NHB Classifies Star Housing Finance's Account as Fraud, Five Months After the Company's Own ₹120 Cr Phantom-Loan Report

At 21:31 IST on August 27, after the close, Star Housing Finance filed a two-sentence disclosure under Regulation 30: the company "has received the order from National Housing Bank classifying the account of the Company as Fraud. This is in furtherance of the process of the Forensic Audit conducted by the auditors appointed by the NHB. The Management of the Company is reviewing the order and determining the appropriate course of action."

That is the whole of it. The order itself has not been published. The filing gives no amounts, no findings, no names and no next step beyond review. "Classified as Fraud" is the regulator's account-classification term under the RBI and NHB fraud-risk directions; it is not, on the face of the filing, a finding against any named person, and the company says it is reviewing the order. What the classification obliges the company or its lenders to do next is not stated.

On April 3 the board recorded receipt of an NHB snap audit report and instructed management to reply. On April 6 the company disclosed that it had filed a Fraud Monitoring Report (FMR-1) with NHB under the RBI Master Direction on Frauds, "following a snap audit report issued by National Housing Bank, suspecting phantom loan book amounting to Rs. 120 Crore", adding that "these findings are currently suspected and have not yet been established" and that an independent auditor was being appointed. The August 27 order is the end of that forensic-audit process, not a new allegation.

Six minutes after the fraud filing, the company filed an update to its August 13 intimation of a Letter of Intent between certain shareholders and Cateye Consultancy Services. It says the company is engaging with a potential investor who has expressed interest in a majority stake through purchase of the promoters' and the single largest shareholder's holdings, "thereby facilitating their complete exit", and has proposed a primary infusion to strengthen the balance sheet, subject to approvals. Whether the classification order affects that process is not stated in either filing.

The latest results available to us are for the quarter ended December 31, 2025: income of ₹25.82 Cr against expenditure of ₹25.05 Cr, profit before tax of ₹0.77 Cr. PBT was ₹2.31 Cr in the September quarter and ₹1.77 Cr in the June quarter. The company was profitable before tax in each reported FY26 quarter; thin, but not loss-making. Results for the March 2026 and June 2026 quarters are not in our records as of this writing, so the financial effect of the April process is not yet visible in reported numbers. Star Housing Finance does not accept public deposits.

The stock has fallen steadily since June, from ₹6.64 to ₹5.06, and is 69.8% below its 52-week high of ₹16.75. The order reached the exchange after the August 27 close (that day: −2.0% on 35,000 shares). The first session after disclosure, August 28, closed up 1.4% at ₹5.06 on 2.2 lakh shares, about twice the 20-day average. There was no sharp move on the news.