Arman Financial Services (ARMANFIN) Q2 24/25 earnings summary

Executive summary

• The company adopted a cautious growth strategy, prioritizing asset quality and collections over expansion due to rising impairment costs and overleveraging in rural unsecured lending.

• AUM reached INR 2,465 crore in H1FY25, up 7% year-over-year, with a diversified retail lending portfolio focused on rural and semi-urban markets.

• Disbursements declined 22.1% year-over-year to INR 832 crore, reflecting sectoral headwinds and cautious underwriting.

• Profit after tax for H1FY25 fell 42% year-over-year to INR 47 crore, impacted by higher provisions and write-offs.

• Collection efficiency remained steady at 95.8% for H1FY25, despite industry-wide challenges in microfinance.

Financial highlights

• H1 FY2025 disbursements were INR 832 crore, down from INR 1,068 crore in H1 FY2024.

• Assets under management as of 30th September 2024 stood at INR 2,465 crore.

• Pre-provisioning operating profit for H1 FY2025 was INR 163 crore, up from INR 133 crore year-over-year.

• Gross total income for H1FY25 rose 18% year-over-year to INR 365.9 crore; net total income increased 32% to INR 235.3 crore.

• Q2 FY2025 profit after tax was INR 15 crore (up 63% YoY); H1 FY2025 PAT was INR 47 crore (down 42% YoY) due to higher impairment costs.

Outlook and guidance

• Management expects the current credit cycle to persist, with improvement likely by Q4 FY2025.

• Targeting AUM of INR 5,000+ crore in the coming quarters, leveraging recent capital raises and diversified lending segments.

• Plans to increase MSME portfolio share to 35% and reduce MFI share to ~60% over time.

• Focus remains on risk mitigation, operational efficiency, and maintaining strong liquidity.

• The company is confident in its ability to manage headwinds and drive sustainable growth.