Company Overview Founded in 1991, Arohan Financial stands as a prominent NBFC-MFI within India. In 2006, the company embarked on its microfinance journey, primarily focusing on underserved states with lower income populations. Arohan Financial Services extends a range of offerings, encompassing both credit and insurance products. The former encompasses income-generating loans and diverse financial aids, while the latter spans life and health insurance solutions.
Objectives of Arohan Financial Services IPO
- Fulfilling general corporate objectives
- Strengthening the capital base
- Repaying a portion or the entirety of outstanding debts
Insights into Arohan Financial Services IPO
Arohan Financial has initiated the process of raising capital through an IPO and has submitted initial documents to SEBI to secure funds within the range of Rs. 1750 crores to Rs. 1800 crores. The proposed IPO structure includes a fresh issuance of Rs. 850 crores and an offer for sale (OFS) involving 27,055,893 shares from existing shareholders.
Qualified institutional buyers (QIBs) hold the opportunity to subscribe to 50% of the IPO, while retail individual investors are allocated up to 35% of the reserved portion. Additionally, 15% of the offering size is designated for non-institutional investors. Moreover, eligible employees of Arohan Financial can subscribe to up to 5% of the total offering.
Reasons to Consider Investing in Arohan Financial Services IPO
Beyond its substantial operational scope, Arohan Financial exhibits robust profitability metrics and boasts a seasoned management team with a proven track record. The company maintains a well-diversified borrowing portfolio, largely attributed to substantial funding from banking institutions. In light of the anticipated expansion in India’s financial services sector, Arohan Financial holds a positive outlook for the future.
Given these factors, potential investors may find value in participating in its inaugural offering. Nonetheless, prudent investors are advised to thoroughly evaluate various aspects, including the company’s vulnerabilities and financial performance, prior to making an investment decision.
IPO Financials
| For the Year/Period Ended | Profit After Tax (in million) | Total Revenue (in million) | Total Assets (in million) | Total Expenses (in million) |
|---|---|---|---|---|
| 30 September 2020 | 625.64 | 5073.93 | 58,131.17 | 4258.83 |
| 31 March 2020 | 1268.01 | 9345.06 | 52,808.21 | 7,669.20 |
| 31 March 2019 | 1,276.40 | 6515.93 | 38,530.97 | 4,744.56 |
| 31 March 2019 | 309.75 | 3278.71 | 23,036.70 | 2804.40 |
| Strengths | Risks |
| In terms of AUM, this company is one of the largest NBFC-MFIs in India. As of 30 June 2020, Arohan’s AUM stood at approximately Rs. 4,862 crores. It has a proven track record of 13 years. |
Arohan’s portfolio loans in its microfinance segment are unsecured. Moreover, they are backed by group-based social security. Thus, the company has a risky asset class.
|
| Arohan Financial has a strong capitalisation profile owing to adequate internal capital generation and equity infusions on a regular basis. |
A significant portion of this company’s revenue in FY2020 comprised interest income earned from its microfinance business. Owing to this single-line nature of operations, there is restricted diversification in relation to this company’s revenue stream.
|
| This company’s management team includes seasoned professionals who have years of experience in the domain of financial services. |
Arohan Financial Services could experience headwinds due to a lack of operational efficiency or deterioration in the quality of assets. These factors would have a direct impact on this company’s profitability.
|
| Arohan’s NIM stood at 10.49% of AMA in FY2020, whereas in the previous financial year, it was 11.14%. Operating expenses of this company diminished to just over 4.5% of AMA in FY2020 in comparison to 5.43% in FY2019. |
In case Arohan Financials’s adjusted gearing increases on a sustained basis owing to the degradation of its capitalisation profile, it could pose a threat to this company.
|
Peer Comparison
| Company | Market Capitalisation Growth rate (Last 5 Years) | TTM P/E Ratio | Dividend Yield |
|---|---|---|---|
| Tata Investment Corporation | 129.81% | 37.97 | 2.08 |
| Mannapuram Finance | 160.40% | 10.31 | 0.95 |
| L&T Finance | 5.55% | 10.31 | – |
| Equitas Holdings | -35.16% | 9.39 | 2.30 |
| Shriram Transport Finance | 13.72% | 14.68 | 1.32 |
What is Arohan Financial Services IPO?
Arohan Financial Services intends to secure funding ranging from Rs. 1,750 crores to Rs. 1,800 crores. The forthcoming initial public offering will encompass a new issuance amounting to Rs. 850 crores, along with an offer for sale (OFS) involving 27,055,893 shares from current shareholders.
Keep reading and supporting Banknomics!
