Arman Financial Services Ltd

(Ankit Gupta) #61

Balance Sheet has to be provided on half yearly basis for listed companies.

(Prashant Kulkarni) #62

Arman listing on NSE as well.

(Ravindra Mutyala) #63

Arman is already illiquid. Will NSE listing further increase the illiquidity?

(Ankit Gupta) #64

Hi Ravindra,

Usually listing at NSE is expected to increase its liquidity. Hopefully, the bid ask spread which used to be high should come down now.

(Gaurav Agarwal) #65

Interview of MD with Economic times -

Would be goping for tier one capital raise considering we are an NBFC: Alok J Patel, Arman Financial

(Rupesh Tatiya) #66

Notice of Postal Ballot from BSE:

Items for voting:

  • Private Placement of NCDs worth 100 Cr
    Initial plan to offer 25Cr worth of NCDs to AAV Sarl (Luxembourg).

  • To increase borrowing limit to 200Cr


Disc - Invested

(vaibhav) #67

Mr. Aalok Patel’s Interview to ETnow (from 1st July, Gaurav has posted the news article above) -

(Ankit Gupta) #68

Arman has come up with decent set of number for Q1FY17. Link -

The press release for the results which should be out soon would give us insights about the granular details like loan book, GNPA, growth plans of the company etc. However, one interesting thing which came up in outcome of the board meeting was the ESOP scheme which has been approved by the board but pending approvals of the shareholders. Link -

It is pretty heartening to see such a small company coming up with an ESOP scheme to retain its employees (I hope it gets distributed across the spectrum of company) especially in times like this when the industry might be facing challenge to retain its employees due to high growth seen in the sector.

Disc: Invested

(Abhishek Basumallick) #70

Concall highlights for Q1 2017

• Total consolidated AUM is up 47% to Rs 187.22 cr vs Rs 110.6 cr in Q12015. Microfinance business AUMs is up 70% to Rs 130.64 crore. The two-wheelers AUMs improved 12% to Rs 56.58 crore at end June 2016.

• The loan portfolio of Namra Finance (subsidiary) is microfinance, the loan portfolio of Arman Financial Services is largely Asset Loans (2 & 3 Wheeler loans).

• Net revenues jumped 43% to Rs 12.7 crore and Net profit surged 41% to Rs 2.87 crore in Q1FY2017. This was driven by improved productivity and better utilization of newer branches. As the scale of operations grows, the company expects to further improve operating metrics.

• The company has forayed into the new states of Maharashtra & Uttar Pradesh in Q1FY2017. The company has added 4 branches in Maharashtra, while expects to add another 3 branches in some time. The company has added 2 branches in Uttar Pradesh and expects to add 3 more branches in some time. The company plans to open 10-12 branches in Maharashtra and 12-15 branches in Uttar Pradesh by end March 2017.

• The company network of 61 branches operational in the Microfinance (37 in Gujarat & 18 in Madhya Pradesh, 4 in Maharashtra & 2 in Uttar Pradesh). The company plan to open another 15 branches in this financial year.

• With 5 operating branches in 2-Wheeler financing, the overall branch count has reached 66 branches at end June 2016.

• The company has started a pilot for SME financing in Godhra branch. These loans are in the range of Rs 0.5 lakh to Rs 1.5 lakh, given to individuals with a repayment period of 2 years. The company aims to provide these loans at higher yields to customers with a good track record, long established small businesses, who are in need of higher sums of money.

• The company has been able to improve productivity at existing branches and are very focused on keep costs under control while expand across new geographies.

• The company has got additional lines of credit from DCB Bank and Bhartiya Mahila Bank, while it is working towards further reducing cost of funds.

• The employee costs of the company are largely under control and the company is able to improve per employee metrics.

• Net Interest Income has grown 46% to Rs 8.16 crore, while consolidated Annualized NIMs are 18.16 % in Q1FY2017. As per the company, as leverage rise and balance sheet expands, these NIMs will gradually reduce as the equity component in balance sheet reduces.

• The company has raised Rs 5 crore of Tier 2 Capital last year, while further aim to enhance Tier 2 Capital by Rs 5-10 crore in Q2FY2017. The company will consider raising Tier I capital in next 6-9 months.

Microfinance (Namra Finance)

• The average monthly disbursements increased 29% to Rs 17.21 crore in Q1FY2017. The company has targeted disbursement of Rs 300 crore in the microfinance segment for FY2017.

• There is a slight slowdown in the disbursement rate for this quarter, as the company slowed down disbursement in certain branches to check the quality of loans and to concentrate on geographical expansion. Going forward, the company expect the disbursement rates to pick up.

• The company has opened 4 branches in Maharashtra and 2 branches in Uttar Pradesh in June 2016, while they should start contributing to disbursements and revenues in the coming quarters.


• The average monthly disbursement increased 33% to Rs 5.45 crore in Q1FY2017.

• With a good monsoon, the company expect a revival in the rural economy and that should bode well for the 2-wheeler sales in the coming year.

• The NPAs in the 2-wheeler business has increased last year due to the RBI mandated policy of recognizing NPAs after a delay of 150 days vs the earlier norm of 180 days.

• The net NPAs have moved from 1.52% to 2.81%. The company expect the business to do well, with lower NPAs with forecasts of above average monsoon.

(Amitayu) #71

Few Questions…

1.Growth in disbursement is 28% where as AUM growth is 70% in MFI Business. They have increased the AUM growth (Disbursement growth is much smaller) by providing the loans which have higher ticket size with loan tenure of 2 years which seems risky.
2.They till have done 52 crore in this quarter . How they will reach 300 cr in disbursement ? To do that they have to reach 80-85 cr each quarter which is a 75 % growthof disbursement yoy (current disbursement growth is 28%)!!
3. Why they are keeping investment on 2 wheeler,3 wheeler which highly competitive, high npa area , low ROE business ? Why they don’t keep focus on HFC which are better ROE, asset quality business .There are many nbfcs who have just started foray in HFC business but growing well…
4.In pilot SME project(Higher Ticket Loan)they will charge 28 TO 30% interest rate under parent Company where the cost of fund is 11-12%.

I might be wrong , IMHO management commentary some time too confusing and conflicting . Sometimes they told they will not foray into UP till next election but later they started operation in UP as they got credible guy. They lowered disbursement growth to check the quality of loans but aims to generate massive growth in disbursement in later part of the year .

Discl: Some of the questions mentioned upper are raised by Amit Jeswani one of the participant . Found the questions are brilliant .

(Gaurav152) #72

Was anyone able to Attend the AGM?

(Ashwini Damani) #73


How do we deal with the temporary overvaluation that the stock is suffering from

(Abhishek Basumallick) #74

@ashwinidamani If you feel the company has a good future, then just wait it out. You can’t second guess the market all the time. Specially, if you see the structure of the stocks (not businesses) in this industry, it is pretty evident that NBFCs are leading this market cycle. So, unless results come in much lower than expected the overvaluation may continue.

(Gaurav Agarwal) #75

IIFL initiated coverage with 12 month target price of 350.

Report is a good read.

(Rupesh Tatiya) #77

@ankitgupta @basumallick

I have seen that NIM of MFi companies is 15%+ and the rate of interest is sounds ridiculously high to me at 20-30%. Although as per RBI circular, it is legal to charge such rate (borrowing cost + 12 or bank lending rate * 2.5) - is it sustainable? is it moral?

I read in one of VP experience sharing posts where Prof. Bakshi said the business has to be helpful/sustainable to all the players in the chain. Please share your thoughts.

RBI Circular link -

Disc - I hold, not a buy/sell reco, have been a little disturbed with NIMs for a while

(v4value) #78

@rupesh there have been many many posts discussing nim and explaining why they are where they are in microfinance thread. Hope some day you will be disturbed enough to be bothered to read them.

(Ankit Gupta) #79

Hi Rupesh,

Lending to MFI borrowers is unsecured and carries a higher risks compared to any secured lending/lending to borrowers like you and me. You will have to realise that it carries a higher risk compared and we have seen that what happened during AP crisis. Furthermore, the operational costs for MFIs are much higher compared to a bank as employees have to directly collect fortnightly repayments from customers. Good thing is with Malegaon committee regulations, the MFIs cannot charge its customers more than 10/12% more than their cost of borrowing or 2.75 times the average base rate of top 5 banks of the company. In addition, with borrowing costs for MFIs coming down, MFIs have started cutting interest rates for its customers eg. Arman recently reduced interest rates by 110 bps to its customers. SKS charges interest rate as low as 18 - 19% to its customers. On moral side, I am not sure whether I am the right person or not. But why dont you look at the options available to these borrowers. Interest rates being charged by money lenders can be as high 4% per month or even more. Furthermore, many of these customer dont have any access to borrowing avenues and thus are not able to grow their business. MFI financing if used for income generating purpose gives them access to funding for growing their business and thus increasing their income over the medium to long term.

(Rupesh Tatiya) #80

I only track Arman in this sector and haven’t had time to go through threads of other MFI companies on VP. AFAIK, Arman thread does not explain why MFI rates are so high. Can you please point to a thread for me to read or I’ll spend sometime on weekend looking at other threads.

Thanks for explanation.

Quick googling lead me to following link on Quora -
I will read up more in MFI industries elsewhere over the weekend.

I have several relatives who lend and borrow as/from private money lenders. They are businessmen and these days getting even 1.5 takka shekada is difficult for the lenders.

Charging crazy rates to poor customers is one of the reasons which led to crash of housing market in US and some scary cases for credit card customers. I’m just paranoid about this. Also increasing average ticket size and loan duration makes this whole thing even more risky.


(Gaurav Agarwal) #81

Few days back I was buying vegetable from hawker close to my home. This guy does not have a shop but occupies a corner on the footpath. As I was buying the vegetables I saw a man telling the vendor that you have not paid for week. You must pay today and vegetable vendor did.

Later I inquired from the hawker, why are you paying up this guy. He said he has borrowed Rs. 10,000 from someone and he has to return Rs. 100 towards principal and Rs. 20 towards interest everyday for 100 days and his loan will done.

Hi @rupeshtatiya I hope you will find time to calculate the effective interest rate in this case.

Vegetable hawker and similar kind of people are served by the microfinance. People who are even hesitant to enter the branch of bank.

Many people including committee on Nobel Prize feel microfinance is one of the greatest innovation of recent time.

One can also opt to spend his/her time reading books on microfinance; before taking a morality judgement; like

(navneet.daga) #82

Thanks for the post. This is one view of the way MFIs work. There was recently a very good documentary which aired on Discovery (I think!) which talks about MFIs and their impact on the society etc. Their findings were very different. They generally believed that MFIs create a lot of pressure and in the long run dont contribute to the community. What was the most appalling revelations was that there are a lot of villages in Bangladesh where each family has at least 1 person who has sold their kidney to replay MFIs. I did a little more research on this and there were other sources which corroborated the story. Before that I was holding some NBFC MFI stocks but decided to sell them as I did not want to invest in businesses with such practices.

Let me re-iterate that I did not find anything in the business model which was wrong just the practices followed by a lot of them and the impact it has on the classes it is supposed to help. All I would ask you to do is research their policies - especially collection policies a little more and you might be surprised to find the realities behind some of these MFIs.

Dont hold or dont plan to hold any MFI company.