Update on Spandana Sphoorty Financial Ltd - Channel check: Moving in the right direction By Anand Rathi Share and Stock Brokers
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We recently visited a Spandana centre/branch in Thane district, Maharashtra, to understand structural changes after the new management took over. Key changes observed were 1) in the incentive structure, 2) improvement in technology, 3) strong traction in disbursements and collections and 4) employee morale. We believe these changes auger well for the company and would reflect in a better operating performance in forthcoming quarters.
Incentive structure turns more appealing.
The structure for disbursements and collections has been revised. Disbursements: incentives on loans to new customers have been increased substantially. Besides, incentives for loans to existing customers have been reduced and are now much lower than those given to onboard customers. Collections: earlier incentives were largely to make collections from the overdue buckets. Collections now, however, are on all buckets including the standard one. Additionally, a strong focus is on collections on 90+ bucket loans. Salary: Earlier, salaries being credited on time were an issues; however this has now been solved by ensuring that the fixed salary is credited on the 28th of the month
Technology is improving, but still several levers for improvement
Three key improvements observed were: Geo-tagging: the geo-tagging feature has been introduced, enabling better tracking of daily operations. Spandana app: multiple upgrades have been done on the Spandana app used by employees on a user interface, which has led to better operability across various departments. E-KYC: back-end systems have been upgraded, E-KYC is expected to go live in the near term
Absence of consumer durables lending
We did not notice any add-on consumer durable products being bundled with micro-finance loans.
The new framework introduced by the RBI regarding household income assessment has been fully integrated by the company. With higher employee morale, a better incentive structure and improvement in technology, traction in both disbursements and collections is expected to improve in the near term.
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