Spandana Sphoorty's Credit Rating Reaffirmed at [ICRA]BBB+ with Outlook Revised to Stable
Spandana Sphoorty Financial Limited's credit rating for ₹1,000 crore term loans and ₹523 crore NCDs has been reaffirmed at [ICRA]BBB+ by ICRA Ratings. The outlook has been revised to Stable from Negative. The revision reflects improved asset quality and profitability in H2 FY2026, with stage 3 assets and delinquencies showing moderation. Capitalisation remains comfortable.
A credit rating upgrade or outlook revision to stable generally has a positive impact on a company's borrowing costs and investor confidence, but the rating itself ([ICRA]BBB+) suggests moderate creditworthiness, hence the MEDIUM impact.
The outlook revision to Stable from Negative and reaffirmation of the credit rating indicate a positive development for the company's financial health and market perception.
Spandana Sphoorty Financial Limited (SSFL) has announced that ICRA Ratings Limited has reaffirmed its credit rating for the company's existing instruments and revised the outlook to Stable from Negative. The Long-term fund-based term loan facility of ₹1,000 crore and Non-Convertible Debentures (NCDs) of ₹523 crore have both been reaffirmed at [ICRA]BBB+ (Stable).
The rating revision reflects the easing of pressure on SSFL's asset quality and profitability in the second half of FY2026. Consolidated gross and net stage 3 assets improved significantly, and 30+ days past due (dpd) delinquencies moderated, although they remain high compared to FY2024. This improvement was driven by enhanced collection efficiency in newly originated portfolios and substantial write-offs of delinquent accounts. The asset quality performance of the new portfolio, originated since April 2025, has been healthy, supported by tightened underwriting policies.
While the company's scale of operations declined during FY2025-H1 FY2026, leading to a weakening of operating efficiency, SSFL has been increasing disbursements from H2 FY2026 as asset quality stress eased. AUM expansion is expected to optimize operating expenses gradually. The company's capitalisation profile remains comfortable with a consolidated managed gearing of 2.0 times as of March 2026, augmented by a rights issue in July 2025.
ICRA notes the proposed merger of SSFL with its subsidiary, Criss Financial Limited, is not expected to have any impact as the assessment is on a consolidated basis. The rating reaffirmation considers SSFL's comfortable capitalisation, diversified geographical presence, and the improvement in asset quality metrics. However, challenges remain in sustaining stable asset quality in the microfinance sector, moderate profitability indicators, and the need to strengthen the funding profile with a focus on competitive borrowing rates.
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