Echo the sentiment. For any student of finance (credit), micro finance in particular, and to check fhe nerve of the sector- no better way to learn than to follow / hear/ read Alok Patel. The man is a maverick and speaks from his heart. One can read the Q3 concall transcripts too- much along above lines. Free lessons in microfinance business and pulse of the sector.
21 Likes
Q1FY26 Results – Arman Financial Services Pvt Ltd
Q1FY26 numbers don’t look encouraging. Credit costs remain elevated, especially due to continued write-offs.
- Disbursements are lower YoY & QoQ, indicating that management is still not fully confident about underlying market conditions.
- Microfinance collection efficiency has inched down to 95.3% in Jun-25 from 95.5% in Mar-25, reflecting persistent stress.
- PAR 31–90 is the only silver lining, improving from 6.8% to 6.1%.
- Once again, management has demonstrated their strict stance on keeping the lowest NNPA in the industry—valuing collections over growth and being aggressive in write-offs, unlike many other MFI players.
Disclaimer: Invested. Not a buy/sell recommendation.
10 Likes
Results dont look good, but compared to most of the peers, its in a btter shape.
Was looking at fusion and spandhna, their loan books have taken a big knock, compared to Arman.
In entire MFI space, i think only credit access has posted better results, but that stock has also recovered all of the lost ground justifiably.
4 Likes
I request to look satin credit care results. GNPA is stable from q4 to q1 (3.7 %). SCNL is in profit for last 16 quarters. This quarter PAT is around 47 crore.Q1 being seasonally weak. Valued at P/B of 0.55. My gut feeling says that after credit access grameen and Armaan financial, it is much better than the likes of spandana and Fusion finance. Management also told in the recent concall that they will open 188 new branches this quarter. Opening new branches is clear sign that worst may be behind in terms of asset quality otherwise no Management will talk of growth. This is my way of reading between the lines. I may be wrong in my analysis.
Disclaimer: Holding and biased with average price of 148 rupees and eagerly waiting for GNPA no. to come in downward trend.
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Yes Satin seems to be an exception, and looks heavily undervalued.
Even post the kind of results it posted over last few quarters.
Dont understams why it still trades beliw its BV
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Because the sector perception is bad
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Huge undervaluation by market can also mean market is seeing something that we don’t see., especially in finance companies. I remember DHFL was also hugely undervalued…by any metrics compared to its peers…And I was so close to initating a position. But then came the scam and DHFL went bust. After that , I was hesitant to take undervaluation to its face.
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Not all undervalued things are scam.
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Found very good article comparing recent performance of MFI
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Lots of strange things in Satins numbers over the past 12-15 months. For any company and especially lending companies, it is hard to catch if numbers arent representing reality. Perhaps thats what the market is feeling hence the low multiples:
- Probably the only company in the entire industry where disbursements have grown in FY25. High disbursements among industry stress is a big indicator of loan evergreening.
- Company has a history of loan evergreening in past microfinance industry crisis
- Collection efficiency is not much different from leading peers such as Arman (~95-96%), yet credit cost is very different from peers.
- High increase in opex despite growth in AUM points to stress also being felt by Satin. Yet, this is not being seen in credit costs to the extent of peers.
- In general, I think it is hard to believe that when most peers, including leading companies have lost >10% of opening FY24 book in credit costs in FY25 and the best company in the sector has provisioned 7.5%, that a company with a history of mediocrity such as Satin has outperformed the industry by such a large degree. Maybe if it looks too good to be true… it isnt?
On the flipside, probably the thing in favour of Satin is geographical mix. They are the only company in the sector to have taken such a big bet on Assam post the crisis there (Double digit AUM mix). Assam seems fairly untouched by the crisis since no other lender was willing to go there. However, even that 10% of AUM shouldnt be able to account for such a big variation in the credit cost vs peers.
11 Likes
Even if two lenders have the same collection efficiency (say 97–98%), their credit cost may diverge due to:
Stage of Delinquency
1)CE does not distinguish between 1–30 DPD, 30–90 DPD, or >90 DPD buckets.
2) If a lender has more loans slipping into higher buckets (even if collections look similar in the short term), provisions will be higher.
There is no public proof that Satin is currently evergreening loans.
However, given the nature of microfinance, past divergence in reported numbers, and Satin’s relatively weaker perception vs. peers, investor concerns about potential evergreening have existed.
Regulatory changes since 2021 make systemic evergreening difficult today.
Will love to hear more counter views as it helps to remove our biases.
1 Like
Of all the earnings calIs, I probably enjoy Arman the most.
Some very important takeaways for me from the latest one include-
- Future of JLG- candid and unabashed acknowledgement that JLG as a model (and as business opportunity) might be dead. The question in my mind since start of year was whether the stress in the sector was just a cyclical or structural. Coming from an industry veteran, this for me was the final nail in the coffin. As investor, we need to re-calibrate the P/B, GNPA, growth expectations etc. in this sector
- Delinquency- Guardrail 2 in itself will result in higher delinquency by limiting evergreening. Evergreening was a way of life in MFI business- borrowers will not repay, if they sense you lender will not provide a new loan. So the worst is behind us is a fallacy.
- MSMEs are under stress too- reconfirmed again (my view- Govt probably sees the stress and slowdown, hence the GST cuts)- This has wider ramifications on how aggressively we should invest in the current environment
- Credit starvation resulting in increased gold loans- Higher degree of rejections means people are now forced to borrow against gold. In my view, gold loan companies should enjoy heightened growth over next 2-3 qtrs
- Underwriting changes- Assessing JLG customers as individual MSMEs which is driving higher Avg Ticket size even in a stressful environment ==> My view, this will significantly increase opex and reduce NIMs (cost increase is higher, Indiv assessment in <1L ticket loans can be extremely costly)
- Attrition: Cost of labour has gone up; alternate employment opportunities are coming up- credit is one of the most stressful jobs- no one wants to go on field to do recoveries. This is an amazing insight which indicates a shifting dynamics at platy and will have significant impact on opex on rural loans
There are few more pointers on business per se, but I enjoy Arman concalls more for the learnings on the sector one gets from listening to Mr. Alok Patel.
Again, highly recommend new and budding investors to listen to his concalls<<
19 Likes