Arman Financial Services (ARMANFIN) Q2 25/26 earnings summary

Executive summary

• Early signs of recovery in the microfinance sector after a challenging period of credit stress and regulatory reforms, with a focus on underserved rural and semi-urban retail markets across 11 states.

• Asset quality has stabilized, with improved collection efficiencies and moderation in bad loan ratios, supported by structural reforms and disciplined execution.

• H1FY26 saw a 13.6% year-over-year decline in AUM to INR 2,130 crore, with disbursements at INR 865 crore and a consolidated equity base of INR 872 crore.

• The company maintains robust capital adequacy (CRAR: 38.73% standalone, 57.78% Namra) and a diversified product portfolio including microfinance, MSME, two-wheeler, and LAP loans.

• Unaudited standalone and consolidated financial results for the quarter and half year ended September 30, 2025, were reviewed and approved by the Board and auditors, with no material misstatements identified.

Financial highlights

• Consolidated AUM at INR 21.3 billion as of September 2025, lower year-on-year but showing stabilization; H1FY26 consolidated income from operations was INR 310.2 crore, down 15% YoY.

• Impairment costs declined for three consecutive quarters, from INR 890 million in Q4 FY2025 to INR 380 million in Q2 FY2026.

• H1 FY2026 disbursements at INR 8.65 billion, flat year-on-year; Q2 FY2026 disbursements up 26% YoY and 21% sequentially.

• H1 FY2026 reported a loss of INR 6.6 crore; Q2 FY2026 profit of INR 8 crore versus INR 14.6 crore loss in Q1 FY2026; consolidated net profit for the half year was INR (659.00) lakhs.

• Collection efficiency improved to 95.6% in September; GNPA at 3.69%, NNPA at 0.53% as of September 30.

Outlook and guidance

• Expect continued stabilization in microfinance asset quality and further moderation in credit costs, with plans to grow AUM to over INR 5,000 crore by leveraging capital raised.

• Anticipate strengthening momentum in H2 FY2026, with improvements becoming more visible and broad-based.

• Strategic focus on increasing MSME portfolio share to 35% and reducing MFI share to ~60% over time.

• The company continues to focus on its core financing business in India, with no separate reportable segments.