Spandana Sphoorty Financial said that the credit rating agency India Ratings and Research has affirmed company's NCDs and bank loans at 'IND A'/Stable; Off RWN.
India Ratings said that the ratings had been placed on 'rating watch negative (RWN)' in view of the developments in Spandana's board and management, and the possible impact of the same on the company's performance, and hence, its franchise building plans.
Furthermore, the agency had taken a cautious stance because the information technology systems were transferred to a new vendor days before the exit of its now former managing director, on account of which the company had to rely materially on manual demand/collection sheets and reconstruct its overall database from piecemeal/departmental databases.
The affirmation and RWN resolution reflect the addressing of the board-level issues, the stabilising of operations with the implementation of new IT systems (along with the availability of complete historical data from the old system), and most of legacy asset quality stress being recognised under the new management team.
The affirmation also factors in the presence of adequate capital levels for at least near-mid-term growth and the operational set-up, including that of subsidiaries, being largely intact.
During December 2021-June 2022, which was a challenging time for the company, it was able to raise Rs 630 crore incrementally. Subsequently, some of the lenders who had been in wait-and-watch mode have now started sanctioning incremental additional limits, indicating a recovery in lender confidence.
Hence, India Ratings does not expect Spandana to face any substantial challenges in raising funds incrementally for achieving at least modest growth over the assets under management (AUM) in Q1 FY23.
That said, during FY23, the agency will continue to monitor Spandana's progress in fund raising and execution of its operational strategies, given that micro finance institutions (MFIs) typically see a bulk of their annual disbursements in the second half of a financial year.
Spandana was incorporated in 2003 as an NBFC after it took over the microfinance operations of a non-governmental organisation started by Padmaja Reddy in 1998. The company was classified as an NBFC - microfinance institution in 2015. As on 30 June 2022, Spandana had operations in 18 states/union territories spanning across 300 districts with AUM outstanding of Rs 5,510 crore.
The scrip jumped 6.71% to currently trade at Rs 543.25 on the BSE.
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