ICRA revises Spandana Sphoorty outlook, citing asset quality concerns

ICRA has revised its outlook on Spandana Sphoorty Financial Limited (SSFL) to negative from stable, while reaffirming its rating at ICRA A+ (negative) for both long-term fund-based term loans (₹2,105 crore) and non-convertible debentures (₹423 crore).

The revision follows concerns over a deterioration in the company’s financial asset quality and profitability in H1FY25. ICRA highlighted a significant rise in delinquencies within the microfinance industry due to factors like borrower overleveraging and political movements.

Additionally, SSFL faces challenges due to its transition to a weekly collection model, with a slowdown in this transition amid sector headwinds.

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Spandana Sphoorty has breached some financial covenants related to asset quality and profitability, including ₹823.3 crore in bonds and term loans. Furthermore, the company has received early redemption requests on ₹196.3 crore of non-convertible debentures (NCDs).

ICRA also noted that 26.7% of SSFL’s customers have borrowed from more than three lenders, adding to the risk posed by over-leveraged borrowers, which could continue to affect the company’s asset quality in the near term.