Intimation regarding change in credit rationg from CARE Ratings Limited
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CARE Ratings has downgraded Star Housing Finance Limited's (SHFL) rating on long-term bank facilities of Rs. 300 crore from CARE BBB (Stable) to CARE BBB- (Negative outlook). The downgrade reflects challenges in scaling operations and funding constraints, despite adequate capital levels. AUM grew 22% YoY to Rs. 521 crore in FY25 and Rs. 568 crore in H1FY26, but retail housing loan disbursements fell sharply from Rs. 241 crore in FY24 to Rs. 139 crore in FY25 and just Rs. 77 crore in H1FY26. The rating action was also influenced by the company's failure to raise equity — a Rs. 100 crore rights issue was withdrawn due to insufficient subscription, and a Rs. 40 crore preferential issue did not materialise. Additional concerns include resignations of two independent directors, the CFO (vacant since June 2025), and the Executive Director. Asset quality remains moderate with GNPA at 1.65% in H1FY26 (improved from 1.85% in FY25), and capital adequacy is strong at 43.36%.
This is a negative signal for shareholders — the downgrade and negative outlook indicate funding and growth pressures, which could raise future borrowing costs and limit business expansion. Further rating action is possible if the company fails to raise growth capital or sees sustained deterioration in profitability and asset quality.