Arman Financial Services Limited , a prominent player in the financial services sector, has successfully allotted non-convertible debentures (NCDs) as part of its funding strategy. This move provides the company with additional capital to support its business operations and growth initiatives.

Key Points

• NCD Allotment: Arman Financial Services has allotted 75,000 listed, rated, senior, secured non-convertible debentures.
• Issue Size: The total value of the allotted NCDs is ₹75.00 crore, including a green shoe option of 25,000 debentures.
• Interest Payments: The debentures will carry quarterly interest payments starting March 2026.
• Maturity Date: The NCDs are set to mature on December 5, 2027.
• Credit Rating: The debentures have received an ACUITE A- Stable rating from Acuite Ratings Research Limited.
• Placement Type: The NCDs were issued on a private placement basis.

Implications for Arman Financial Services

Diversified Funding Sources

By issuing NCDs, Arman Financial Services is diversifying its funding sources, potentially reducing dependence on traditional borrowing methods.

Capital for Growth

The additional capital raised through NCDs could be utilized to fuel the company's growth strategies, including expansion of its loan portfolio or entering new markets.

Financial Flexibility

Successful NCD issuance may provide Arman Financial Services with greater financial flexibility to manage its operations and pursue strategic opportunities.

Recent Financial Performance

While specific financial details are not provided in the given information, it's worth noting that Arman Financial Services has been actively managing its portfolio across various segments:

• Microfinance: The company's microfinance subsidiary, Namra Finance, has shown signs of recovery with improved collection efficiency.
• MSME and LAP: Arman's non-MFI business, including MSME (Micro, Small, and Medium Enterprises) and LAP (Loan Against Property), has been performing in line with expectations.
• Asset Quality: The company has reported improvements in asset quality metrics, with a focus on strengthening portfolio quality and enhancing credit processes.

Looking Ahead

The successful allotment of NCDs aligns with Arman Financial Services' strategy to strengthen its financial position and support its growth trajectory. As the financial services sector continues to evolve, the company's proactive approach to capital management and business expansion is evident through this debt instrument.

Investors and stakeholders will likely be watching closely for further developments regarding the NCD issuance, including the impact on the company's financial performance and future growth prospects.

Note: The information provided is based on the latest available data and company announcements. Investors are advised to conduct their own research and consult financial advisors before making investment decisions.

Arman Financial Services Limited , a prominent player in the microfinance and MSME lending sector, has reported a significant turnaround in its financial performance for the second quarter (Q2). The company has swung back to profitability with a net profit of INR 8.00 crores, marking a substantial improvement from the INR 14.60 crores loss recorded in the previous quarter (Q1).

Key Financial Highlights

• Profit Recovery: The company posted a profit of INR 8.00 crores in Q2, compared to a loss of INR 14.60 crores in Q1.
• Asset Under Management (AUM): Consolidated AUM stood at INR 2,130.00 crores.
• Disbursements: Grew by 26% year-on-year to INR 475.00 crores in Q2.
• Collection Efficiency: Improved to 95.60% in September.
• Asset Quality: Gross Non-Performing Assets (GNPA) improved to 3.69%, with Net NPA at 0.53%.

Improving Asset Quality and Operational Metrics

The company's return to profitability has been driven by several factors, including:

1. Enhanced Collection Efficiency: The collection efficiency improved to 95.60%, indicating stronger borrower discipline and improved field-level monitoring.
2. Declining Impairment Costs: Impairment costs have shown a consistent downward trend for three consecutive quarters, decreasing from INR 89.00 crores in Q4 of the previous fiscal year to INR 38.00 crores in Q2.
3. Asset Quality Improvement: The GNPA improved to 3.69%, while the NNPA stood at a low 0.53%, reflecting the company's focus on portfolio quality.

Segment-wise Performance

Microfinance (Namra Finance)

• AUM: INR 1,507.00 crores
• Disbursements in Q2: INR 335.00 crores (25% YoY increase)
• GNPA: 3.77%

MSME, LAP, and Two-Wheeler (Standalone)

• AUM: Grew by 29% YoY to INR 623.00 crores
• Disbursements in Q2: INR 140.00 crores (34% YoY growth)
• GNPA: 3.86% for MSME, 4.99% for Two-Wheeler, and 0.16% for LAP

Strategic Initiatives and Outlook

Aalok Patel, Joint Managing Director of Arman Financial Services, highlighted the company's strategic focus:

• Calibrated Growth Approach: The company is prioritizing portfolio quality and risk discipline over headline growth.
• Operational Reforms: Implementation of structural changes, including the separation of credit underwriting from recovery functions, which is now operational across 50% of the branches.
• Product Diversification: Continued expansion in MSME, Two-Wheeler, and LAP segments, while maintaining a calibrated approach in the Microfinance business.
• Technology Integration: The company is exploring the integration of AI and machine learning in its operations, particularly in areas like evaluations, back-end processes, and IT tracking.

Future Outlook

While the company remains cautiously optimistic about the future, management expects the momentum to strengthen further in the second half. They anticipate continued stabilization in microfinance asset quality, sustained strength in collections, and further moderation in credit costs.

Arman Financial Services appears well-positioned to capitalize on improving rural sentiment and a supportive policy environment. The company's focus remains on building scale with quality, aiming to deliver durable, profitable, and sustainable growth while creating long-term value for stakeholders.

As the microfinance industry evolves, Arman Financial is also considering strategic shifts, including potential diversification beyond traditional group-based lending models, to adapt to changing market dynamics and customer needs.

Investor Call Highlights

In the Q2 earnings conference call, management provided additional insights:

• The company is exploring the implementation of Credit Guarantee Fund for Micro Units (CGFMU) coverage for its MSME portfolio, similar to the 67% coverage in its microfinance portfolio.
• Arman is expanding its geographical footprint, having opened new branches in Uttar Pradesh, which is expected to contribute to MSME growth.
• The management aims for a sustainable Return on Assets (ROA) of 3.50% to 4.00% in the long term.

With these strategic initiatives and improving financial metrics, Arman Financial Services appears to be on a path of recovery and growth, navigating through the challenges in the microfinance and MSME lending space.