Arman Financial Services Ltd. Results

H1FY25 & Q2FY25 Result Announced for Arman Financial Services Ltd.

Finance company Arman Financial Services announced H1FY25 & Q2FY25 results Financial Highlights: Company’s consolidated Asset Under Management (AUM) stood at ~Rs 2,465 crore registering a growth of 7% YoY. Consolidated disbursements for H1FY25 stood at ~Rs 832 crore, a de-growth of 22% year-onyear, led by industry challenges. Disbursements for Q2FY25 stood at ~Rs 373 crore, registering a de-growth of 31% YoY. During the period ended 30th September 2024, the company has deliberately prioritized collections and portfolio quality over rapid expansion. Net total income for H1FY25 amounted to ~Rs 235 crore, registering a 32% year-on-year growth, while Q2FY25 net total income grew by 25% to ~Rs 116 crore. Pre-Provision Operating Profit (PPoP) for H1FY25 registered a 23% year-on-year growth to ~Rs 163 crore. PPoP for Q2FY25 grew by 12% year-on-year to ~Rs 78 crore. Shareholders' Equity as of September 30, 2024, stood at ~Rs 865 crore, calculated in accordance with IND-AS standards. For H1FY25, Return on Average AUM stood at 3.65%; while Return on Equity stood at 11.10%. Credit Rating upgraded to ‘A | Stable’ by Acuite Ratings for Namra Finance Limited Borrowing & Liquidity Profile: Total borrowings stood at ~Rs 2,019.5 crore (Including off balance sheet direct assignment (DA) liability). Of the total borrowings, 35.9% is through banks, 12.3% is through NBFCs, 18.7% is through debt and NCDs, 0.8% is through PTC, and 27.9% is through direct assignments (off-balance-sheet liabilities), of which 23.2% is through banks and 4.7% is through financial institutions. The rest is borrowed from DFIs (i.e., NABARD & SIDBI) and others. As on 30 th September 2024, the Company has a healthy liquidity position with ~Rs 281.2 crore in cash/bank balance, liquid investments, and undrawn CC limits. Additionally, the Company has ~Rs 157.5 crore undrawn sanctions from existing lenders. Asset Quality: GNPA stood at 3.7%; NNPA stood at 0.6%. Cumulative Provisions stood at ~Rs 114.3 crore as on 30 th September 2024 (covering 4.64% of the consolidated AUM, 5.88% on book) Jayendra Patel, Vice Chairman & Managing Director, Arman Financial Services, said: The microfinance industry is currently facing a significant rise in impairment costs due to overleveraging in the rural retail unsecured lending space, involving both MFIs and non-MFIs. This overleveraging has strained borrowers' repayment capacities, leading to increased delinquencies and higher default rates. High attrition rates among ground-level staff across the industry have also impacted collection efficiency, as staff turnover disrupts the continuity and effectiveness of borrower interactions, which are critical for ensuring timely repayments in microfinance. We have been anticipating an increase in credit costs due to over-leveraging since early last year. However, the extent of the challenges has been greater than expected, and the evolving macroeconomic and regulatory environment has only added to these difficulties. Given these challenges, we have adopted a cautious growth strategy, prioritizing collections and portfolio health over aggressive expansion. This approach is essential for safeguarding the quality of our assets and maintaining a stable financial position. For H1 FY25, total disbursements stood at Rs. 832 crore, compared to Rs. 1,068 crore in H1 FY24, indicating a slowdown in lending to focus on asset quality. Our Assets Under Management (AUM) reached Rs. 2,465 crore. The Gross Non-Performing Assets (GNPA) were at 3.74%, with Net Non-Performing Assets (NNPA) at 0.64%, which remain within manageable levels given the broader industry context. The Pre-Provision Operating Profit (PPoP) for the period stood at Rs. 163 crore, compared to Rs. 133 crore in H1 FY24. This growth in PPoP reflects our commitment to maintaining operational efficiency and cost discipline, even as we navigate a difficult macroeconomic environment. Impairment expenses amounted to Rs. 99 crore for H1 FY25, reflecting the impact of the current challenges on our financials. We understand that these impairment costs are a natural consequence of the changed risk environment, and we are taking all necessary steps to mitigate these risks. Both the industry and Arman are taking proactive steps to mitigate these issues and navigate through this difficult phase. The MFIN guardrails have been implemented to help manage overleveraging, and we are in the process of rolling out independent credit teams across all branches by the end of this fiscal year. These independent credit teams will enhance our credit assessment processes, ensuring greater oversight and quality control at the branch level. This initiative is aimed at improving our risk management capabilities and ensuring that we are better positioned to assess and respond to borrower needs effectively. Our focus remains on maintaining quality over quantity while navigating the uncertainties in the rural environment and awaiting the end of the down-cycle. We believe that by prioritizing quality, we will be better positioned to emerge stronger once the industry environment stabilizes. Finally, we acknowledge the challenges faced in H1 FY25, which have led to weaker-than-expected performance. However, we want to emphasize that these challenges are not unique to Arman but are being experienced across the industry. The rural sector, in particular, has faced significant pressures due to multiple factors, including erratic weather, elections, and general economic uncertainty, all of which have also impacted borrowers' ability to repay on time. Despite the near-term challenges, we remain confident in our long-term strategies, which we believe will position us for future growth. Arman, with its 32-year history, is no stranger to downcycles. We have successfully navigated similar situations in the past, and each time, we have emerged stronger and more resilient. Our experience in handling such challenges gives us the confidence to continue on our long-term path. We are steadfast, wellcapitalized, and poised to navigate these challenges effectively. With prudent management practices, a dedicated team, and a clear focus on risk mitigation, we are well-equipped to overcome the current headwinds and drive longterm growth for our stakeholders."

Q4FY24 Quarterly & FY24 Annual Result Announced for Arman Financial Services Ltd.

Finance company Arman Financial Services announced Q4FY24 & FY24 results: Growth momentum has continued driven by Micro-Finance and MSME business segments. Consolidated Asset Under Management (AUM) stood at ~Rs 2,639 crore which grew by 36% on a YoY basis. Disbursements for the FY24 stood at ~Rs 2,297 crore, registering a growth of 30% YoY compared to ~Rs 1,767 crore. Disbursements for Q4FY24 stood at ~Rs 669 crore, registering a growth of 6% YoY. Net total income for FY24 amounted to ~Rs 396 crore, registering a 57% YoY growth, while Q4FY24 net total income grew by 40% to ~Rs 120 crore. Pre-Provision Operating Profit (PPoP) for FY24 registered a 73% YoY growth to ~Rs 293 crore. PPoP for Q4FY24 grew by 40% YoY to ~Rs 88 crore Profit After Tax for FY24 stood at ~Rs 174 crore, reflecting a YoY growth of 85%. Shareholders' Equity as of Mar 31, 2024, stood at ~Rs 813 crore, calculated in accordance with IND-AS standards. For FY24, Return on Average AUM stood at 7.58%; while Return on Equity stood at 27.76% (ROE calculation includes QIP proceeds of ~Rs 230 crores raised in the last week of December 2023, which was yet to be fully deployed) Borrowing & Liquidity Profile: Total borrowings stood at ~Rs 2,261 crore (Including off balance sheet direct assignment (DA) liability) Of the total borrowings, 41.1% is through Banks, 13.8% is through NBFCs, 13.5% is through debt and NCDs, 3.0% is through PTC, 23.5% is through direct assignments (off balance-sheet liabilities) of which (18.78% Direct Assignment is through Banks and 4.75 % Direct Assignments is through Financial Institutions) and the rest is borrowed from DFIs (i.e., NABARD & SIDBI) and others. The company is successfully diversifying its funding sources. It has raised ~Rs 89 crore through listed Non-Convertible Debentures (NCDs) in FY24. As on 31st March 2024, the Company has a healthy liquidity position with ~Rs 179 crore in cash/bank balance, liquid investments, and undrawn CC limits. Additionally, the Company has ~Rs 320 crore undrawn sanctions from existing lenders. Collection Efficiency: Collection efficiency FY24 stood at 97.7%. Segment wise collection efficiency for FY 2024 stood at: Microfinance segment – 97.6% MSME segment – 98.4% 2W segment – 96.4% Asset Quality: GNPA stood at 2.88%; NNPA stood at 0.31% Cumulative Provisions stood at ~Rs 90.16 crore as on 31st March 2024 (covering 3.42% of the consolidated AUM, 4.20% on book) Commenting on the Company’s performance, Jayendra Patel, Vice Chairman & Managing Director, Arman Financial Services said, “After the initial two years of COVID-induced stress, the economy has made a significant recovery during the last two financial years. This rebound has positively impacted various sectors, particularly the microfinance and the MSME sectors. As a result, the industry has recorded steady and sharp growth over the last 2 years, with all parameters showing excellent results. Key indicators such as disbursements, AUM Growth, Opex, cost of borrowing, and asset quality have all shown improvements or have remained stable, reflecting the resilience and adaptability of the industry. Throughout the year, the sector maintained its momentum without any major negative news. This stability was bolstered by effective risk management practices and efficient last-mile delivery of credit to the customers. The consistent performance and positive developments have set a solid foundation for continued growth in the sector in the coming years. As a result, the credit ratings were upgraded to A- (Outlook Stable) by CARE Ratings in March’24 for both Arman & Namra. Now, turning to Arman’s FY24 consolidated performance, the company has implemented stringent credit filters, resulting in a high rejection rate but ensuring that we maintain a high-quality loan book. Despite the rigorous screening process, we reported 30% growth in disbursement to ~Rs 2,297 crore, driven by robust and consistent demand during the review period. Our Micro-Finance and MSME AUM reported a 35% and 44% YoY growth respectively. This growth was also fuelled by the favourable economic environment and the revised regulatory framework issued by the Reserve Bank of India. Our consolidated Profit After Tax as on Mar-24 stood at ~Rs 174 crore, registering a growth of 85% YoY. Furthermore, Arman has always embraced a progressive approach, which has been instrumental in sustaining growth while maintaining asset quality and collection efficiency. Our gross non-performing assets (NPA) stood at 2.88%, and net non-performing assets were at a low 0.31% for the period. Regarding branch expansion, we have opened 67 new branches over the last twelve months, bringing our total branch count to 402. This expansion has been complemented by our successful penetration into newer states and geographies where the performance has been promising. Of the new branches opened in FY24. In addition, we have also initiated the Rural Micro-LAP product pilot in Q4. While it is too early to comment, we are bullish on this product gaining significant traction in the long run. Over the last year, the company initiated several new technological initiatives, such as Aadhaar based Biometric eSign, launch of new HR software, live staff tracking, streamlined paperless loan origination, AI Bot Calling, Monitoring App for Audit/Supervisors, launched Business Intelligence Unit using Advance Analytics, and many other initiatives. During the year, the company also concluded its a fund raise by way of a QIP of ~Rs 230 crore, which makes us adequately capitalized for future growth. We are confident that we are on the right track to achieve our strategic goal of building over ~Rs 5,000 crore of Assets Under Management while maintaining a balanced debt-to-equity ratio. This solid financial foundation and our strategic initiatives position us well for continued growth and success.”

Q1FY24 Quarterly Result Announced for Arman Financial Services Ltd.

Non-banking Financial company Arman Financial Services announced Q1FY24 results: Company recorded the highest ever AUM of Rs 2,143 crore registering a healthy growth of 54.5% YoY and 10.3% QoQ Company experienced strong demand across all business segments, attributed to a robust credit need in rural India, combined with our technology-driven processes and rigorous underwriting practices. Consolidated disbursements for the quarter stood at Rs 537 crore as compared to Rs 380 crore for Q1FY23 increasing by 41.6% YoY Net Total Income for the Q1FY24 stood at Rs 86 crore registering a strong growth of 70.0% YoY PPoP grew by a healthy 98.8% over Q1FY23 to Rs 63 crore Profit After Tax stood at Rs 40 crore registering a robust growth of 154.2% YoY Shareholders' Equity stood at Rs 406 crore as on June 30, 2023 Total borrowings stood at Rs 2,161 crore. (Including the debt component of OCRPS and CCDs as per IND AS Rs 48 crore) Of the total borrowings, 33.2% is through Banks, 19.3% is through NBFCs, 13.4% is through debt and NCDs, 11.3% is through PTC, 19.2% is through direct assignments (off-balance-sheet liabilities) and the rest is borrowed from DFIs (i.e., NABARD & SIDBI) and others. The company has successfully been diversifying its funding sources. It raised Rs 45 crore through Market linked debentures (MLDs) last year and raised another Rs 49 crore through listed nonconvertible debentures (NCDs) in Q1 FY24. As on June 30, 2023, the Company has a healthy liquidity position with Rs 294 crore in cash/bank balance, liquid investments, and undrawn CC limits. Collection efficiency stood at 98.2% for Q1FY24 Segment-wise collection efficiency in June 2023 stood at: Microfinance segment – 98.3% MSME segment – 98.4% 2W segment – 96.6% GNPA stood at 2.49%; NNPA stood at 0.14% Cumulative Provisions stood at Rs 72 crore as on June 30, 2023 (covering 4.1% on-book POS), of this, provisions for Arman standalone stood at Rs 15.5 crore, and for Namra stood at Rs 56.5 crore The additional management overlay, over the regular ECL provisions is included in the Rs 72 crore, of which Rs 7.7 crore is for Arman and Rs 19.9 crore is for Namra.