Arman Financial Services Ltd

(Ankit Gupta) #21

Arman released the press release for Q4FY14 -
The growth in the microfinance segment continues with 45.71% increase in the disbursements for microfinance segment during Q4FY15 on a y-o-y basis. The company is planning to open 15 - 20 branches in Madhya Pradesh in coming year to scale up the business. The company has also expanded the two wheeler business which is facing competition in the Ahmedabad market by entering Madhya Pradesh where it already has presence through micro-finance. The dividend has also been increased to Rs.1.20 per share from Rs.1.0 per share.

(Ankit Gupta) #22

A very good presentation by SKS Microfinance explaining the MFI sector in thorough detail:

(Ankit Gupta) #23

Arman came up with decent set of numbers for Q1FY16 with consolidated interest income increasing by 32.63% and profit after tax increasing by 19.30%. Prima Facie looks like the MFI segment is again driving the growth. The detailed press release by the company would give us more details about loan book break up, growth, progress of expansion in Madhya Pradesh, NPAs etc. Interestingly, the company has scheduled a conference call tomorrow the details of which are attached - Its pretty good that they put up the login details on BSE.

(Ankit Gupta) #24

The detailed press release of the company for Q1FY16 financials -

The growth in the MFI business continues with disbursement increasing by 82.35% y-o-y and AUM growing by 64.46% on a y-o-y basis as on June 30, 2015. Interest income increased by 61.76% in Q1FY16 on a y-o-y basis. The company is also gradually moving towards 2 years loan. The Gross and Net NPA in the segment were 0 as on June 30, 2015 :smile:.

The two wheeler business grew by 13.74% on a y-o-y basis. The gross and net NPA have increased moderately during the quarter.

Overall the business remains on track with healthy growth in MFI segment. Expansion in the Madhya Pradesh seems to be on track which will lead to reduced geographic concentration of loan book. The increase in sales of 2 wheelers and reduction in interest rates in the near to medium term might provide an additional kicker to the profitability.

(Hemant V Bhatia) #25

Jayendra Patel-MD & Aalok Patel –ED addr the call:Highlights by Capital Mkt:
Total consolidated AUM of the company has surged 40% to Rs 127.70 crore at end June 2015 over Rs 91.39 crore at end June 2014. A large part of this growth has been driven by Microfinance business AUMs rising 64% to Rs 77.05 crore. The two-wheelers AUMs increased 14% to Rs 50.65 crore at end June 2015.As on date, while the entire loan portfolio of Namra Finance (subsidiary) is microfinance, the loan portfolio of Arman Financial Services is largely Asset Loans (2 & 3 Wheeler loans).Overall revenues jumped 33% to Rs 8.87 crore in Q1FY2016 from Rs 6.68 crore in Q1FY2015.
There are 45 branches operational in microfinance (32 in Gujarat and 13 in Madhya Pradesh). Overall branch strength including both microfinance and two-wheeler business is 49 branches at end June 2015.The customer base of the company jumped 40% to 1.15 lakh at end June 2015 from 0.78 lakh at end June 2014. We expect the interest costs to gradually come down as we capture the gain from the investment grade rating and replace the higher cost borrowings with lower cost borrowings.Funding costs have risen at a higher rate as the incremental loans are being raised at a higher cost as these loans are funded by Financial Institutions, charging higher rates than banks. The cost of funds for the company stands at 14.5-15%. The borrowing mix between bank and non-bank was 50-50. The company proposes to improve the share of bank borrowings.
The Net Interest Income has grown by 26% to Rs 5.58 crore in Q1FY2016. Annualized NIMs are 18.39% in the last one year.The profitability jump for this quarter is lower than income growth, due to higher operational costs, driven by higher consultancy charges and the need to staff for the incremental growth.We are also looking to raise Tier 2 Capital to help us better leverage the balance sheet.
**Microfinance (Namra Finance):Two microfinance branches will become operational in August 2015, while the company proposes to improve the microfinance branch count to 59 branches by end March 2016.Microfinance disbursement increased by 82% to Rs 40.38 crore. Currently majority of the microfinance loans have a maturity of less than 1 year. The company has gradually started 2-year loans and are gradually ramping it up across branches. This will help increase AUM at a faster pace and gradually help reduce operational costs.
The company has targeted the disbursements of Rs 180-185 crore and AUM of Rs 110-115 crore for FY2016.The NPAs in the microfinance business are 0.00% as there are no overdues greater than 180 days.
The company has network of 50 dealers and four branches in the two-wheelers lending business. The company is looking at further expansion in the 2-wheeler finance business with new branch openings in Madhya Pradesh. The company has already hired the team and the branch should be operational in this quarter.Two wheelers disbursement increased 10% to Rs 12.29 crore in Q1FY2016.The company has targeted the disbursements of Rs 65 crore and also AUM at Rs 65 crore for FY2016.
NPAs in the 2-wheeler business have increased moderately in this quarter. The 3-Wheeler portfolio is witnessing some pressures, while the company has been gradually withdrawing from the 3-Wheeler market, due to lack of financial viability for 3-Wheeler operators.

(Ankit Gupta) #26

Arman came up with good set of numbers for Q2FY16 with interest income growing by 40% while profit after tax growing by 38% on a consolidated basis (MFI plus two wheeler). The press release for the quarterly result which should be out in a few days and concall would give us more details about the growth in AUMs of MFI and two wheeler segment as well as the development on the expansion in MP for MFI business.

Disclosure: Invested at an average price of 49. Forms more than 10% of my pf.
This is not an investment recommendation. Pls do your own due diligence before taking any action. Have been following the stock since more than a year and have been single handedly posting about it but not a post to promote the stock.

(Prasad India) #27

Dear Ankit, Your posts are very informative. BTW do you track CAPITAL TRUST. I do not have economics background. Somehow the numbers seem to be appealing. Can you shower some light?

(Ankit Gupta) #28

Hi Prasad,
I don’t track Capital Trust and hence can’t comment on it.

(Gaurav152) #29

Having listened to multiple confrence calls from the management, absolutely delighted with the great information disbursal by them despite being such a small player limited to only Gujarat and MP

(Prashant Kulkarni) #30

Ankit, thanks for sharing info in such a detailed way. I went through the last 2 con calls, felt good that promoter knows in out of the business very well and they took the pain to explain in detail about the process.
In Q2 con call, they mentioned that, they are trying to venture into the HFC and they hired some industry veteran to address this. Do you have any further info on that? Is MFI allowed to disperse HFC loan? I was wondering why they want to go into the market which is flooded with many institutions.

off topic: attached Religare MFI sector report. Might be helpful.India Microfinance - Sector Report 19Aug15.pdf (3.0 MB)

Disc: No investment. tracking

(Ankit Gupta) #31

Hi Prashant,

They are planning to venture into SME financing with loan size of 50,000 to 5,00,000 post incorporation of the MUDRA bank and not housing finance. However, it is still few years away and they are awaiting clarity on regulatory front. Also, the MFI business is in Namra Financial which is 100% subsidiary of Arman while the two wheeler business is in standalone Arman.

(Prashant Kulkarni) #32

Thanks a lot for clarification Ankit. I thought, i heard HFC :frowning:

(richdreamz) #33

Hi @ankitgupta Did you get a chance to look at Satin Credit? This looks like an MFI with very good fundamentals and promoter and a bit undiscovered and so low valuations compared to its peer SKS. Can you offer your opinion on this please?

(Prashant Kulkarni) #34

Ankit, I again I went through the call and they mentioned about venturing into the HFC(in the audio b/w 32.35–33.40) and they have some industry veteran on board who was a head of nationalized bank but nothing materialize yet in this front they said.

(Ankit Gupta) #35


Havent looked at Satin Credit and thus dont have any view.

(Ankit Gupta) #36

Hi Prashant,

Will go through the concall again and get back. May be I missed it earlier.

(JatinK) #37

Hi Prashant & Ankit,

Yes, they mentioned about plans of entering into Housing finance only.
But this was the first time it was mentioned & from their talk it looked that plan was at very very basic stage only.
Will take atleast a few quarters to implement & should take atleast a few years to reflect into numbers.

Also, i think, they will look to lend to their existing set of customers only for this.

(Ankit Gupta) #38

Hi Jatin and Prashant,

Ya even I went through the concall again and heard about the company’s plan to enter HFC. As Jatin said, it seems to be at planning stage and will take years to reflect in numbers.

(Prashant Kulkarni) #39

thanks Ankit and Jatin. Yes, its under planning stage. Am not able understand is it a good move by company to diversify when so many are already present in HFC(specially with Gruh in low ticket size) :neutral_face:

(manish) #40

HFC - I think it is not a bad move. most likely they will be lending to the same type of customers as they have for 2-wheeler or Micro fin .
I believe that the competition for these customers will be less. Thats why Gruh has been able to grow so well. Whether Arman can grow or not ? only time will tell.
Whether it is HFC or MFI the raw material is same - money. So if one segment is not growing the company will have the option to diverse the funds to the other segment.
However, the expertise required for each segment is different.
Still I feel it is better if a finance company is into 3-4 segments. Thats what I liked about Bajaj Finance.
Being exposed to only 1 segment like auto fin , HFC , MSME etc will lead to subdued growth during the down cycle.
Disc - Invested