Arman Financial Services Ltd

Arman Finance Concall Q4-FY23:

1. New guidelines have played an important role in the growth of the MFI sector, the AUM grew by 58% in Q4 to 1943cr. Company demonstrated robust growth in all segments, disbursement grew by 73% to 1767cr which is supported from Bihar. Bihar is doing exceptionally well in our new geographies. During the year 44 new branches opened, and now the company has a presence in 8 states.

2. In the long run, the company’s target is to reduce operating expenses with the help of technology, automated underwriting and advanced data analytics. Implemented a paperless journey from onboarding to collection with the help of tech.

3. Company recorded the highest ever profits due to improvement in NIM, optimising operating costs and improvement in credit costs.

4. We will be opening 50 to 70 branches during FY24. We typically break even at 600 to 800 customers which usually happens in 4 to 6 months.

5. Direct assignment income is included in our yields as we have to recognise profits as per Ind AS, as we grow we will be doing DA transactions regularly, it is mostly done in Q4 so major impact will be seen in Q3 & Q4 and lower assignment income in H1.

6. The general yield on MFI is 24 to 27%; there will be some marginal increase in yields during the year as currently there is no plan to increase the interest rate yields.

7. Currently all loans disbursed and collected are cashless.

8. Maharashtra has been the worst impacted states during covid, even in today’s scenario the stress is highest in Maharashtra but our asset quality has been improving quarter on quarter. We are currently not seeing pre covid levels of credit cost as it is not going to come back, days of 1% loss assets are behind us, now things have changed and it will be 2 to 2.5% in the long run. Current credit cost is around 3%.

9. On loan growth our CAGR is 35 to 40% during the last one decade, so we are expecting it to continue at the same pace in near future. Not giving guidance for the year

10. Over a period of time Bihar’s share in total AUM will be improving; it is currently at 6 to 7% of total AUM; we are opening branches in Bihar as well. This year it will be at 12 to 13% AUM share from Bihar. Haryana is a slow growing state.

11. Most of our tech infra is on SaaS model, so there will not be much capex into it. There will be some marginal increase in the ticket size of around 7 to 10%.

12. We have sufficient capital to reach to 2500cr AUM without any assignment and fund raise. At around 2500cr AUM we will raise equity.