Spandana Sphoorty Financial is in the eye of a financial storm after reporting a ₹434 crore net loss in Q4 FY25 and a staggering ₹1,035 crore annual loss—its worst-ever performance. Amid warnings of potential fraud, internal control lapses, and high delinquencies, the microfinance lender now faces scrutiny from regulators and auditors alike.
The company reported a ₹434 crore consolidated net loss in the final quarter of FY25, bringing its total annual loss to ₹1,035 crore. This marks a dramatic fall from a ₹501 crore net profit the previous year, raising serious questions about the company’s asset quality, internal controls, and leadership stability.
Independent auditor BSR & Co, which reviewed the financial statements, flagged the possibility of fraud and collusion, pointing to material misstatements that may have resulted from the override of internal controls, forgery, and intentional omissions. The Reserve Bank of India is also reportedly monitoring Spandana for unreported frauds and cash balance mismatches at branch levels.
Mounting Losses, Rising NPAs, and Auditor Red Flags
The troubles at Spandana began compounding over successive quarters, with Q4 marking the third consecutive quarterly loss. Interim CEO Ashish Damani cited “elevated impairment costs” and “heightened delinquencies” as primary contributors to the latest loss figures.
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The company’s Gross Non-Performing Assets (GNPA) surged to 5.63% by March 2025, up from 1.5% a year earlier. Spandana’s consolidated Assets Under Management (AUM) also shrank sharply, falling by 43% year-on-year to ₹6,819 crore from ₹11,973 crore.
BSR & Co’s audit note was scathing: “The risk of not detecting material misstatements due to fraud is significantly higher… these may involve collusion and the override of controls.” Their report highlighted potential forgery and misrepresentation in the company’s accounts.
Leadership Vacuum Adds to Instability
Adding to the chaos, Managing Director and CEO Shalabh Saxena resigned abruptly on April 23, just days before the year-end audit. His sudden exit has only intensified speculation about deeper issues within the organization.
The company, in its stock exchange filing, attributed its performance to “unprecedented external and structural headwinds”, without elaborating on the internal turmoil. However, sources suggest that rising attrition at the field level, deteriorating borrower discipline, and disrupted loan collection efforts significantly hampered operations.
Insiders also claim that field-level mismatches in cash balances and missing documentation had been noted as early as Q1 but were not addressed effectively—possibly contributing to the sharp rise in credit costs.
RBI Lens, Reputational Risk, and Sector-Wide Implications
In April, ET had reported that Spandana was under regulatory lens from the Reserve Bank of India for branch-level financial irregularities. With the audit’s findings now public, the lender’s troubles could spill into investigations, shareholder lawsuits, and further regulatory scrutiny.
The developments also come at a time when India’s microfinance sector is already battling high delinquencies, inflationary pressure on rural borrowers, and recovery lags post-pandemic. Spandana’s fall may serve as a cautionary tale for the sector on the dangers of unchecked expansion, poor governance, and weak internal controls.