ARMANFIN - Arman Financial

📊 NSE: ARMANFIN 🏢 Finance & Investments 📅 Last Updated: 12/13/2025 18:30

💰 Financial Performance

Revenue Growth by Segment

Consolidated AUM stood at INR 2,130 Cr in H1 FY26, a decline of 13.6% YoY. The Microfinance (Namra) segment AUM was INR 1,507 Cr, while the Non-MFI segment (MSME, Two-Wheeler, LAP) grew 29% YoY to INR 623 Cr. H1 FY26 disbursements grew 3.9% YoY to INR 865 Cr, driven by a 26% YoY increase in Non-MFI disbursements to INR 260 Cr.

Geographic Revenue Split

Operations are spread across 149 districts in states including Gujarat, Madhya Pradesh, Maharashtra, Uttar Pradesh, Uttarakhand, Rajasthan, Telangana, Haryana, and Bihar through a network of 402 branches. Specific % split per region is not disclosed.

Profitability Margins

Profitability has weakened with PAT declining from INR 173.57 Cr in FY24 to INR 52.07 Cr in FY25. H1 FY26 reported a net loss of INR 7 Cr compared to a profit of INR 47 Cr in H1 FY25. However, Net Interest Margins (NIM) remained healthy, improving from 15.11% in FY25 to 15.49% in Q1 FY26.

EBITDA Margin

Pre-provisioning operating profit for the MFI subsidiary (Namra) was INR 36 Cr in Q2 FY26, up from INR 32 Cr in Q1 FY26. Core profitability is impacted by elevated credit costs which rose to INR 264.10 Cr in FY25 and INR 66.52 Cr in Q1 FY26 due to MFI sector stress.

Capital Expenditure

Not disclosed in available documents as the company is an NBFC; however, shareholders' funds stood at INR 872 Cr as of September 2025.

Credit Rating & Borrowing

Maintains an 'ACUITE A-' rating with a Stable outlook for NCD facilities. The company utilizes a diverse borrowing mix including Term Loans (TL), NCDs, and Direct Assignment (DA). Top lender concentration includes one partner providing 13.12% of total borrowings.

⚙️ Operational Drivers

Raw Materials

Capital/Debt Funds (100% of operational input cost for lending).

Import Sources

Domestic financial markets and banks across India.

Key Suppliers

Lenders include various banks and financial institutions; specific names include 'Lender 1' (13.12% of borrowings) and others providing TL and DA facilities.

Capacity Expansion

Current network of 402 branches across 149 districts. Expansion is focused on increasing the secured Loan Against Property (LAP) and MSME portfolios to diversify away from unsecured MFI lending.

Raw Material Costs

Cost of funds is managed through a borrowing mix of TL, NCDs, and DA. Average tenure of active borrowings is 15-16 months as of Q2 FY26.

Manufacturing Efficiency

Collection efficiency in the 'zero bucket' (on-time) improved to 99% in September 2025. The portfolio created after September 2024 shows a 99.4% zero DPD repayment rate.

Logistics & Distribution

Distribution is handled via 402 physical branches; operational efficiency is tracked via Cost-to-Income ratio, which was 50.1% for the MFI segment in Q2 FY26.

📈 Strategic Growth

Expected Growth Rate

33%

Growth Strategy

Achieving growth through a 'calibrated approach' in Microfinance while aggressively expanding the Non-MFI segments (MSME, Two-Wheeler, and LAP). The strategy involves a pivot toward a higher coverage of the secured book to enhance risk-adjusted growth and leveraging a 33% historical AUM CAGR (FY16-25).

Products & Services

Microfinance loans (Joint Liability Group model), MSME loans, Two-Wheeler loans, and Loan Against Property (LAP).

Brand Portfolio

Arman Financial Services, Namra Finance (wholly-owned subsidiary).

New Products/Services

Strategic pivot toward Loan Against Property (LAP) to increase the secured portion of the total book.

Market Expansion

Focusing on under-served rural and semi-urban retail markets across existing 10 states.

Market Share & Ranking

Not disclosed.

Strategic Alliances

Partnerships with multiple lending partners for Direct Assignment (DA) and Term Loans.

🌍 External Factors

Industry Trends

The MFI industry is currently undergoing a credit cycle stress phase with rising delinquencies. Arman is positioning for a recovery by focusing on 'quality over scale' and diversifying into secured retail lending segments.

Competitive Landscape

Competes with other NBFC-MFIs, Small Finance Banks, and local moneylenders in rural segments.

Competitive Moat

Durable advantage through a 30-year track record (since 1992) and deep rural distribution network. The moat is sustained by experienced management (100+ years combined experience) and a high-yield niche focus.

Macro Economic Sensitivity

Highly sensitive to rural economic sentiment and agricultural cycles which affect the repayment capacity of MFI and MSME borrowers.

Consumer Behavior

Shift toward seeking larger, secured loans (LAP/MSME) as rural entrepreneurs scale their businesses.

Geopolitical Risks

Low direct impact; primarily affected by domestic regulatory changes and Indian interest rate environment.

⚖️ Regulatory & Governance

Industry Regulations

Regulated by RBI as an NBFC-MFI. Must maintain CAR above 15%; currently maintains 38.73% (Standalone) and 57.78% (Namra), well above requirements. Complies with CGFMU guarantee scheme norms.

Environmental Compliance

Not disclosed.

Taxation Policy Impact

Standard corporate tax rates apply; H1 FY26 saw a tax credit due to losses.

Legal Contingencies

A routine internal audit in January 2025 revealed a minor discrepancy of INR 11.10 lakhs. No major pending High Court or Supreme Court litigation values disclosed.

⚠️ Risk Analysis

Key Uncertainties

Asset quality in the MFI segment remains the primary uncertainty; credit costs rose to INR 264.10 Cr in FY25, significantly impacting the bottom line by 70% YoY.