Another nice interview
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In the second quarter result, they did not talk about the quantum of loans restructured in Q1FY22. Any idea, what is the restructuring book as a % to advances as of 1QFY22?
The company has extended repayment period between 1 to 3 months to Level 1 standard customers as on March 2021 in MFI segment. Approximately 70,000 customers were eligible for the scheme, with approximately 40% of them with 1 EMI deferred, and 30% each with 2 EMIs and 3 EMIs, respectively. There was no payment holidays or restructuring provided for MSME or Two-Wheeler customers.
Arman expects the recovery to be strong with the worst behind and a strong balance sheet.
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Thanks for the reply Debashish. This was helpful.
Excellent detail research on Arman by SOIC !
Link to the video: https://youtu.be/I9ygnNSx6U4
LInk to the presentation: https://soic.in/visualization
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Nothing was happening except stock price…
Interest cost going up , impairment losses of 8cr 2 yr after COVID . I guess it’s 8th quarter when they are showing impairment losses.
Look at other financial services company like Bajaj finance where they have posted impairment losses??
Or microfinance companies like IIFL ! Does they hiding behind, anything else?
Disc. Holding
Wasn’t the results good?
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What is cost of funds for Arman ? can’t find it in investors presentations and conf call.
it should be above 12%, since yield of namra is 22.6%
Ask for PAR also.
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even though cost of capitol is high…why stock performed well compare to others mentioned in tweet…any enlightenment…which market knows…which we dont know
Possibly due to prudent risk management, early provisioning for NPAs. Their NPA numbers were lowest among peer group. So their business suffered during COVID, but suffered less.
One of the earliest players to upfront recognise that covid will lead to more credit losses than demonitisation and started providing for it. Even during demon, their credit losses were the lowest when compared to peers. @DEBASHISH has been a true long term investor here and he can further add to this thread regarding the conservative nature of the management. Industry is definitely volatile, qualitatively they do stand apart in my view
Disc: invested
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The cost of funds would be a lot more similar than the tweet suggests. One has to adjust for the cost of opex (branches etc) on the liability side.
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At the end of the day cost of funds matter…what makes Arman so special…to give this multiple…may be we are missing any other parameter…
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Exactly, that’s my point is if they are so good to enjoy valuations likes of bajaj finance and hdfc (actually more optimistically priced than bajaj finance & hdfc) , why bond markets aren’t funding them at interest rates like they do to bajaj finance and hdfc ?
I rarely see disconnect between bond markets and equity markets - In case of Arman it exists.
U can say ohh bcoz Arman cater to most vulnerable customers vs baja fin & hdfc ltd thats why bond markets are more cautious and pricing that in then i could ask same why equity markets aren’t cautious ?
Another thing to ponder upon is Why can’t Bandhan (bcoz intellectuals say they r aggressive vs others - which is bad) come to Gujarat not only give credit to arman customers at 17% (400 bps reduction) but provide them door step full fledge banking (that’s what they do).
Why can’t customer switch ?
If you give Rs 100 to bandhan guy & arman representative to go out and lend
– As a customer i’ll only care abt interest rates not NPA, ROA, ROE, Con calls and past stock returns.
Also, why can’t they get themselves rated by more reputed credit rating agencies CRISL & ICRA if they are as good as equity market investors think in other to work towards brining the COC down ?
we all know reputation of CARE and SAMERA .
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History of not cooperating with the rating agency. A good financial institution should be rated by CRISIL and/or ICRA. Yes, exceptions might be there.
If they go down the quality ladder, you know why they choosing subpar credit rating agencies.
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1)I fully agree with you .The management is very conservative (very much needed in a NBFC ) and pragmatic .During demon time they were one of the first to stop disbursement the very next day.
2)In MFI the main issue is not cost of fund so much as by regulation one can charge a spread of 10% pa to the customer and for customer it doesnt matter that extra 1-2% pa as its only circa Rs 100/- for the EMI which doesnt pinch in a month to the customer /borrower (as anyway the ROI for the borrower is more than 100% pa in MFI as she is borrowing for a productive asset /animal like Goat/Cow /Buffalos ) .If it was only cost of fund then the lowest cost bank /MFI would have the highest ROE which is not the case in MFI .
3)What matters is collection efficiency .Arman was above 99%+ all along (leaving demon and covid ) .Their process is completely focused on collection efficiency which is why sales force is penalized on incentive if collection is below 99.5% .
- I personally feel the bottom is in place (talking business not share price ) when it comes to Arman and from hereon growth should pick up (provided no new wave or a black swan event).Their collection efficiency is at 92% ( I think only credit access Grameen have more CE ,otherwise most MFI lower than Arman ) and from here on CE should improve to 95/96% by Mar (my gut feeling) and they are adequately provided for the year .
Disc .-My views may be biased because of my holdings
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Yeah, that’s why I said exceptions are there. Being rated by ICRA and CRISIL does not ensure quality, but not being rated by them does increase the probability of the company’s quality being in question.
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