Spandana Sphoorty Financial Limited — Credit Ratings, 05-04-2025: Credit Rating

Spandana Sphoorty Financial Limited has announced a board meeting regarding the credit rating on its long-term bank facilities, with the rating reaffirmed by CARE Ratings. The company has seen its long-term bank facilities reduced from ₹1,500 crore to ₹800 crore, retaining a rating of CARE A with a negative outlook. Non-convertible debentures (NCDs) totaling ₹500 crore and ₹200 crore also maintain the CARE A (Negative) rating, while commercial paper remains strong at CARE A1.

Financially, the company reported significant challenges, including a consolidated net loss of ₹601 crore for the first nine months of FY2025, a sharp decline from a profit of ₹501 crore during the same period last year. The overall return on average total assets (ROTA) plummeted to -6.98%, with increasing operational costs and elevated credit adversely impacting profitability.

Operational expenses rose to 7.87%, and credit costs skyrocketed from 2.32% in FY2024 to 16.08% in 9MFY25, exacerbating the company's financial strain. The asset quality metrics also worsened, with gross stage 3 assets at 5.25% and net stage 3 assets at 1.11%, reflecting the difficulties in the microfinance sector.

The outlook remains negative owing to ongoing stress in the microfinance portfolio, leading to elevated credit costs and profitability concerns. Investors are advised to hold, given the existing challenges and potential for recovery dependent on future capital raising efforts and operational adjustments.