Spandana Sphoorty Financial (NSE:SPAD) Limited (SSFL) faced a setback as Crisil Ratings downgraded its long-term bank facilities to ‘Crisil A-/Stable’ from ‘Crisil A/Stable’. The downgrade reflects a sharper-than-expected decline in profitability, primarily driven by continued asset quality pressures. Crisil Ratings revised its medium-term credit risk outlook for the company, raising concerns about SSFL’s financial stability.
SSFL’s borrowing costs have surged, further impacting profitability. In Q3 FY25, its incremental cost of borrowings stood at 11.7%, pushing the average cost of funds to 12.3% for the first nine months of FY25—higher than 11.9% in FY24 and 9.2% in FY23. The company raised INR 802 crore in fresh funding during the quarter, but its funding mix remains expensive.
A significant 44.3% of incremental borrowings came from assignments (19.3%) and securitization (25%), while term loans and non-convertible debentures (NCDs) accounted for 35.7% and 19.9%, respectively. Despite this funding mix, SSFL’s borrowing costs remain higher than its similarly rated peers, putting further pressure on profitability.
Image Source: InvestingPro+
Despite the credit rating downgrade, SSFL’s valuation tells a different story. According to InvestingPro’s fair value model, the stock’s fair value stands at INR 459.1 per share, suggesting a potential upside of 41.3% from its current market price of INR 325.
For investors assessing opportunities, this valuation insight is crucial. The fair value metric in InvestingPro evaluates stocks based on multiple financial models, eliminating the need for manual calculations and offering highly precise intrinsic valuations. Investors can instantly determine if a stock is overvalued or undervalued, empowering them to make informed decisions.
The downgrade signals caution, but with a 41.3% upside potential, SSFL remains an intriguing stock. For those seeking deeper stock insights, InvestingPro provides cutting-edge tools to analyze fair value, financial health, and market trends in real-time.
Investors looking to maximize returns can take advantage of InvestingPro’s ongoing sale, offering discounts of up to 45%. With market volatility on the rise, having access to professional-grade stock analysis could be the edge retail investors need.
As SSFL navigates challenges, its valuation presents an opportunity—but only for those who have the right tools to analyze it.
Read More: Mastering the Market with InvestingPro’s Cutting-Edge Stock Screeners
X (formerly, Twitter) - Aayush Khanna
LinkedIn - Aayush Khanna