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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Non Convertible Debentures (NCD) | 65.70 | ACUITE BBB | Positive | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 12.00 | Not Applicable | Withdrawn | - |
| Total Outstanding | 65.70 | - | - |
| Total Withdrawn | 12.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating to ’ACUITE BBB’ (read as ACUITE triple B) on Rs 65.70 Cr Non-Convertible Debentures facilities of Varthana Finance Private Limited (VFPL). The outlook revised from 'Stable' to ‘Positive’. Acuité has withdrawn the long-term rating on Rs. 12.00 Cr. Non-Convertible Debentures facilities of Varthana Finance Private Limited (VFPL) without assigning any rating as the instrument is fully repaid. The rating is being withdrawn on account of request received from the company and NOC (No Objection Certificate) received from the trustee. The rating withdrawal is in accordance with Acuité's policy on withdrawal of rating as applicable to the respective facility / instrument. Rationale for the Positive Outlook. The rating factors in the Improvement in loan portfolio and Disbursement levels, adequate capitalization, diverse funding profile and experienced management. The company has demonstrated strong operational performance, with disbursements rising from Rs 858.43 Cr to Rs 1,240.20 Cr . Its Gross Loan Portfolio (GLP) expanded from Rs 1,281.13 Cr in FY24 to Rs 1,896.66 Cr in FY25 and further to Rs 1,988.57 Cr as of September 30,2025. Additionally, the company’s net worth has shown healthy growth, increasing from Rs 537.50 Cr in FY24 to Rs 559.08 Cr as on March 31, 2025, and Rs 563.60 Cr as on September 30, 2025. VFPL reported a robust Capital Adequacy Ratio (CAR) of 28.53% as on March 31, 2025, and a gearing of 3.06 times (compared to 40.70% in FY24). Further, The company has a large and diversified borrowing profile which has 60+ lenders. The company has a total outstanding debt of ~Rs 1700 Cr which comprises of a mix of Term loans, External commercial borrowings (ECBs) and non-convertible debentures (NCDs) and PTC transactions. However, the rating remains constrained by the profitability and asset quality levels, going forward, timely equity infusion would be crucial.Going forward, the ability of the company to contain asset quality pressures while scaling up the portfolio along with improving the profitability will remain a key rating monitorable. |
| About the company |
| Based in Bangalore, Varthana Finance Private Limited is a non-deposit taking non-banking financial company incorporated in 1984. It commenced financing operations in 2013 post acquisition of the company by the current promoters, Mr. Steve Hardgrave and Mr. Brajesh Mishra. VFPL extends credit mainly through secured and unsecured loans to private schools for expansion purposes. The company has 43 branches with presence across 15 states and Gross loan portfolio stood at Rs 1,988.57 Cr as of September, 30 2025. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone financial and business risk profile of VFPL to arrive at the rating. |
| Key Rating Drivers |
| Strength |
| Experienced management VFPL has an experienced management team led by Mr. Steve Hardgrave, Vice Chairman, Mr. Brajesh Mishra,MD & CEO who have relevant experience in the business segment of school financing. Mr. Hardgrave had worked in early stage venture funds which target social purpose businesses. Mr. Mishra has close to two decades of experience in retail banking, rural, and agri-lending and automotive finance at ICICI Bank. In addition, the company is backed by institutional investors such as ChrysCapital, Elevar Equity, LightRock, Kaizen PE among others. Acuité believes that VFPL’s business profile will be supported by its experienced promoters and investors and will be able to leverage their expertise to raise funding and grow its loan book. Improvement in AUM and Disbursements levels and adequate capitalization. The company has demonstrated strong operational performance, with disbursements rising from Rs 858.43 Cr to Rs 1,240.20 Cr. Its Gross Loan Portfolio (GLP) expanded from Rs 1,281.13 Cr in FY24 to Rs 1,896.66 Cr in FY25 and further to Rs 1,988.57 Cr as of Q2 FY26. Additionally, the company’s net worth has shown healthy growth, increasing from Rs 537.50 Cr in FY24 to Rs 559.08 Cr as on March 31, 2025, and Rs 563.60 Cr as on September 30, 2025. VFPL reported a robust Capital Adequacy Ratio (CAR) of 28.53% as on March 31, 2025, and a gearing of 3.06 times, providing sufficient headroom to pursue future growth plans. Going forward, Acuite expects VFPL to continue benefiting from consistent support from external investors, thereby maintaining adequate capitalization. Diverse funding profile The company has a large and diversified borrowing profile which has 60+ lenders. The company has a total outstanding debt of ~Rs 1700 Cr which comprises of a mix of Term loans, External commercial borrowings (ECBs) and non-convertible debentures (NCDs) and PTC transactions. The Term loans comprise ~46 percent of the outstanding debt, followed by 26 percent from ECBs, 23 percent from NCDs and the remaining being from PTC transactions as of September 2025. |
| Weakness |
| Moderate asset quality;albeit improving The asset quality marked by the GNPA improved to 2.46 percent as on September 30,2025 (down from GNPA of 2.72 percent as of June 2025) as against 1.94 percent as on March 31, 2025. The increase in GNPA was on account of delinquencies from the student loans portfolio. The company has seen a significant improvement from March 2023 levels at 8.35 percent lowered to 2.90 percent as of March 31, 2024. Going forward, the ability of the company to improve the asset quality while limiting additional slippages and credit costs would be a key monitorable. Subdued profitability The company reported a PAT of Rs 3.30 Cr. in H1FY26 ( Provisional) as against a PAT of Rs 5.80 Cr in H1FY25 and a PAT of Rs 23.66 Cr in FY25. Q1FY26 saw an increase in provisions impacting profitability. The restructured portfolio has seen a rundown to ~Rs 16 Cr as of September 30, 2025. The profitability remains susceptible to the additional credit costs pertaining to the slippages in the outstanding restructured portfolio. Acuite believes that the company's ability to contain asset quality pressures and credit costs while improving its profitability parameters will be a key rating monitorable. |
| ESG Factors Relevant for Rating |
| VFPL belongs to the NBFC sector which complements bank lending in India. Some of the material governance issues for the financial services sector are policies and practices with regard to business ethics, board diversity and independence, compensation structure for board and KMPs, role of the audit committee and shareholders’ rights. On the social aspect, some of the critical issues for the sector are the contributions to financial inclusion and social development, responsible financing including environmentally friendly projects and policies around data privacy. The industry, by nature has a low exposure to environmental risks. VFPL offers financial services for private schools for expansion purposes. The company has a well-placed grievance redressal mechanism; it has made adequate disclosures with respect to related party transactions. It also adheres to Reserve Bank of India’s Fair Practices Code and has the necessary interest rate and grievance redressal policies. The company’s board comprises of three independent directors out of total nine directors. VFPL supports community development through CSR projects mainly aimed at promotion of education, eradication of hunger, environmental sustainability, promoting gender equality and empowering women among other causes. |
| Rating Sensitivity |
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| All Covenants |
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Financial Covenants i. The ratio of Financial Indebtedness to Tangible Net Worth shall not exceed 3.5x or times till the remaining tenor of the instrument; ii. No cumulative liquidity mismatch in any of the standard buckets up to 9 months on all standard liquidity buckets, as prescribed by RBI. For the purpose of this calculation, undrawn term loans are to be excluded. This covenant will be tested from 1 Oct 23 onwards; iii. Entity shall remain profitable on a quarterly basis from Q2FY24 onwards till the remaining tenor of the instrument and losses to not exceed INR 1 crs in Q1FY24; iv. Company shall at all times maintain the Capital Adequacy Ratio (CAR) ratio of no less than 20% OR two percentage points above the regulatory minimum, whichever is higher. v. GNPA to be no more than a. 15% from deemed date of allotment till 31 Dec 23; b. 7% from 1 Jan 24 till 30 Sep 24 and c. 5% from 1 Oct 24 till the remaining tenor of the instrument; vi. NNPA to be no more than 6% from deemed date of allotment till 31 Dec 23 and no more than 3% from 1 Jan 24 till the remaining tenor of the instrument; vii. Write offs during any financial year to be less than 3% till the remaining tenor of the instrument. This covenant will be tested from 1 Oct 23 onwards; viii. Exposure of top 20 borrowers (all accounts of the borrower) shall not exceed 30% of the Tangible Net Worth till the remaining tenor of the instrument; Further , the Issuer will at all times maintain:
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| Liquidity Position |
| Adequate |
| VFPL has adequately matched asset-liability profile as on September 30, 2025 with no negative cumulative mismatch in near term. The company has maintained cash and bank balances of Rs 275.41 Cr. as on September 30,2025. |
| Outlook : Positive |
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
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| Status of non-cooperation with previous CRA (if applicable): |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• 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 |
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