model: borrowers organise into small groups that vouch for one another’s repayment, a structure microfinance lenders across India have used since the 1990s to substitute for collateral. As of March 2025 the company operated across 20 states through 1,804 branches at the consolidated level, and by the FY26 Business Responsibility and Sustainability Report it employed 9,405 permanent staff across 1,327 branches, 85% of them rural.

The origin

Padmaja Reddy started Spandana in 1998 in Guntur, Andhra Pradesh, not as a company but as an NGO called SRUDO, the Spandana Rural and Urban Development Organisation. The idea was plain: lend small amounts to low-income women who banks would not touch, women running vegetable stalls, tailoring a few garments a week, keeping a milch animal or two, and who needed working capital in units of a few thousand rupees rather than a few lakh. The lending model broke even within its first year, a signal that the unit economics of very small, very short loans could work if collections were disciplined. In March 2003 the operation was formally incorporated as Spandana Sphoorty Innovative Financial Services Ltd, later renamed Spandana Sphoorty Financial Ltd, converting a development project into a regulated lending business. Between 2003 and 2010 it expanded hard, growing at a compound rate approaching 100% a year and becoming one of India’s largest microfinance institutions by loan book, according to the company’s own profile and industry write-ups of the period.

The struggle years

The growth that built Spandana in the 2000s nearly destroyed it in 2010. That October, the Andhra Pradesh government issued an ordinance to rein in aggressive microfinance collection practices after a wave of borrower suicides was linked to over-indebtedness and coercive recovery. Borrowers in the state, Spandana’s home market, took the ordinance as licence to stop repaying. According to a Center for Financial Inclusion case study of the episode, the loan repayment rate across the sector in Andhra Pradesh collapsed from 99.89% to about 1% within a month, and roughly ₹7,000 crore of loans across 6.25 million accounts came under stress. Nearly half of Spandana’s own portfolio sat in Andhra Pradesh at the time, so the collapse hit it harder than most peers.

The company could not service its lenders. In September 2011 it signed a Master Restructuring Agreement with creditors under corporate debt restructuring, the formal insolvency-avoidance route Indian banks used for stressed borrowers before the Insolvency and Bankruptcy Code existed. Spandana spent close to six years inside CDR, operating under lender oversight with its growth frozen and its balance sheet in workout. It exited CDR only in April 2017, after a fresh equity infusion led by Kedaara Capital Investment Managers, alongside new funding lines from three banks, according to rating-agency disclosures and Kedaara’s own account of the deal. A second, quieter struggle followed a decade later: in November 2021, founder Padmaja Reddy resigned as managing director after a public falling-out with Kedaara over the company’s direction, a rupture examined in the next section.

The turning point

The 2017 Kedaara-led recapitalisation is the single event that separates Spandana’s near-collapse from its listing two years later. Padmaja Reddy, still running the company as MD, used the fresh capital and lender confidence to rebuild the loan book from about ₹1,000 crore in March 2017 to roughly ₹8,000 crore by March 2021, an eightfold expansion in four years, as she later stated in a public letter explaining her exit. The rebuilt, de-risked balance sheet is what made an IPO viable: Spandana’s shares listed on the NSE and BSE on 19 August 2019 at ₹824, a 3.7% discount to the ₹856 issue price, after an offer that raised about ₹1,190 crore and was subscribed 1.05 times overall.

The same turnaround that enabled the IPO also set up the next rupture. Reddy said in her November 2021 resignation letter that Kedaara, sitting on a paper profit of roughly ₹1,800 crore against an investment of about ₹900 crore, wanted to sell the company to Axis Bank at what she considered a low valuation, and that she resigned rather than go along with the sale. The company and Reddy disputed each other publicly for months before reaching a board-approved settlement on 21 June 2022, by which point Spandana had already lost the founder who had steered it from an NGO in Guntur to a listed lender.

The money behind it

Spandana’s capital history runs from early venture-style stakes through a large private-equity rescue to a public listing:

• 2007-08: Helion Venture Partners and Valiant Capital bought minority stakes, per company and market-data profiles, providing early institutional capital while Spandana was still expanding aggressively pre-crisis.
• April 2017: a consortium led by Kedaara Capital Investment Managers put in about $100 million of fresh equity to pull Spandana out of corporate debt restructuring; co-investors in the round included George Soros’s Quantum fund, the Ontario Teachers’ Pension Plan, and US-based Maple Mountain Holdings, alongside existing holders Valiant Mauritius, JM Financial India Trust and Helion Venture Partners.
• August 2019: the NSE/BSE IPO added roughly ₹1,190 crore, converting private capital into a public float and giving early backers a partial exit route.
• Total raised: about $192 million across nine rounds of private equity and debt funding, according to Tracxn’s company database, before counting IPO proceeds separately.

What changed with each backer: Helion and Valiant’s early stakes financed the pre-crisis branch expansion; Kedaara’s 2017 capital, and the credibility it lent with lenders, is what got Spandana out of CDR and back to growth; the IPO gave the company a public currency and disclosure discipline it did not have as a private, restructured NBFC. As of March 2026, the promoter group, made up of Kedaara Capital entities, held 48.2% of Spandana, with foreign institutional investors holding 19.9%, domestic institutions 5.8%, and public shareholders the remaining 26.2%, per shareholding-pattern data compiled by Trendlyne and Choice India. Kedaara Capital Fund III LLP alone held 7.0% as of June 2026.

How it makes money

Spandana’s business is simple in structure and unforgiving in execution:

• Money in: interest income on unsecured joint-liability-group loans, plus fee income on ancillary products; net interest margin stood at 12.5% in Q1FY27, up from 9.9% a year earlier, per the company’s Q1FY27 results.
• Money out: the cost of the wholesale and bank borrowing that funds the loan book, which stood at 12.8% in Q1FY27, down from 13.2% a year earlier; plus branch, staff and collection costs across a largely rural network.
• Where the margin sits: in the spread between what Spandana pays lenders and what it earns on loans, minus credit costs; that spread compressed sharply in FY25 as loan losses rose, which is the main reason profit turned to loss even as the interest-rate spread itself held up reasonably well.
• The part people get wrong: microfinance is often described as a high-margin business because retail lending rates look high; in practice the margin is thin once funding cost, branch overheads and credit losses on unsecured loans are netted out, which is why a single bad collection cycle, as in FY25, can wipe out more than a year of profit.

The numbers

Spandana’s income statement over the past four financial years shows the swing from record profit to record loss and a partial recovery beginning in FY26:

• FY24: total income ₹2,534 crore and net profit ₹501 crore, the company’s highest-ever annual profit, on assets under management of ₹11,973 crore, as per its own April 2024 results release.
• FY25: total income fell 3% year-on-year to ₹2,424 crore while the company booked a net loss of ₹1,035 crore, driven by a jump in credit costs; assets under management fell 43% to ₹6,819 crore and disbursements fell 48% to ₹5,605 crore from ₹10,688 crore in FY24, as the company deliberately slowed lending to protect portfolio quality.
• FY26: consolidated total income nearly halved again to ₹1,024 crore with a net loss of ₹699 crore, though Q4FY26 alone returned to a marginal consolidated profit of ₹5.27 crore, an early sign of stabilisation.
• Q1FY27: the recovery continued, with standalone net profit of ₹16.1 crore and consolidated net profit of ₹11.9 crore for the quarter ended June 2026, against a loss of ₹328.9 crore standalone in the same quarter a year earlier, alongside assets under management of ₹4,887 crore, up 11% quarter-on-quarter.

Asset quality tracks the same arc. Standalone gross non-performing assets rose from 1.43% in March 2024 to 4.85% in March 2025, with net non-performing assets rising from 0.29% to 0.96% over the same period, according to India Ratings. By June 2026, consolidated gross non-performing assets had improved to 3.64% and net non-performing assets to 0.68%, with a provision coverage ratio of about 81%, per the company’s Q1FY27 disclosures.

Where the money comes from

Spandana has spent the past several years deliberately reducing how much of its book sits in any one state, after concentration made the 2010 Andhra Pradesh crisis so damaging:

• March 2022: the top three states by portfolio, Odisha, Madhya Pradesh and Bihar, accounted for 47.5% of standalone assets under management, per India Ratings’ company coverage.
• December 2024: Odisha alone was the largest state at 13.14% of standalone AUM, with the top three states (Odisha, Madhya Pradesh, Bihar) at 38.07%.
• March 2025: the top five states, Madhya Pradesh, Odisha, Bihar, Andhra Pradesh and Karnataka, made up 59.1% of the consolidated loan portfolio; on a standalone basis the top three states had narrowed further to 37.9% of AUM, and no single state exceeded 14% of standalone AUM.

The surprise is less about which states dominate than about how little concentration has actually fallen in absolute risk terms: even after years of deliberate diversification, three states still account for roughly two in every five rupees Spandana has lent, and its founding state, Andhra Pradesh, the one that nearly ended the company in 2010, remains inside the current top five.

The risks

• Borrower overleveraging: as of October 2024, 26.7% of Spandana’s borrowers had taken loans from more than three microfinance lenders simultaneously, per India Ratings, a stacking of unsecured debt across lenders that raised the odds of default across the industry, not just at Spandana.
• Political and regulatory intervention: Karnataka’s state government brought in an ordinance in 2025 to regulate microfinance recovery practices, providing for penalties up to ₹5 lakh and jail terms of up to ten years for violations, while loan-waiver campaigns such as the “Karja Mukti Abhiyan” movement encouraged mass non-repayment in some pockets, echoing the mechanism that hit Spandana in Andhra Pradesh in 2010; India Ratings and CARE Ratings both flagged this as a live sector risk through 2025.
• Unsecured, cash-heavy lending to a vulnerable customer base: because Spandana’s loans carry no collateral, credit costs can move very fast when borrower income is disrupted; the company’s own credit-cost ratio rose from 2.32% in FY24 to an annualised 16.08% in the nine months to December 2024, according to CARE Ratings, illustrating how quickly the model’s margin can be erased.

The takeaway

Spandana’s history argues against reading any single year of microfinance results, good or bad, as the steady state. A company can post its best-ever profit and its worst-ever loss eighteen months apart without changing its underlying business at all; what changed was borrower leverage and collection discipline across an entire lending cycle, factors that sit mostly outside any one lender’s control once its loan book is large enough to be a proxy for the sector. The lesson that carries beyond microfinance is that a lending business’s real risk shows up in the credit cycle, not the income statement of any single quarter, and a management team’s job is to have already reduced concentration and tightened underwriting before the cycle turns, not after.

Frequently asked questions

Is Spandana Sphoorty Financial a listed company?

Yes. Its shares have traded on the NSE and BSE since 19 August 2019 under the ticker SPANDANA, following an IPO priced at ₹856 per share.

Who founded Spandana Sphoorty Financial and when?

Padmaja Reddy Gangireddy founded it in 1998 in Guntur, Andhra Pradesh, initially as an NGO called SRUDO, before it was incorporated as a financial company in March 2003.

Why did Spandana Sphoorty report a loss in FY25 and FY26?

A sharp rise in bad loans across the microfinance sector, driven by borrower overleveraging, state-level regulatory action such as Karnataka’s 2025 ordinance, and loan-waiver movements, pushed Spandana’s credit costs and non-performing assets up sharply, turning a ₹501 crore FY24 profit into a ₹1,035 crore FY25 loss and a further ₹699 crore consolidated loss in FY26.

Who runs Spandana Sphoorty Financial now?

Venkatesh Krishnan was appointed Managing Director and Chief Executive Officer effective 27 November 2025 for a three-year term, succeeding Shalabh Saxena, who resigned in April 2025. Dipali Hemant Sheth was appointed Non-Executive Chairperson on 23 July 2026.

What is Spandana Sphoorty Financial’s market value today?

Its market capitalisation stood at approximately ₹1,782 crore as of 25 September 2026, according to Sharekhan’s live market data, making it a small-cap NBFC on Indian exchanges.

Sources

Figures are as of September 2026. Currency converted at $1 ≈ ₹96.0 as of 18 September 2026 (Trading Economics).

• Women Entrepreneurs Review, profile of Padmaja Reddy, 2024
• Center for Financial Inclusion, “Weathering the Storm II: A Case Study of Spandana”, 2011
• Kedaara Capital, Spandana Sphoorty portfolio page, 2026
• HDFC Securities, Spandana Sphoorty Financial initiating-coverage report, December 2022
• OpIndia, “Former Spandana Sphoorty MD Padmaja Reddy drops bombshells”, November 2021
• Business Standard, “Spandana Sphoorty-Reddy settlement clears way for announcing FY22 results”, June 2022
• Business Standard, “Spandana Sphoorty lists at discount”, August 2019
• Chittorgarh, Spandana Sphoorty Financial IPO details, August 2019
• Tracxn, Spandana Sphoorty Financial funding and investors profile, 2026
• Trendlyne and Choice India, Spandana Sphoorty Financial shareholding pattern, 2026
• Spandana Sphoorty Financial, press release on FY24 results (“highest ever PAT of ₹501 Cr”), April 2024
• Equitymaster, Spandana Sphoorty Financial 2023-24 annual report analysis, 2024
• Business Standard, “Spandana Sphoorty Financial reports Rs 440 crore loss in Q3 FY25”, January 2025
• The Hawk / Multibagg, Spandana Sphoorty FY25 results coverage (loss, AUM, disbursements), April-May 2025
• India Ratings and Research, Spandana Sphoorty Financial Limited press release, 2025
• CARE Ratings, Spandana Sphoorty Financial Limited press release, February and April 2025
• Business Standard, “Spandana Sphoorty CEO Saxena resigns; CFO Damani named interim chief”, April 2025
• Business Standard / Tribune India, “Spandana Sphoorty strengthens leadership with appointment of MFI veteran K. Venkatesh as MD and CEO”, November 2025
• ScanX Trade, Spandana Sphoorty Financial Q4FY26 results coverage, May 2026
• ScanX Trade, “Spandana Sphoorty posts ₹16.09 crore Q1FY27 profit, appoints new chairperson”, 2026
• Sharekhan, Spandana Sphoorty Financial Ltd share price and market capitalisation, 25 September 2026
• Biz News Connect, “Micro Finance in Karnataka in for Major Crisis”, 2025

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