The agency has reaffirmed the rating on the term-loan and debentures of Spandana Sphoorty at “[ICRA] A”.

ICRA stated that the revision in the rating outlook factors in the steady improvement in Spandana Sphoorty Microfinance’s (SSFL) borrowing profile, characterised by a reduction in the marginal borrowing cost and the addition of new lenders.

The marginal cost of borrowing has reduced over the last four quarters, but is higher compared to some of the industry peers. Going forward, SSFL’s ability to diversify its liability profile further and keep the borrowing rates under control would be crucial from a rating perspective.

SSFL’s consolidated assets under management (AUM) stood at Rs. 9,784 crore as of September 2023, catering to about 27 lakh borrowers through a network of 1,502 branches spread across 19 states. Its portfolio remains diversified with no state accounting for more than 20% of the portfolio.

The ratings also consider the risks associated with the marginal borrower profile, unsecured lending, business, and political risks along with the high pace of growth. SSFL’s ability to manage such risks while expanding to new geographies would be crucial.

ICRA takes note of the new management team and various initiatives for risk management, technology and operational improvements, which shall partly offset the impact of the above risks.

Spandana Sphoorty Financial is a rural-focused non-banking financial company and a microfinance lender (NBFC-MFI) with a geographically diversified presence in India. The company offers income generating loans under the joint liability group (JLG) model, predominantly to women from low-income households in rural areas.

The MFI has reported 127% jump in consolidated net profit to Rs 125 crore in Q2 FY24 from Rs 55 crore in Q2 FY23. Total income from operations increased by 105% year-over-year to Rs 610 crore during the period under review.

The scrip shed 0.90% to currently trade at Rs 1147.60 on the BSE.