Spandana Sphoorty Financial Ltd (SSFL), a microfinance institution backed by private equity firm Kedaara Capital, plans to raise around Rs 4,000 crore through bonds in FY23 to support business growth. It has set a target to increase assets under management (AUM) from Rs 6,581 crore in March 2022 to Rs 15,000 crore in FY25.

The company resumed operations (payments) in Q4FY22 after facing disruption in Q3FY22 due to the sudden resignation of former managing director Padmaja Reddy.

The board has approved a proposal to raise to Rs 4,000 crore through non-convertible debentures (NCD). Non-banking financial companies (NBFCs) said in a filing to the BSE that they could issue in tranches through private placements.

As for growth, Spandana has identified seven other states – Gujarat, Rajasthan, Haryana, Uttar Pradesh, Bihar and West Bengal – with favourable indicators for rapidly expanding microfinance books. Its new managing director and chief executive officer, Shalabh Saxena, said it was looking for incremental AUM of Rs 6,000-7,000 crore from these states and continued organic growth in existing states.

Scaling up growth will require higher investment and spending. Spandana Sphoorty’s cost-to-income ratio (C\I ratio) increased from 21.9% in FY21 to 32.9% in FY22. It is expected to rise further to 43.7% in FY23 and slow to 35.7% in FY25 due to increased investment in developing businesses. Branches in its network are expected to increase from 1,010 by end-March 2022 and 1,010 in March 2020 to 1,500 in FY25.

Regarding adapting to changing business models, company executives said on a conference call with analysts that it did not want to make knee-jerk reactions or disrupt existing models. Anything new will be done in a calibrated way.