Spandana Sphoorty suffers net loss, auditor flags concerns over frauds

Spandana Sphoorty Financial on Friday reported a Rs 434 crore of net loss on consolidated basis for the fourth quarter ending March 31, while the independent auditor flagged concerns over possibilities of misstatement due to likely fraud which may involve collusion and override of internal control.

This was Spandana group's third quarterly net loss in a row, as the lender is facing intense asset quality stress. Its gross non-performing assets ratio jumped to 5.63% at the end of FY25 as compared with 4.85% three months back and 1.5% a year ago.

The company had reported a net profit of Rs 129 crore in the fourth quarter of FY24.

"The heightened delinquencies contributed to elevated impairment cost and resulted in a net loss of Rs 434 crore for Q4FY25," interim chief executive Ashish Damani said.

The company ended the fiscal with an annual net loss of Rs 1035 crore against Rs 501 crore profit in the preceding fiscal.

"The microfinance industry faced unprecedented challenges due to a combination of external and structural headwinds," the company said in its note to stock exchanges. The note was signed by chairperson Abanti Mitra and Damani.

Managing director and chief executive officer Shalabh Saxena resigned from his position on April 23. His sudden resignation raised suspicion that there is something more to it than meets the eye.

ET on April 25 reported that Spandana said to be under the Reserve Bank of India's lens for unreported frauds and cash balance mismatches at the branch level.

On Friday, the auditor said that the responsibility of preparing the financial results and keeping it free from material misstatement due to error or fraud lies with the management.

"The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control," independent auditor BSR & Co said in its report accompanied with the company's quarterly and annual financial statement.

"We exercise professional judgment and maintain professional skepticism throughout the audit," the auditor said.

Spandana's consolidated assets under management shrank 43% year-on-year to Rs 6819 crore at the end of March from Rs 11973 crore a year back. The group disbursed merely Rs 365 crore during the fourth quarter, less than one-tenth of Rs 3970 crore of disbursement it did in the year-ago period.

The group's operational stress was further intensified by increased field-level attrition, contributing to higher delinquencies, gross slippages and elevated credit costs.

"These factors, which emerged in Q1 and persisted through the year, significantly impacted field operations, disrupted center meetings, and hindered the timely delivery of services to borrowers including timely collections," the company said.
Spandana Sphoorty suffers net loss, auditor flags concerns over frauds