Arman Financial Services reported a consolidated net profit of ₹45 crore for the quarter ended June 30, 2026, marking a sharp turnaround from the ₹15 crore loss posted in Q1 FY26. The Mumbai-headquartered NBFC also saw its gross total income rise 34% year-on-year to ₹202 crore, supported by robust growth in its asset under management (AUM).

Consolidated AUM reached a record high of ₹2,925 crore as of June 2026, up 36% from the previous year. Disbursements during the quarter stood at ₹686 crore, representing the highest first-quarter disbursement in the company’s history. This growth was fueled by both its microfinance subsidiary, Namra Finance, and its standalone MSME lending book.

Financial Performance

The company’s profitability improved alongside better collection trends and lower fresh delinquencies. Pre-provisioning operating profit (PPOP) increased to ₹77 crore from ₹59 crore in Q4 FY26. The cost-to-income ratio improved meaningfully to 44.3% from 51.7% in the previous quarter, reflecting early gains from operational restructuring.

Provisions and write-offs for the quarter were ₹20 crore. Management noted that the current quarter’s provisions are not directly comparable to Q4 FY26 due to over-provisioning in the prior period. The consolidated net interest margin (NIM) remained healthy at 17.4%, while annualized return on average AUM was 6.4%.

What the Numbers Show

The improvement in net profit is primarily driven by operational efficiency rather than just lower provisioning. While provisions accounted for ₹20 crore of expenses, the PPOP grew by ₹18 crore sequentially. Furthermore, the cost-to-income ratio dropped by 740 basis points to 44.3%, indicating that revenue growth is outpacing operating expense growth. This divergence suggests that the recent investments in independent credit and collection teams are beginning to yield scale benefits, validating management’s strategy to prioritize asset quality over near-term volume.

Segment-wise Performance

Namra Finance, the microfinance subsidiary, contributed significantly to the top-line growth. Its AUM grew 39% year-on-year to ₹2,167 crore, with disbursements reaching ₹530 crore. Namra’s gross total income rose 35% YoY to ₹138 crore, and it reported a PAT of ₹30 crore, compared to a loss of ₹28 crore in Q1 FY26.

The standalone Arman business saw AUM grow 26% YoY to ₹758 crore, driven largely by the MSME segment. Standalone gross total income increased 30% YoY to ₹66 crore, with PAT rising 17% YoY to ₹15 crore.

Asset Quality and Outlook

Asset quality metrics continued to improve for the fourth consecutive quarter. Consolidated gross NPA (GNPA) stood at 2.76%, down from previous peaks, while net NPA (NNPA) improved to 0.84%. Early-stage delinquencies remained stable, with approximately 99.5% of accounts showing zero days past due (DPD).

Management emphasized that despite the record AUM, risk posture remains unchanged with high rejection rates maintained. Approximately 94% of the eligible microfinance portfolio is covered under the CGFMU scheme, providing an additional layer of protection against tail-end events. Looking ahead, the company plans to maintain disciplined underwriting and focus on improving operating efficiency to target a cost-to-income ratio of 7% by end-FY27.

Arman Financial Services swung to a consolidated net profit of ₹452 million in Q1FY27, reversing a net loss of ₹146 million in the corresponding period of the previous fiscal year. Revenue for the quarter rose to ₹201.8 crore from ₹151.0 crore, driven by a 34% year-on-year increase in income from operations. The turnaround was underpinned by a significant reduction in provisions and write-offs, which fell to ₹19.5 crore from ₹66.5 crore in Q1FY26, alongside strong growth in pre-provision operating profit (PPOP).

Financial highlights

The table below captures the key financial metrics for the quarter on a year-on-year basis.

Asset quality and AUM growth

The company’s consolidated AUM expanded to ₹2,925 crore as on June 30, 2026, reflecting steady portfolio growth across its microfinance, MSME, and two-wheeler loan verticals. Asset quality metrics showed improvement, with gross non-performing assets (GNPA) standing at 2.59% and net NPAs at 0.89%. Collection efficiency also strengthened, reaching 96.8% in June 2026, up from previous months, indicating stabilizing borrower cash flows and disciplined field-level execution.

The portfolio composition remained diversified:

• Microfinance loans accounted for the largest share with ₹2,167 crore in AUM.
• MSME loans contributed ₹573 crore.
• Two-wheeler and Loan Against Property (LAP) loans held ₹93 crore and ₹90 crore respectively.

Operational efficiency

Pre-provision operating profit grew by 39% to ₹76.7 crore, outpacing the 34% revenue growth. This divergence highlights improved cost management and operating leverage. Employee benefits expenses rose by 27.5% to ₹42.6 crore, while other expenses increased by 85.4% to ₹17.8 crore, though the overall cost-to-income dynamics favored profitability due to the sharp decline in credit costs.

What the numbers show

The shift from loss to profit is notable alongside the revenue expansion. The net result swung by ₹59.8 crore, moving from a ₹14.6 crore loss to a ₹45.2 crore profit, while revenue grew by ₹50.8 crore. The magnitude of the profit turnaround relative to the revenue increase points to factors beyond topline growth, specifically the normalization of provision charges. In Q1FY26, provisions consumed ₹66.5 crore, heavily impacting the bottom line, whereas in Q1FY27, provisions were contained at ₹19.5 crore. This suggests that the current profitability is driven not just by volume growth but by stabilized asset quality and reduced credit risk provisioning.

Source: https://lodr-files.dhan.co/lodr-inputs/Company/INE109C01017/96b289b6-a555-4e13-8731-c4af3c1703a2.pdf