Press Release April 22, 2025 UFIN FINANCIAL SERVICES LIMITED (ERSTWHILE MSM MICRO FINANCE LIMITED) Rating Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	24.50	ACUITE BB+ | Negative | Reaffirmed | Stable to Negative	-
Total Outstanding	24.50	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

­­Acuite has reaffirmed the long-term rating of ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs. 24.50 crore bank facilities of Ufin Financial Services Limited (Erstwhile MSM Micro Finance Limited)(UFIN). The outlook is revised from 'Stable' to 'Negative' .  Reason for Rationale: The revision in the rating outlook factors in a significant deterioration in the earning profile,  which is due to the ongoing stress in the micro-finance (MFI) segment. The earning profile has also been affected adveresly where the profitability at FY24 was Rs. 1.34 Cr. and subsequently registered a PAT of Rs. 0.21 Cr. at 9MFY25.  Furthermore, the asset quality has deteriorated, marked by a GNPA of 2.25 percent as on Dec 31, 2024, where the GNPA was 1.33 percent in March 31, 2024. The rating is also constrained on account of UFIN's high off book exposure which stood at ~68 percent of its AUM of Rs 134.91 Cr. as on 9MFY2025. However the rating continues to factor in UFIN's healthy capitalization, experienced management, support of resourceful promoters. Capital infusion by promoters of Rs 2.66 Cr. during FY2024 have contributed to the company’s Capital adequacy ratio of 67.18 percent as on Mar 31,2024.  Acuite believes that the company’s ability to timely infuse capital, improved networth base, and improvement in the profitability metrics, while keeping the momentum in growth of AUM, and disbursements would be a key rating monitorable.

About the company

Ufin Financial Services Limited (Erstwhile MSM Micro Finance Limited), incorporated in 1996, the present promotors acquired the company in 2010 is engaged in the financing of income-generating activities and agricultural activities in Tamil Nadu, Gujarat,  Madhya Pradesh and Pondicherry. The company is also has a partnership model with Fincare small finance bank and several non-banking finance companies such as MAS Financial Services Limited, Kaleidofin Capital Pvt. Limited, Monexo Fintech and Ananya Finance Limited. UFIN originates loans on behalf of these NBFCs and is responsible for credit appraisal, monitoring and collections of receivables from the portfolio.

Unsupported Rating

­Not Applicable

Analytical Approach

Acuité has considered the standalone business and financial risk profile of UFIN Financial Services Limited (Erstwhile MSM Micro Finance Limited) to arrive at the rating.

Key Rating Drivers

Strength

­Experienced management and long track record of operations The day-to-day operations are led by Mr. Mohan Kumar Subramanyam, Chairman and Managing Director, Mr. P.S.V. Vasanth – Joint Managing Director, Mr.Prem kumar – Executive director, Mr.Sudhansu Sekar – DGM Operations and Mr.Sudhakar – DGM Finance. The management has been in the microfinance industry for over two decades. The company has long term relations with various financial institutions. Besides, UFIN has been able to enter into partnership model relationships with various Banks and NBFCs. Under the partnership model, UFIN extends advances to low income groups for undertaking income generating activities and is responsible for post disbursement monitoring and supporting recovery. UFIN also provides a first loss facility to cover a predetermined proportion of delinquencies in the asset pool. The company has 57 branches across four states and reported Assets Under Management (AUM) (on-balance sheet loan book plus managed portfolio) of Rs. 134.91 crore on 9MFY25 as against Rs.150.41 crore on 31 March, 2024. On the back of its experienced management and relationships with coveted financial institutions, Acuite expects UFIN's AUM to report sustained growth over the medium term.

Weakness

Degrowth in  AUM growth and asset quality Asset Quality; The company’s loan portfolio registered a degrowth to Rs. 134.91 Cr. on Dec 31, 2024, as against Rs. 150.41 Cr. as on March 31, 2024. UFIN's asset quality has also deteriorated to a GNPA of 2.25 percent as on Dec 2024 from 1.33 percent as on March 24. Company’s on-time portfolio is marked by 99.03 percent in FY24 and 96.65 percent in 9MFY25. Overall collection efficiency for average six month ending Dec'24 stood at 79.67 percent.  Acuité believes that UFIN’s ability sustain the growth in its loan book, while maintaining sound asset quality level in the near to the medium term will be key rating monitorable.­ Subdued profitability metrics: UFIN was incorporated in 1996, the present promotors acquired the company in 2010; engaged in the financing of income-generating activities and agricultural activities in the states of Tamil Nadu, Gujarat and Madhya Pradesh and Pondicherry, the company expanded their branch network from 51 in March 31, 2024, to 57 in Dec 31, 2024, as to improve it's borrower base. This expansion resulted in high operating expenses primarily driven by staff expenses leading to subdued profitability metrics, where the company reported PAT of Rs 0.21 Cr. at 9MFY25. Moreover the earning profile was further subdued due to the stress in the MFI segment which has created a requirement to increase their provisioning which has also contributed their subdued earning profile at 9MFY25. The company's ability to expand while maintaining its profitability will be key monitorable. Risk inherent to the microfinance segment The activities of microfinance companies like UFIN are exposed to the concentration risks. The company has presence in 5 states with a concentration in Tamil Nadu (~87 percent), MP (~1.20 percent), Gujrat (~7 percent), Kerala (~3 percent) and Pondicherry (~4.50 percent) of total portfolio as on Dec 30,2024. This exposes the company to high geographical concentration risk. Besides geography, the company will be exposed to competition and any changes in the regulatory framework, thereby impacting the credit profile of Ufin Financial Services Limited.

Rating Sensitivity

­ ­Movement in asset quality metrics. Movement  in the profitability metrics. Movement in liquidity buffers. Changes in regulatory environment.

Liquidity Position

Adequate

UFIN’s overall liquidity profile remains adequate with no negative cumulative mismatches in near to medium term as per ALM dated March 31, 2024. The company’s liquidity position is supported by unencumbered Cash and Bank Balance of Rs 0.62 Cr. as on March 31, 2024.

Outlook:

­Negative

Other Factors affecting Rating

­None

Key Financials - Standalone / Originator

­­ Particulars Unit FY24 (Actual) FY23 (Actual) Total Assets** Rs. Cr. 63.63 55.78 Total Income* Rs. Cr. 12.00 12.92 PAT Rs. Cr. 1.34 0.82 Networth Rs. Cr. 22.78 17.50 Return on Average Assets (RoAA) (%) 2.25 1.75 Return on Net Worth (RoNW) (%) 6.67 5.00 Total         Debt/Tangible Net Worth (Gearing)**   Times 1.65 2.01 Gross NPA (%) 1.33 1.45 Net NPA (%) Nil Nil *Total income equals to Total Income net off interest expense

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

­Not Applicable

Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite)

Not applicable

Any other information

­None

Applicable Criteria

• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.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 23 Jan 2024 Proposed Long Term Bank Facility Long Term 4.50 ACUITE BB+ | Stable (Upgraded from ACUITE B+) Proposed Long Term Loan Long Term 20.00 ACUITE BB+ | Stable (Upgraded from ACUITE B+) 12 Jul 2023 Proposed Long Term Bank Facility Long Term 4.50 ACUITE B+ (Reaffirmed & Issuer not co-operating*) Proposed Long Term Loan Long Term 20.00 ACUITE B+ (Reaffirmed & Issuer not co-operating*) 20 Apr 2022 Proposed Long Term Bank Facility Long Term 4.50 ACUITE B+ (Reaffirmed & Issuer not co-operating*) Proposed Long Term Loan Long Term 20.00 ACUITE B+ (Reaffirmed & Issuer not co-operating*)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 4.50 Simple ACUITE BB+ | Negative | Reaffirmed | Stable to Negative Not Applicable Not avl. / Not appl. Proposed Long Term Loan Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 20.00 Simple ACUITE BB+ | Negative | Reaffirmed | Stable to Negative

Contacts

Mohit Jain Senior Vice President - Rating Operations Shabad Palakkal Associate Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

­Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.