Press Release June 05, 2026 FEDERAL OPERATIONS AND SERVICES LIMITED Rating Reaffirmed

Product	Quantum (Rs. Cr) (SEBI)	Quantum (Rs. Cr) (Other FSR)	Long Term Rating	Short Term Rating	Regulated By
Non-Convertible Preference Shares	0.00	5.00	ACUITE A+ | Stable | Reaffirmed	-	MCA
Total Outstanding	0.00	5.00	-	-	-
Total Withdrawn	0.00	0.00	-	-	-

Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.

Rating Rationale

­Acuité has reaffirmed the long-term rating of 'ACUITE A+’ (read as ACUITE A plus) on the Rs. 5.00 crore non-convertible preference shares of Federal Operations and Services Limited (FOSL). The outlook is 'Stable'. Rationale for the rating The rating continues to derive comfort from the fact that FOSL is strategically important to Federal Bank Limited (FBL), which holds a 99.99% stake in FOSL and is significantly aligned with FBL’s banking operations. As of March 31, 2026, FOSL had taken over 243 activities, compared to 240 activities as of March 31, 2025. Accordingly, FOSL’s income has increased to Rs.133.81 crore in FY2026 as against Rs.102.98 crore in FY2025. The rating also derives strength from demonstrated capital support from FBL and expectations of continued support going forward. However, the rating remains constrained by the modest scale of operations and susceptibility to operational and regulatory risks.

About the Company

­­FOSL was incorporated in October 2018 as a wholly owned subsidiary of the Indian private sector bank, The Federal Bank Limited (FBL). FOSL was established with the intent of streamlining the operational and technology-driven services of FBL in line with best global practises. It works as a back-office processing unit for FBL. Currently, FOSL is handling 243 activities as on March 31, 2026. FOSL’s operating facilities are located in Kochi (Kerala), Vizag (Andhra Pradesh), Bangalore(Karnataka) and Indore (Madhya Pradesh).

About the Group

­FBL is an Indian private sector bank founded in 1931. The bank has a network of 1640 banking outlets and 2112 ATMs and cash recyclers (including mobile ATMs) as on March 31, 2026. The bank has aggregate deposits of ~Rs. 3.14 trillion and advances of ~Rs. 2.64 trillion as on March 31, 2026. FBL’s share holding pattern is well diversified with majority shares held by Mutual Funds (36%), Foreign Institutional Investors (26%), financial institutions & banks (11%) and Corporates & Others (27%) as on March 31, 2026. The bank is listed both on BSE and NSE.

Unsupported Rating

­ACUITE BBB-/Stable

Analytical Approach

­Acuité has considered the standalone business and financial risk profile of FOSL and has notched-up the standalone rating to factor in the expectation of support from The Federal Bank Limited (FBL). The rating of FBL is central to the rating of FOSL and will remain a key monitorable.

Key Rating Drivers

Strengths

­Improving financial performance, along with benefits emanating from the parentage of Federal Bank   FOSL was incorporated in October 2018 as a wholly owned subsidiary of FBL. FOSL is strategically important to FBL and is significantly aligned with FBL’s banking operations. As of March 31, 2026, FOSL was handling 243 activities, compared to 240 activities as of March 31, 2025.These activities include Contact centre, IT Services, Account opening, ATM Monitoring and Trade finance activities. It operates as a captive vehicle for FBL and is required to maintain exclusivity with FBL. It operates from its five offices located in Kochi, Bangalore, Vizag, Indore and Coimbatore. The financial performance of FOSL witnessed improvement in terms of an increase in revenue of ~30% to Rs. 133.81 crore in FY2026 over Rs. 102.98 crore in FY2025. The net profitability margin stood at 8.36% in FY26. The increase in financial performance is due to FOSL acquiring more and more activities from its parent company (FBL) every year. FOSL has the target of acquiring all remaining activities in the near to medium term. In line with the increase in its scale of operations, FOSL is also gradually increasing its workforce. As per the arrangement with FBL, FOSL carries out several activities that are considered important from a customer service standpoint. Since the operational risks in banking are significantly high, FBL maintains considerable oversight over the operations of FOSL. FOSL has integrated with the bank's tech platform and aids the bank in improving its operating efficiency through lower costs of operations and better productivity. The Board of Directors of FOSL comprises nominees from FBL and experienced professionals. Mr. Siddhartha Sengupta, Independent Director of FBL, is the Chairman and Director of FOSL. Besides the managerial support, FBL has infused funds by way of equity and preference shares to support the business operations of FOSL. The company’s operations are managed by Mr. Prashant Preman, President and full-time Executive Director. He has been associated with FedServ since August 2019. He has been appointed as Whole-Time Director (as Key Managerial Personnel) of FedServ with effect from April 16, 2021. Mr. Prashant has been key to FedServ in setting up and rolling out successful long-term and short-term strategic programmes and successfully reengineering various operations, including consumer asset products including ATMs, debit cards, contact centre operations, CASA and KYC operations, trade finance operations, and various other activities. FOSL has also received support from other key employees of FBL who are assisting in the smooth migration of systems to FOSL. Acuité believes that FOSL will continue to derive significant benefits from FBL and augment its scale of operations through the gradual migration of the processes as envisaged under their mutual arrangement. The continued support and ownership of FOSL by FBL will be central to the rating.

Weaknesses

­Initial stage of operations; susceptible to operational and regulatory risks  Since FOSL was incorporated in 2018, it is in its initial stage of operations. Though the plan of activities for migration is going as planned, the gradual takeover of activities by FOSL is done in close coordination with the employees of FBL. As of March 31, 2026, FOSL manages 243 activities of FBL. The operations of FOSL are dependent on FBL’s systems and databases, which exposes FOSL to operational risks. The risks are expected to multiply once additional processes are added to FOSL’s portfolio. Hence, continuous management of operational risks is crucial for the smooth running of this arrangement. Besides operational risks, the growth trajectory of FOSL will also depend on the regulatory environment. Any changes in the regulatory framework restricting or curtailing banks from outsourcing their activities will impinge on the performance of FOSL. Acuité believes that the success of FOSL’s business model will depend on its ability to manage the various operational aspects and enhance its linkages with FBL within the regulatory paradigm.

Assessment of Adequacy of Credit Enhancement under various scenarios including stress scenarios (applicable for ratings factoring specified support considerations with or without the “CE” suffix)

­FOSL is strategically important to FBL and is significantly aligned with FBL’s banking operations. Hence, Acuité believes that there would be continued support from the FBL.

Rating Sensitivities

Potential triggers (individual or collective) for an upward rating action:

Sustained improvement in EBITDA margin. Consistent support from parent Federal bank

Potential triggers (individual or collective) for a downward rating action:

­Changes in share-holding pattern and parent support. Decline in EBITDA margin below 6.00 percent.

Liquidity Position

Adequate

­As on March 31, 2026, FOSL had no external borrowings.As on March 31, 2026, the cash and cash equivalents stood at Rs. 16.85 Cr. The company is expected to be adequately supported by FBL for its working capital requirements as and when necessary.

Outlook

­Stable

Other Factors affecting Rating

­None

Key Financials :

­ Particulars Unit FY26(Actual) FY25(Actual) Operating Income* Rs. Cr. 133.81 102.98 PAT Rs. Cr. 11.19 7.91 PAT Margin % 8.36 7.68 Total Debt/Tangible Net Worth Times 0.15 0.17 PBDIT/Interest Times - - *Operating income is calculated as per internal classification of Acuite and it includes grants & subsidies and Miscellaneous income. **Ratios are as per Acuite's calculation.

Status of non-cooperation with previous CRA (if applicable)

­Not applicable

Any other information

­None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Group And Parent Support: https://www.acuite.in/view-rating-criteria-47.htm

Note on complexity levels of the rated instrument

­In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 13 Jun 2025 Perpetual Non-Cumulative Preference Shares Long Term 5.00 ACUITE A+ | Stable (Reaffirmed) 13 Jun 2024 Perpetual Non-Cumulative Preference Shares Long Term 5.00 ACUITE A+ | Stable (Reaffirmed) 14 Jun 2023 Perpetual Non-Cumulative Preference Shares Long Term 5.00 ACUITE A+ | Stable (Reaffirmed)

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*Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support)

­ Sr.No. Company Name 1 Federal Operations and Services Limited 2 The Federal Bank Limited

Contacts

Mohit Jain Chief Analytical Officer - Rating Operations Yash Dharmale Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

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