Arman Financial Services Ltd

Arman Financial Services Ltd Concall Q3-FY23:

1. Credit demand is unaffected and rebounded even after the rate hikes by RBI; strong disbursement growth in Q3; improvement in rural and semi rural demand.

2. Started offering individual business loan; as on Dec 22 it contributes 2.3% of AUM; idea is to retain the MFI customer

3. Achieved milestone in Jan where company has received highest ever credit rating in MFI segment; it will improve the cost of borrowing for the company

4. Entire MFI process is now completely paperless; Arman is first company to do so in MFI segment

5. AUM growth of 14.4% QoQ; disbursement increased 72% QoQ basis; growth supported by high demand in MFI segment; registered growth of 11% in GTI due to improvement in yields; recorded highest ever quarterly profit

6. Have presence in 8 states with 321 branches; company forayed into Bihar & Haryana

7. Company believe that worst is behind us and they will see robust growth in next couple of quarters

8. Finance cost increased in current qtr due to CCD and OCRPS; also the interest rates has been increased as RBI raises repo rate. Approx 5cr is due to OCRPS; in Q4 also there will be slightly higher finance cost

9. Direct assignment transaction is of Rs. 100cr in Q3; the gain increase is due to lower retention ratio; and weighted ratio of tenure also impacts the assignment income

10. Increase in NPA of MFI is due to West Maharashtra; it is a small blip; but it is under control on an overall basis. Also increased due to RBI new guidelines, due to its new guidelines the increase is of 20bps.

11. Our target is to grow 35-40% in AUM over a long period of time. Will continue the same or near that in next year as well.

12. Avg cost of borrowing is around 12%; might expect increase of 20-25 bps due to repo rate increase by RBI and also after improvement in credit rating company may continue in the range of 12% as well but it is hard to tell currently

13. Approx 5cr increase in finance cost is due to qtrly impact of 3cr of CCD & 2cr due to OCRPS; this 5cr qtrly impact will continue till the redemption/conversion period i.e, till Mar 24

14. Our target is to achieve 2500cr AUM in next few qtrs and expecting 14 to 15% NIM going forward;