l) Provisions
Provisions are recognized when the Company has a
present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of economic
benefits will be required to settle the obligation, and
a reliable estimate can be made of the amount of the
obligation.
When the effect of the time value of money is material,
the Company determines the level of provision by
discounting the expected cash flows at a pre-tax rate
reflecting the current rates specific to the liability. The
increase in the provision due to un-winding of discount
over passage of time is recognized within finance costs.
Provisions are reviewed at each reporting date and
are adjusted to reflect the current best estimate" for
accounting policy of provisions.
m) Contingent liabilities and assets
A contingent liability is a possible obligation that arises
from past events whose existence will be confirmed
by the occurrence or non-occurrence of one or more
uncertain future events beyond the control of the
Company or a present obligation that is not recognized
because it is not probable that an outflow of resources
will be required to settle the obligation. A contingent
liability also arises in extremely rare cases where there
is a liability that cannot be recognized because it cannot
be measured reliably. The Company does not recognize
a contingent liability but discloses its existence in the
financial statements.
A contingent asset is a possible asset that arises from
past events and whose existence will be confirmed only
by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of
the entity. The Company does not have any contingent
assets in the financial statements.
n) Earnings per equity share (EPS)
The Company reports basic and diluted earnings per
share in accordance with Ind AS 33 on Earnings per
share. Basic EPS is calculated by dividing the net profit
or loss for the year attributable to equity shareholders
(after deducting preference dividend and attributable
taxes) by the weighted average number of equity shares
outstanding during the year.
For the purpose of calculating diluted earnings per
share, the net profit or loss for the year attributable to
equity shareholders and the weighted average number
of shares outstanding during the year are adjusted for
the effects of all dilutive potential equity shares. Dilutive
potential equity shares are deemed converted as of the
beginning of the period, unless they have been issued
at a later date. In computing the dilutive earnings per
share, only potential equity shares that are dilutive and
that either reduces the earnings per share or increases
loss per share are included.
o) Cash and cash equivalents
Cash and cash equivalents in the balance sheet
comprise cash at banks and on hand and short-term
deposits with an original maturity of three months
or less, which are subject to an insignificant risk of
changes in value.
p) Statements of cash flows
The standalone statement of cash flows from operating
activities is prepared in accordance with the Indirect
method as per Ind AS 7. Standalone statement of cash
flows presents the cash flows by operating, financing
and investing activities of the Company. Operating cash
flows are arrived by adjusting profit or loss before tax
for the effects of transactions of a non-cash nature, any
deferrals or accruals of past or future operating cash
receipts or payments, and items of income or expense
associated with investing or financing cash flows.
q) Offsetting financial instruments
Financial assets and financial liabilities are offset
when it currently has a legally enforceable right (not
contingent on future events) to off-set the recognised
amounts and the company intends either to settle on a
net basis, or to realise the assets and settle the liabilities
simultaneously.
r) Proposed dividend
As per Ind AS -10, 'Events after the Reporting period',
the Company disclose the dividend proposed by board
of directors after the balance sheet date in the notes
to these standalone financial statements. The liability
to pay dividend is recognized when the declaration of
dividend is approved by the shareholders.
s) Recent Accounting pronouncements
Ministry of Corporate Affairs ("MCA") notifies new
standards or amendments to the existing standards
under Companies (Indian Accounting Standards) Rules
as issued from time to time. For the year ended March
31, 2025, MCA has not notified any new standards or
amendments to the existing standards applicable to
the Company.
7: Loans (Contd.)
from the customer and the field staff. In a joint liability group model (JLG), the fellow group / centre members understand the
financial position and their intent to pay. Inputs on product guideline are driven basis feedback received during interactions
between the customers (group members attending centre meetings) and our field staff. Recommendations basis these
interactions are then given to the supervisory hierarchy including the Chief Business Officer who in turn evaluates and
recommends for approval to the COO. In determining whether lending to these customers has any significant increase
in credit risk or impairment of such loans and potential future loss estimate, the Company takes into consideration the
borrowers' vintage, past repayment behaviour and viability of their businesses, as a separate cohort. Accordingly, the
company has classified such loans based on their latest repayment schedule as at respective period end and in the respective
stage buckets. Further, the company has discontinued disbursement to delinquent (30 ) borrowers w.e.f January 1, 2025.
21: Other Equity (contd.)
Nature and purpose of other equity
Securities premium
Securities premium is used to record the premium on issue of shares. The reserve can be utilised only for limited purposes
in accordance with the provisions of the Companies Act, 2013.
General reserve
Amount set aside from retained profits as a general reserve to be utilised in accordance with provisions of the Companies
Act, 2013.
Capital redemption reserve
In accordance with section 55 of the Companies Act, 2013, the Company had transferred an amount equivalent of the
nominal value of Optionally convertible cumulative redeemable preference shares redeemed during previous years, to the
Capital Redemption Reserve. The reserve can be utilised only for limited purposes in accordance with the provisions of the
Companies Act, 2013.
Share options outstanding account
The share option outstanding account is used to recognise the grant date fair value of option issued to employees under
employee stock option scheme.
Statutory reserve (As required by Section 45-IC of Reserve Bank of India Act, 1934
Statutory reserve represents the accumulation of amount transferred from surplus year on year based on the fixed percentage
of profit for the year, as per section 45-IC of Reserve Bank of India Act 1934.
Retained earnings
Retained earnings are the profits that the Company has earned till date, less any transfers to statutory reserve, general
reserve or any other such other appropriations to specific reserves.
Fair valuation on loans through other comprehensive income
The Company has elected to recognize changes in the fair value of loans in other comprehensive income. These changes
are accumulated as reserve within equity. The Company transfers amount from this reserve to retained earnings when the
relevant loans are derecognized.
Effective portion of cashflow hedges
For designated and qualifying cash flow hedges, the effective portion of the cumulative gain or loss on the hedging instrument
is initially recognised directly in OCI within equity (cash flow hedge reserve). When the hedged cash flow affects the statement
of profit and loss, the effective portion of the gain or loss on the hedging instrument is recorded in the corresponding income
or expense line of the statement of profit and loss.
Note: For the year ended March 31, 2025, 4,72,139 employee stock options granted under ESOP were excluded from the
calculation of diluted weighted average number of equity shares as their effect would have been anti-dilutive.
33: Operating segment
The Company operates in a single business segment i.e. financing, as the nature of the loans are exposed to similar risk
and return profiles hence they are collectively operating under a single segment as per I nd AS 108 on 'Operating Segments'.
The Company operates in a single geographical segment i.e. domestic, and hence there is no external revenue or assets
which require disclosure. No revenue from transactions with a single external customer aggregates to 10% or more of the
Company's total revenue during the year ended March 31, 2025 or March 31,2024.
34: Related party disclosures (As per Ind AS 24)
(a) Name of related parties and nature of relationship
I. Subsidiary Companies
a) Caspian Financial Services Limited
b) Criss Financial Limited
II. Key Management Personnel (“KMP")
a) Mr. Shalabh Saxena - Managing Director and Chief Executive Officer (resigned w.e.f April 23, 2025)
b) Mr. Ashish Damani - Interim CEO, President and Chief Financial Officer (Interim CEO w.e.f. April 23, 2025)
c) Mr. Ramesh Periasamy - Company Secretary and Chief Compliance Officer (KMP upto January 22, 2024)
d) Mr. Vinay Prakash Tripathi - Company Secretary (w.e.f. January 23, 2024)
36: Fair Value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the
principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price),
regardless of whether that price is directly observable or estimated using a valuation technique. In order to show how
fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques. This note
describes the fair value measurement.
Valuation framework
The Company will assess the fair values for assets qualifying for fair valuation. The Company's valuation framework includes:
1. Benchmarking prices against observable market prices or other independent sources;
2. Development and validation of fair valuation models using model logic, inputs and adjustments.
These valuation models are subject to a process of due diligence and validation before they become operational and are
continuously calibrated. These models are subject to approvals by various functions.
Fair values of financial assets, other than those which are subsequently measured at amortised cost, have been arrived at
as under:
1. Fair values of investments held under FVTPL have been determined under level 1 using quoted Net Asset Value of the
underlying instruments;
2. Fair value of loans held under a business model that is achieved by both collecting contractual cash flows and selling
the loans are measured at FVOCI. The fair value of these loans has been determined under level 2.
37: Fair Value Hierarchy of assets and liabilities
Fair value measurement
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques
as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - The fair value of financial instruments that are not traded in an active market are determined using valuation
techniques which maximise the use of observable market data (either directly as prices or indirectly derived from prices)
and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are
observable, the instrument is included in level 2. The financial instruments included in Level 2 of fair value hierarchy have
been valued using quotes available for similar assets and liabilities in the active market.
Level 3 - If one or more of the significant inputs is not based on observable market data (unobservable), the instrument is
included in level 3.
Note:
The carrying amounts of cash and cash equivalents, bank balances other than cash and cash equivalents and other financial
assets / liabilities approximate the fair value because of their short-term nature.
Valuation technique used
For Term loans
The scheduled future cash flows (including principal and interest) are discounted using the lending rate prevailing as at the
balance sheet date. The discounting factor is applied assuming the cash flows will be evenly received in a month. Further the
overdue cash flows upto 90 Days (upto stage II) are discounted assuming they will be received in the third month. Fairvalue
of cash flows for stage III loans are assumed as carrying value less provision for impairment loss allowance.
For investment in mutual funds
For investments, the Company has assessed the fair value on the basis of the NAV (Net Asset Value) declared by the
mutual fund houses.
For investment in security receipts
The expected recoveries are discounted at yield to arrive at the present value of the recoveries. Fair value of cash flows
are assumed as carrying value less provision for impairment loss allowance.
Financial liabilities measured at amortised cost
For Borrowings
The fair value of fixed rate borrowings is determined by discounting expected future contractual cash flows using current
market interest rate being charged for new borrowings. The fair value of floating rate borrowing is deemed to equal its
carrying value.
There have been no transfer between Level 1, 2 and 3 during the year ended March 31, 2025 and March 31, 2024.
38: Capital Management (Refer Note 51)
The Company's objective for capital management is to maximize shareholders' value, safeguard business continuity, meet
the regulatory requirement and support the growth of the Company. The Company determines the capital requirement based
on annual operating plans and long-term and other strategic investment plans. The funding requirements are met through
borrowings, retained earnings and operating cash flows generated.
As an NBFC-MFI, the RBI requires us to maintain a minimum capital to risk weighted assets ratio ("CRAR") consisting of Tier
I and Tier II capital of 15% of our aggregate risk weighted assets. Further, the total of our Tier II capital cannot exceed 100%
of our Tier I capital at any point of time. The capital management process of the Company ensures to maintain a healthy
CRAR at all the times.
39: Defined Benefit Gratuity Plan
The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible
for gratuity, on cessation of employment and it is computed at 15 days salary (last drawn salary) for each completed year of
service subject to limit of ' 0.2 crs per the Payment of Gratuity Act, 1972. The scheme is funded with an insurance Company
in the form of a qualifying insurance policy.
The following tables summarized the components of net benefit expense recognized in the statement of profit and loss and
the funded status and amounts recognized in the Balance Sheet for the gratuity plan.
Investment risk
The plan liabilities are calculated using a discount rate set with references to government bond yields; if plan assets
underperform compared to this yield, this will create or increase a deficit. Currently, for the plan in India, it has a relatively
balanced mix of investments in government securities, and other debt instruments.
Interest rate risk
A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an
increase in the value of the plan's investment in debt instruments.
Variability in withdrawal rates
If actual withdrawal rates are higher than assumed withdrawal rate assumption, then the gratuity benefits will be paid earlier
than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.
Regulatory Risk
Gratuity Benefit must comply with the requirements of the Payment of Gratuity Act, 1972 (as amended up-to-date). There is
a risk of change in the regulations requiring higher gratuity payments (e.g. raising the present ceiling of ' 20,00,000, raising
accrual rate from 15/26 etc.).
Inflation Risk
The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan
participants. As such, an increase in the salary of the plan participants will increase the plan's liability.
Salary Risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such,
an increase in the salary of the members more than assumed level will increase the plan's liability.
Asset Liability Matching Risk
The plan faces the ALM risk as to the matching cash flow. Since the plan is invested in lines of Rule 101 of Income Tax Rules,
1062, this generally reduces ALM risk.
Concentration Risk
Plan is having a concentration risk as all the assets are invested with the insurance company and a default will wipe out all
the assets. Although probability of this is very low.
Life expectancy
The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan
participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase
the plan's liability.
If actual mortality rates are higher than assumed mortality rate assumption than the gratuity benefits will be paid earlier than
expected. Since there is no condition of vesting on the death benefit, the acceleration of cashflow will lead to an actuarial
loss or gain depending on the relative values of the assumed salary growth and discount rate.
42: Risk Management and financial objectives
Risk is an integral part of the Company's business and sound risk management is critical to the success. As a financial
intermediary, the Company is exposed to risks that are particular to its line of business and the environment within which it
operates and primarily includes credit, liquidity and market risks. The Company has a risk management policy which covers
all types of risks that the Company is exposed to. The risk management policy is approved by the Board of Directors.
The Company has identified and implemented comprehensive policies and procedures to assess, monitor and manage risk
throughout the Company. The risk management process is continuously reviewed, improved and adapted in the context of
changing risk scenarios and agility of the risk management process is monitored and reviewed for its appropriateness in
the changing risk landscape. The process of continuous evaluation of risks includes taking stock of the risk landscape on
an event-driven basis.
The Company has an elaborate process for risk management. Major risks identified by the businesses and functions are
systematically addressed through mitigating actions on a continuing basis.
42.1 Credit Risk
Credit risk is the risk that the counterparty shall not meet its obligations under a financial instrument or customer contract,
leading to a financial loss for the lender. Credit risk encompasses of both, the direct risk of default and the risk of deterioration
of the creditworthiness as well as concentration of risks. Credit risk arises primarily from financial assets such as loan
receivables, investment in securities, balances with banks and other receivables.
Financial instruments that are subject to concentration of credit risk principally consist of investments, bank deposits and
other financial assets. The policies of the Company are framed in a manner that ensure that none of the financial instruments
where the Company has invested result in material concentration of credit risk.
None of the Company's cash equivalents, including fixed deposits, were either past due or impaired as at March 31, 2025
and March 31,2024. The Company has diversified its portfolio of investment in cash and cash equivalents and term deposits
with various banks with sound credit ratings, hence the risk is reduced.
Loans
Credit risk is the risk of loss that may occur from defaults by our borrowers under our loan agreements. In order to address
this credit risk, we have stringent credit assessment policies for client selection. Measures such as verifying client details,
online documentation and the usage of credit bureau data to get information on past credit behaviour also supplement the
efforts for containing credit risk. We also follow a systematic methodology in the opening of new branches, which takes into
account factors such as the demand for credit in the area; income and market potential; and socio-economic and law and
order risks in the proposed area. Further, our client due diligence procedures encompass various layers of checks, designed
to assess the quality of the proposed group and to confirm that they meet our criteria.
The Company is a rural focused NBFC-MFI with a geographically diversified presence in India and offers income generation
loans under the joint liability group model, predominantly to women from low-income households in rural areas. Further,
as we focus on providing micro-loans in rural areas, the results of our operations are affected by the performance and the
future growth potential of microfinance in rural India. Our clients typically have limited sources of income, savings and
credit histories and our loans are typically provided free of collateral. Such clients generally do not have a high level of
financial resilience, and, as a result, they can be adversely affected by declining economic conditions and natural calamities.
In addition, we rely on non-traditional guarantee mechanisms rather than tangible assets as collateral, which may not be
effective in recovering the value of our loans.
The criteria of default, significant increase in credit risk and stage assessment is mentioned in note 3 (j) of the material
accounting policies. The below discussion describes the Company's approach for assessing impairment.
A) Probability of default (PD)
The Company compute PD at enterprise level considering the borrower profile and loan product offered to them are
homogeneous. The product features like loan tenure, interest rate, ticket size, customer selection are uniform across
the branches and thus carry similar uncertainties. The geographical related political and natural calamity risk is more
rationalised when looked at the enterprise level.
Accordingly, the Company determines PD for each stage depending upon the underlying classification of asset (i.e.,
Stage I or Stage II). The PD rates for Stage I and II have been further bifurcated based on the days-past-due (DPD) status
of the loans (i.e., current to 30 DPD, 31-60 DPD and 61-90 DPD) to incorporate adequate granularity. PD rate for stage 3
is derived as 100% considering that the default occurs as soon as the loan becomes overdue for 90 days.
B) Exposure at default (EAD)
Exposure at default (EAD) is the sum of outstanding principal and the interest amount accrued but not received on
each loan as at reporting date.
C) Loss given default
The Company determines its expectation of lifetime loss by estimating recoveries towards its loan through analysis
of historical information. The Company determines its recovery rates by analysing the recovery trends over different
periods of time after a loan has defaulted. LGD is the difference between the exposure at default and its recovery rate.
It is based on the difference between the contractual cash flows due and those that the Company would expect to
receive. LGD is calculated as % of Exposure that the Company expects to lose at the time of default. LGD is computed
as {1-Recovery Rate (RR)} where RR indicates % of Recovery post default.
Collateral and other credit enhancement
The Company's secured portfolio consists of loans against property (including land and building). Although collateral is an
important mitigant credit risk, the Company's practice is to lend on the basis of its assessment of the customer's ability to
repay rather than placing primary reliance on collateral. Based on the nature of the product and the Company's assessment
of the customer's credit risk, a loan may be offered with suitable collateral.
42.1 .a I nter-corporate advance given by the Company to related parties are repayable on demand and governed by Company's
policy on demand loans approved by the board of directors. Such policy requires credit appraisal of the financial and
operational performance of the counter parties, to be performed by the Company before renewing/rolling over of the advance.
42.2 Liquidity Risk
Liquidity risk refers to the risk that the Company may not meet its financial obligations. Liquidity risk arises due to the
unavailability of adequate funds at an appropriate cost or tenure. The objective of liquidity risk management is to maintain
sufficient liquidity and ensure that funds are available for use as per requirements. The Company consistently generates
sufficient cash flows from operating and financing activities to meet its financial obligations as and when they fall due. Our
resource mobilization team sources funds from multiple sources, including from banks, financial institutions and capital
markets to maintain a healthy mix of sources. The resource mobilization team is responsible for diversifying fundraising
sources, managing interest rate risks and maintaining a strong relationship with banks, financial institutions, mutual funds,
insurance companies, other domestic and foreign financial institutions and rating agencies to ensure the liquidity risk is well
addressed. In order to reduce dependence on a single lender, the Company has adopted a cap on borrowing from any single
lender at 25%. The maturity schedule for all financial liabilities and assets are regularly reviewed and monitored. Company
has a asset liability management (ALM) policy and ALM Committee to review and monitor the liquidity risk and ensure the
compliance with the prescribed regulatory requirement. The ALM Policy prescribes the detailed guidelines for managing
the liquidity risk.
Spandana Employee Stock Option Plan 2018 and Spandana Employee Stock Option Scheme, 2018 ('ESOP Plan 2018 and
ESOP Scheme 2018')
Spandana Employee Stock Option Plan 2018 and Spandana Employee Stock Option Scheme, 2021 ('ESOP Plan 2018 and
ESOP Scheme 2021')
Spandana Employee Stock Option Plan 2021 Series A and Spandana Employee Stock Option Scheme, 2021 -Series A ('ESOP
Plan 2021 and ESOP Scheme 2021 Series A')
45: The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other
sources or kind of funds) to any other person or entity , including foreign entities (Intermediaries) with the understanding
(whether recorded in writing or otherwise) that the Intermediary shall:
(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf
of the Company (Ultimate Beneficiaries) or
(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
46: The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party)
with the understanding (whether recorded in writing or otherwise) that the Company shall:
(i) directly or indirectly lend or invest in other person or entity identified in any manner whatsoever by or on behalf of
the Funding Party (Ultimate Beneficiaries) or
(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
Exchange Traded Interest Rate (IR) Derivatives
The Company has not traded in Interest Rate Derivative during the financial year ended March 31,2025 (March 31, 2024: Nil).
Disclosures on Risk Exposure in Derivatives
A. Qualitative Disclosure
The Company manages various risks associated with the lending business, including liquidity risk, foreign exchange risk,
interest rate risk and counterparty risk. To manage these risks, the Company has Board approved policies and framework,
including the Risk Management Policy and ALM Policy, which sets limits for exposures on currency, interest rates and other
parameters. The Company manages its currency risk and enters in to derivative contracts in accordance with the guidelines
prescribed therein.
Liquidity risk and Interest rate risk arising out of maturity mismatch of assets and liabilities are managed through regular
monitoring of maturity profiles. The currency risk and interest rate risk on borrowings is actively managed mainly through
derivative financial instruments by entering in to forward contracts and cross currency interest rate swaps. Counter party
risk is reviewed periodically to ensure that exposure to various counter parties is well diversified and is within the limits fixed
by the Risk Management Committee.
H. The Company does not have any parent company, hence disclosure relating to product financed by parent company is
not applicable.
I. Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the applicable NBFC
The Company has not exceeded the prudential exposure limits for Single Borrower Limit / Group Borrower Limit during
current and previous year.
J. Unsecured Advances - Refer note 7
K. Registration obtained from other financial sector regulators:
The Company is registered with the 'Ministry of Corporate Affairs' (Financial regulators as described by Ministry of
Finance).
L. Disclosure of Penalties imposed by RBI and Other Regulators:
For the year ended March 31, 2025: No penalty imposed by RBI and other Regulators
For the year ended March 31, 2024: No penalty imposed by RBI and other Regulators
48: Additional information required by Master Direction - Reserve Bank of India (Non-Banking Financial
Company - Scale Based Regulation) Directions, 2023, as amended from time to time. (contd.)
AC: Liquidity coverage ratio
The RBI has issued final guidelines on Liquidity Risk Management Framework for Non-Banking Financial Companies and
Core Investment Companies on November 04, 2019. As per the said guidelines, LCR requirement shall be binding on all
non-deposit taking systemically important NBFCs with asset size of ' 5000 crore and above but less than ' 10,000 crs from
December 1, 2020, with the minimum LCR to be 30%, progressively increasing, till it reaches the required level of 100%, by
December 1, 2024.
The Company follows the criteria laid down by RBI for calculation of High Quality Liquid Assets (HQLA), gross outflows
and inflows within the next 30-day period. HQLA predominantly comprises cash and balance with other banks in current
account. All significant outflows and inflows determined in accordance with RBI guidelines are included in the prescribed
LCR computation template. The disclosure on Liquidity Coverage Ratio of the Company for the period ended March 31, 2025
is as under:
6. Institutional set-up for liquidity risk management:
The Company has an Asset Liability Management Committee (ALCO), a management level committee to handle liquidity
risk management. The ALCO meetings are held at periodic intervals. At the apex level, the Risk Committee (RC), a sub¬
committee of the Board of Directors of the Company, oversees the liquidity risk management. The RC subsequently
updates the Board of Directors on the same.
Notes:
1. Significant counterparty is as defined in RBI Circular RBI/2019-20/88 DOR.NBFC (PD) CC.No.102/03.10.001/2019-20
dated November 4, 2019 on Liquidity Risk Management Framework for Non-Banking Financial Companies and Core
Investment Companies.
2. Significant instrument/product is as defined in RBI Circular RBI/2019-20/88 DOR.NBFC (PD) CC.No.102/03.10.001/2019-20
dated November 4, 2019 on Liquidity Risk Management Framework for Non-Banking Financial Companies and Core
Investment Companies.
3. Total Liabilities has been computed as sum of all liabilities (Balance Sheet figure) less Equities and Reserves/Surplus.
4. Short term liabilities includes all financial and non-financial liabilities expected to be paid within one year.
5. Public funds is as defined in Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit
taking Company and Deposit taking Company (Reserve Bank) Direction, 2016.
49: The Company in respect of the observation made by the RBI in its inspection report for the years ended March 31, 2018
and March 31, 2019 and subsequent correspondence with Reserve Bank of India ("RBI") with respect to the compliance with
the pricing of credit guidelines prescribed under paragraph 56 of the Master Direction - Non-Banking Financial Company -
Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016, dated
September 1,2016, as amended had adequately recognised the impact of excess interest collected on loans disbursed during
the period from Oct 2017 to Feb 2020, in the financial statements for the year ended March 31,2021. During the year ended
March 31, 2025, the Company had refunded ' 2.14 crores by way of credit into customers bank accounts / loan accounts.
Given the profile of the customers and accessibility issues, the company is unable to trace borrower / bank account of
borrower for remaining balances of ' 23.13 crores and has sought advice from Reserve bank of India on the refund of balance
amount (for which bank account details are not available with the Company) and will act as per directive from Reserve bank
of India.
Note 2: The Company has not restructed any loan accounts under RBI's Resolution Framework 1.0 dated August 6, 2020.
51 (a): During the financial year ended March 31,2025, the microfinance industry faced unprecedented challenges due to a
combination of external and structural headwinds. These included climatic disruptions, the weakening of the Joint
Liability Group (JLG) lending model, deterioration in borrower discipline, elevated levels of borrower indebtedness,
and external socio-political influences affecting customer behavior. 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. Operational stress was further intensified by
increased field-level attrition, contributing to higher delinquencies, gross slippages, elevated credit costs, and a
resulting in reported loss for the quarter and year ended March 31, 2025.
As a prudent and conservative accounting measure, the Company has recognized technical write-offs amounting
to '646.81 crores for the quarter ended March 31, 2025 and '1,555.39 crores for the year ended March 31, 2025.
These accelerated write-offs also contributed to elevated credit costs and a reported loss for both the quarter
and the financial year ended March 31, 2025. The selection of accounts for write-off was based on objective
criteria, including loan ageing and persistent non-repayment behaviour as of the reporting date. The Company
remains focused on strengthening on-ground recovery initiatives and is confident of driving improved collection
performance going forward. Any recoveries from these technically written-off assets will be recognized in the
statement of profit and loss in the period in which they are realized.
Owing to the reasons outlined above, the Company was non-compliant with certain covenants related to portfolio
at risk (PAR) 30, PAR 60, Gross non-performing assets, non-performing loans, tangible net worth, and quarterly /
annual profitability as of and for the year ended March 31, 2025. The Company has obtained waivers in respect of
such non-compliant covenants from few of the lenders.
The Company has been in constant communication with its lenders and is confident that no demand for immediate
repayment of borrowed funds will be made due to non-compliance with the covenants. As on the date of these
financial results, none of the lenders have intimated about the same.
(b) The Company, being an NBFC-MFI, is required to deploy a minimum of 75% of its total assets toward "microfinance
loans" in accordance with paragraph 5.1.21 of the Master Direction - Reserve Bank of India (Non-Banking Financial
Company - Scale Based Regulation) Directions, 2023, as amended from time to time. As of March 31, 2025, the
Company's qualifying assets (i.e., microfinance loans to total assets) stand at 65.51%. Pursuant to the Company's
request dated January 18, 2025, the RBI, vide its communication dated February 6, 2025, has granted an extension
of time until June 30, 2025 to meet the qualifying asset requirement of 75%. The Company will take the necessary
steps including continued disbursement of microfinance loans in the normal course of business to fully comply
with the qualifying asset criteria by June 30, 2025.
(c) The Company's cautious and calibrated disbursement strategy resulted in a reduction of the loan book from
'10,566.91 crores as of March 31, 2024, to '5,554.45 crores as of March 31, 2025. The Company continues to
maintain a strong capital position, with Tier I capital of '1,672.74 crores and a healthy Capital to Risk-Weighted
Assets Ratio (CRAR) of 36.31%, well above the regulatory minimum requirement.
The Company's healthy CRAR has the ability to support current operations and much of its future growth projections.
Further, the Company has a strong nationwide presence with a large and engaged borrower base, including over
23-24 lakh active customers and an additional pool of dormant borrowers with fresh credit demand. Some of these
borrowers maintain a primary lending relationship with the Company, reinforcing customer loyalty and demand
visibility. With the implementation of industry guardrails, the broader ecosystem is expected to become more
credit-disciplined, contributing to sustainable improvements across key performance metrics. Backed by a healthy
liquidity position and an upcoming proposed equity infusion as confidence capital, approved by the Board and
shareholders, the Company is well-positioned to meet future growth requirements while maintaining operational
continuity and financial resilience.
(d) Considering the factors outlined in Notes 51 (a), (b) and (c), management has carried out an assessment of its going
concern assumption and concluded that going concern assumption is appropriate for the preparation of financial
statements. Management is of the view that the Company will be able to realise all its assets and discharge all
its liabilities in the normal course of business. There are no material uncertainties on the Company's ability to
continue as a going concern. Accordingly, the standalone financial statements for the year ended March 31, 2025,
have been prepared on a going concern basis.
(e) The Company has recognized a deferred tax asset of '437.97 crores to the extent it is considered recoverable,
based on probable future taxable income supported by approved business plans and budgets. The losses for
the current year were mainly due to significant impairment losses (including technical write offs) arising from
credit deterioration of loans to customers (as stated in Note 51 (a)) and this will be improved going forward by
strengthening on-ground recovery and implementaion of industry guardrails. Accordingly, the Company expects
to generate sufficient taxable profits to fully utilize the losses.
52. The Company maintains its records through an integrated software application that encompasses both the financial
accounting and loan management modules. This application was historically managed and updated by the Original
Equipment Manufacturer (OEM). During the financial year 2024-25, the Company transitioned the control of further system
enhancements and deployments in-house, thereby mitigating operational risks associated with third-party dependency.
In FY 2024-25, the Company faced operational challenges particularly in field operations because of elevated attrition at
the branch level. This resulted in discontinuity & disruption at branch-level controls such as increased instances of fraud
[refer note 48 (w)], delays in end-of-day (EOD) processing & operational monitoring. The financial impact of these events
has been fully recognized and appropriately accounted for in the financial statements.
To prevent recurrence and strengthen operational oversight, the Company has implemented corrective measures including
deploying additional monitoring layer in form of Branch Quality Manager (BQM) at the branches, increased its frequency
of branch monitoring by supervisory levels, customer engagement & tightening measures of operational control through
technology.
53: Additional Regulatory Information
(a) There is no such immovable properties held whose title deeds are not held in the name of the Company.
(b) There are no investment property as on March 31, 2025 and March 31, 2024.
(c) The Company has not revalued its Property, Plant and Equipment (including Right-of Use Assets) and intangible
assets based on the valuation by a registered valuer as defined under rule 2 of Companies (Registered Valuers
and Valuation) Rules, 2017.
(d) No proceeding has been initiated or pending against the Company for holding any benami property under the
Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.
(e) The statements of current assets filed by the Company with banks or financial institutions with respect to its
borrowings including debt securities and working capital limits on a quarterly basis are in agreement with the
books of accounts.
(f) The Company has not been declared wilful defaulter by any bank or financial Institution or other lender.
(g) No transactions were carried out during the year with companies struck off under section 248 of the Companies
Act, 2013 or section 560 of Companies Act, 1956 except as disclosd below:
(h) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read
with Companies (Restriction on number of Layers) Rules, 2017
(i) There is no income surrendered or disclosed as income during the current or previous year in the tax assessments
under the Income Tax Act, 1961, that has not been recorded in the books of account.
(j) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(k) The Company has been sanctioned working capital limits by banks or financial institutions on the basis of security
of current assets during the year.
(l) The Company has availed borrowings from banks and financial institutions and has applied the funds for the
specific purposes for which they were sanctioned, as at the balance sheet date. Any unutilized funds as at March
31, 2025 and March 31, 2024 have been temporarily deployed in investments and bank deposits, pending their
intended utilization.
(m) The Company has a process whereby periodically all long-term contracts (including derivative contracts) are
assessed for material foreseeable losses. The Company reviews and ensures that adequate provision as required
under any law/ accounting standards for material foreseeable losses on such long-term contracts (including
derivative contracts) has been made in the books of account. There were no such contracts for which there were
any material foreseeable losses for the year ended March 31, 2025.
As per our report of even date
For B S R & Co. LLP For and on behalf of the Board of Directors of
Chartered Accountants Spandana Sphoorty Financial Limited
ICAI Firm registration number
101248W/W-100022
Kapil Goenka Abanti Mitra Ashish Damani
Partner Chairperson Interim CEO, President &
Membership No.: 118189 DIN: 02305893 Chief Financial Officer
Vinay Prakash Tripathi
Company Secretary
Membership No.: ACS-18976
Place: Hyderabad Place: Hyderabad
Date: May 30, 2025 Date: May 30, 2025
|