Credit Rating

Ref: SSFL/Stock Exchange/2026-27/034 July 03, 2026 To To BSE Limited, National Stock Exchange of India Limited, Department of Corporate Services Listing Department P. J. Towers, 25th Floor, Exchange Plaza, C-1, Block G, Dalal Street, Bandra Kurla Complex, Bandra (E) Mumbai – 400001 Mumbai – 400051 Scrip Code: 542759 and 890221 Symbol: SPANDANA and SSFLPP Dear Sir/Madam, Subject: Intimation of Credit Rating - Rating reaffirmed of the Company by Care Ratings Limited. Pursuant to Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, we hereby inform that Care Ratings Limited has reaffirmed the rating of the Company as detailed below: Amount S. No. Facilities / Instruments Rating Action (Rs. Crore) 1. Long-term bank facilities 800.00 CARE BBB+; Stable (Reaffirmed) Non-convertible 2. 280.00 CARE BBB+; Stable (Reaffirmed) debentures Non-convertible 3. 450.00 CARE BBB+; Stable (Reaffirmed) debentures Non-convertible 4. 150.00 CARE BBB+; Stable (Reaffirmed) debentures 5. Commercial paper 100.00 CARE A2 (Reaffirmed) Please find enclosed rationale as published by Care Ratings Limited on July 02, 2026. Kindly take the same on record. Thanking You. Yours Sincerely, For Spandana Sphoorty Financial Limited Vinay Prakash Tripathi Company Secretary Encl: as above Spandana Sphoorty Financial Limited CIN - L65929TG2003PLC040648 Galaxy, Wing B, 16th Floor, Plot No.1, Sy No 83/1, Hyderabad Knowledge City, TSIIC, Raidurg Panmaktha, Hyderabad – 500081, Telangana Ph: +9140-48126666 | contact@spandanasphoorty.com | www.spandanasphoorty.com Press Release Spandana Sphoorty Financial Limited July 02, 2026 Facilities/Instruments Amount (₹ crore) Rating1 Rating Action Long-term bank facilities 800.00 CARE BBB+; Stable Reaffirmed Non-convertible debentures 280.00 CARE BBB+; Stable Reaffirmed Non-convertible debentures 450.00 CARE BBB+; Stable Reaffirmed Non-convertible debentures 150.00 CARE BBB+; Stable Reaffirmed Commercial paper 100.00 CARE A2 Reaffirmed Details of instruments/facilities in Annexure-1. The list of facilities / instruments falling under the purview of various financial sector regulators (FSRs), along with the names of respective FSRs has been disclosed under Annexure-7. Rationale and key rating drivers Rating reaffirmation of debt instruments of Spandana Sphoorty Financial Limited (SSFL) factors in its adequate capitalisation, as reflected in a consolidated capital adequacy ratio of 35.9% and moderate gearing of 2.8x as on March 31, 2026, its experienced management team and a geographically diversified lending portfolio. SSFL has demonstrated its ability to access capital markets, having raised ₹200 crore through a rights issue in FY26, with flexibility to call an additional ₹200 crore from the partly-paid rights issue by March 2027. Capital infusion has partially offset the erosion in net worth arising from two consecutive years of losses and supported the company's capital position. The rating also considers improving collection efficiency trends aided by strengthening underwriting and risk management framework through stricter borrower selection guardrails. As on March 31, 2026, ~80% of SSFL’s standalone assets under management (AUM) had been originated under the revised framework, with the portfolio exhibiting healthy repayment behaviour as reflected in an X-bucket collection efficiency of 99.7%. Share of borrowers with exposure to over three microfinance lenders declined to 4.8% in March 2026 from 18.0% a year earlier on a standalone basis. Supported by these measures, asset quality indicators improved, with gross stage-3 and net stage-3 loans declining to 4.2% and 0.9%, respectively, as on March 31, 2026, from 6.2% and 1.4%, respectively, a year earlier on a consolidated basis. Operating performance has also shown improvement in recent quarters. Disbursements have increased sequentially since Q2FY26, supporting a recovery in AUM. Profitability started improving from Q3FY26 onwards, with the company reporting a marginal net profit in Q4FY26 after six consecutive quarters of losses. Profitability is expected to remain moderate in the near term due to residual portfolio stress, while sustained improvement in asset quality and profitability remains a key monitorable. Ratings remain constrained by its loss-making operations in FY25 and FY26, which led to a significant reduction in its tangible net worth. Significantly lower disbursements and sizeable write offs led to decline in AUM and kept its operating expenses and credit costs elevated. The company's AUM declined from ₹11,973 crore as on March 31, 2024, to ₹3,940 crore as on December 31, 2025, before recovering to ₹4,420 crore as on March 31, 2026. The company’s ability to scale up disbursements, and thus AUM, will be critical for improvement in its profitability. SSFL's funding profile remains constrained by a relatively high cost of borrowings compared to peers. Average cost of funds stood elevated at 12.6% in FY26, although incremental borrowing cost moderated to ~12% for funds raised in Q4FY26. Despite the challenging operating environment, SSFL mobilised ~₹3,116 crore in FY26. SSFL was in breach of certain financial covenants pertaining to borrowings aggregating ~₹36 crore as on March 31, 2025, comprising ~₹19 crore of non-convertible debentures (NCDs; redeemed as per scheduled maturity in April 2026) and ₹17 crore of term loans from two lenders, for which covenant waivers have been obtained. Ratings also factor in inherent risks associated with the microfinance sector, including the unsecured nature of lending, vulnerability of the borrower profile to external shocks, socio-political intervention risk and regulatory uncertainties. 1Complete definition of ratings assigned are available at www.careratings.com and other CARE Ratings Limited’s publications. 1 CARE Ratings Ltd. Press Release CARE Ratings Limited (CareEdge Ratings) notes that SSFL’s Board of Directors has approved the merger of Criss Financial Limited (CFL), a 99.92%-owned subsidiary, with SSFL, subject to receipt of requisite regulatory, shareholder, creditor and judicial approvals. Since CareEdge Ratings assesses SSFL’s credit profile on a consolidated basis, the proposed merger is not expected to have material impact on its credit profile. Rating sensitivities: Factors likely to lead to rating actions Positive factors: Factors that could individually or collectively lead to positive rating action/upgrade • Significant scale-up of operations while maintaining adequate capitalisation. • Sustained improvement in asset quality and profitability with Return on managed assets (ROMA) of above 2%. Negative factors: Factors that could individually or collectively lead to negative rating action/upgrade • Deterioration in SSFL’s consolidated capitalisation profile with AUM to net worth remaining above 6x on a sustained basis. • Continued weakness in its asset quality and profitability. • Sustained pressure on its liquidity profile. Analytical approach: Consolidated CareEdge Ratings has considered the consolidated profile of SSFL and its subsidiaries owing to financial and operational linkages with its subsidiaries. Please refer to Annexure 6 for details. Outlook: Stable The Stable outlook on long-term rating of SSFL reflects CareEdge Ratings’ expectation that SSFL will scale up its operations in the near-term, with gradual improvement in its profitability while maintaining adequate capitalisation levels and healthy on-book liquidity. Detailed description of key rating drivers: Key strengths Established franchise with experienced management and diversified geographic presence SSFL has over two decades of experience in the microfinance industry since its incorporation in 2003 and has built a meaningful presence in the segment over the years. The company is led by an experienced senior management team and continues to benefit from the institutional backing of Kedaara Capit [Showing first 8,000 characters — download PDF for full document]