Spandana Sphoorty Financial has received Management Committee approval for transferring its stressed loan portfolio to an asset reconstruction company (ARC) while simultaneously strengthening its funding base through a ₹415 crore NCD issuance. The microfinance institution's Management Committee approved the significant balance sheet restructuring move on December 29, as part of its recovery strategy amid challenging financial performance.

Management Committee Approval

The Management Committee of the Board of Directors passed a resolution on December 29, approving the transfer of stressed loan portfolio including written off loans. The meeting was conducted from 12:30 p.m. to 1:00 p.m., with the decision communicated to stock exchanges under Regulation 30 of SEBI Listing Regulations.

Transaction Parameters

The approved transaction involves transferring the stressed loan portfolio through the Swiss Challenge Method, a competitive bidding process used for asset sales in accordance with RBI Master Directions.

Funding Base Strengthening

Separately, the company's board approved the allotment of non-convertible debentures worth ₹415 crore through private placement to strengthen its funding base. The company allotted 41,500 rated, listed, senior, secured, redeemable and taxable NCDs pursuant to a board resolution passed on December 23.

Recent Financial Performance

The lender reported sharp deterioration in its September quarter performance, highlighting the need for balance sheet cleanup. Net sales fell significantly while losses widened substantially compared to the previous year.

Strategic Impact

This move represents a significant write-down of approximately 93% on the original portfolio value, reflecting the challenging nature of these distressed assets. The transfer to an ARC will help Spandana Sphoorty clean up its balance sheet and focus on core lending operations. In recent management changes, the company appointed Venkatesh Krishnan as managing director and chief executive officer, effective November 27.

Spandana Sphoorty Financial Limited has announced the approval for transferring its stressed loan portfolio to an Asset Reconstruction Company (ARC), marking a significant step in the company's asset management strategy. The decision was taken by the Management Committee of the Board of Directors.

Transaction Details

The company has received a binding bid from an ARC for its stressed loan portfolio, including written-off loans. The transaction involves substantial amounts that highlight the scale of the portfolio transfer.

Bidding Process and Next Steps

Spandana Sphoorty Financial will follow the Swiss Challenge Method for the bidding process, ensuring transparency and competitive pricing. This method allows other potential bidders to submit counter-offers, potentially improving the terms for the company. The final decision regarding the sale will be made in accordance with:

• Existing guidelines governing the Swiss Challenge Method
• Relevant company policies
• Regulatory requirements under SEBI listing regulations

This disclosure was made pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, ensuring compliance with mandatory reporting requirements for material events affecting the company's operations.