Arman Financial Services Q1 FY27 earnings call

Q1 FY27 marked an encouraging start, continuing the improvements seen in H2 FY26, with stable collection trends and moderated fresh delinquencies. Despite this, management remains cautious due to broader macroeconomic uncertainties, geopolitical issues, and weather-related disruptions. The company's strategy emphasizes quality over quantity, with rejection rates remaining high, and a focus on learning, monitoring, and adapting to market conditions.

Consolidated AUM reached a record high of INR 2,925 crores as of June 2026, representing a 36% year-on-year growth. Disbursements during the quarter were INR 686 crores, up 76% year-on-year, marking the highest ever first-quarter disbursements. Consolidated PAT stood at INR 45 crores, a significant turnaround from a loss of INR 15 crores in Q1 FY26 and INR 41 crores in Q4 FY26. The consolidated gross total income was INR 202 crores, up 34% YoY and 15% QoQ.

Overall collection efficiency for Q1 stood at 96.6%, with steady improvement throughout the quarter. Consolidated GNPA improved to 2.76% and NNPA to 0.84%, reflecting improved borrower behavior. Early-stage delinquencies remained stable at approximately 99.5% zero DPD flow forwards. The cost to income ratio improved meaningfully to 44.3% in Q1 FY27 from 51.7% in Q4 FY26, driven by portfolio scale and improved productivity.

The individual loan portfolio now constitutes 33% of the overall book, growing in importance within the microfinance business. The objective is to move towards more individualized credit assessment, leveraging credit history, bureau behavior, customer-level cash flow, and digital repayment mechanisms like UPI mandates and e-NACH. This approach provides a better understanding of individual borrowers compared to traditional group-based lending, enhancing underwriting architecture.

Arman Stand-alone's AUM grew 26% YoY and 4% sequentially to INR 758 crores, with disbursements of INR 156 crores driven by the MSME segment. PAT for Arman Stand-alone was INR 15 crores, up 17% YoY and 48% QoQ. Namra Finance, the microfinance subsidiary, saw its AUM grow 39% YoY and 8% sequentially to INR 2,167 crores, with disbursements of INR 530 crores. Namra's PPOP increased 64% YoY and 26% QoQ to INR 52 crores.

The company remains comfortably positioned on capital and liquidity. Capital adequacy stood at 33.6% for Arman Stand-alone and 38.8% for Namra Finance. Consolidated shareholders' equity was INR 979 crores as of June 2026. A healthy liquidity position was maintained with INR 286 crores in cash, bank balances, and liquid investments, complemented by INR 335 crores of undrawn sanctions from existing lenders, providing ample headroom for growth.

For the remainder of FY27, the approach remains unchanged: calibrated growth supported by portfolio quality, recalibrating based on collection trends, early delinquencies, and macroeconomic conditions. The company aims to bring operating costs down further through portfolio scale, productivity improvements, and technology, without compromising credit and recovery controls. The goal is to achieve a cost-to-income ratio of 7% by the end of March.