Arman Financial Services Limited reports solid Q1 FY25 results despite economic hurdles

Arman Financial Services Limited, a prominent non-banking financial company (NBFC) based in Gujarat, has disclosed its unaudited financial results for the first quarter ending 30th June 2024. The report, which follows Ind-AS guidelines, reveals a mixed performance amid economic headwinds and operational challenges.

Consolidated Business Performance

For the quarter, Arman Financial Services Limited reported a notable 21% year-on-year increase in its Assets Under Management (AUM), reaching approximately INR 2,594 crore. This growth underscores the company’s resilience despite a challenging macroeconomic environment. However, the firm experienced a 2% decline in AUM compared to the previous quarter, highlighting some operational difficulties.

The company’s gross total income for Q1 FY25 was INR 184 crore, marking a 23% increase from the same period last year. This growth reflects the company’s ability to enhance its income streams despite a moderation in disbursement activities, which amounted to INR 459 crore for the quarter. The pre-provisioning operating profit (PPoP) stood at INR 85 crore, showing a significant 34% year-on-year rise, while the profit after tax (PAT) decreased by 22% to INR 31 crore.

Financial Stability and Liquidity

Arman Financial Services Limited maintained a robust liquidity position with INR 248 crore in cash, bank balances, liquid investments, and undrawn credit lines. The company’s total borrowings amounted to INR 2,217 crore, with 40.2% sourced from banks and 24% from direct assignments. The firm also enjoys a strong shareholder’s equity of INR 847 crore, and its credit rating has been upgraded to ‘A | Stable’ by Acuite Ratings for its subsidiary, Namra Finance Limited.

Collection Efficiency and Asset Quality

The collection efficiency for Q1 FY25 was reported at 95.8%, with the microfinance segment achieving a 95.1% efficiency, and the MSME and two-wheeler segments performing slightly better. The gross non-performing assets (GNPA) were recorded at 2.79%, while net non-performing assets (NNPA) stood at a low 0.18%. Despite these figures, the company has made significant provisions, covering 3.9% of its consolidated AUM.

Expert Opinion

Jayendra Patel, Vice Chairman & Managing Director of Arman Financial Services Limited, commented on the company’s performance amidst various challenges. Patel highlighted the adverse impacts of economic uncertainties, central election disruptions, and extreme weather conditions. He acknowledged the issue of overleveraging among microfinance clients, which has led to lower repayment rates. However, Patel expressed confidence in the company’s cautious growth strategy, focusing on portfolio quality rather than aggressive expansion. He assured that the company is implementing stringent corrective measures to improve asset quality and is committed to enhancing collections and credit assessments.

Patel also noted that the company’s PAT decline to INR 31 crore from INR 40 crore in the previous year was attributed to higher provisioning and a focus on risk management. He expressed optimism about the company’s capability to navigate current challenges and achieve better performance in future quarters.

Arman Financial Services Limited is navigating a complex economic landscape with a balanced approach to growth and risk management. The company’s substantial AUM growth and improved income figures reflect its operational strength, while the cautious approach to expansion and proactive measures to address asset quality issues position it well for future success. The company remains optimistic about its ability to leverage its strong capital base and resilient strategy to overcome current challenges and drive sustained growth.