Q1 2027 Arman Financial Services Ltd Earnings Call

August 13, 2026

Speaker #1: Ladies and gentlemen, the conference will begin shortly. Please stay connected. Ladies and gentlemen, the conference will begin shortly. Please stay connected. Ladies and gentlemen, good day and welcome to the Q1 FY27 earnings call of Arman Financial Services, hosted by Aquarius Securities.

Operator 4: Ladies and gentlemen, the conference will begin shortly. Please stay connected. Ladies and gentlemen, the conference will begin shortly. Please stay connected. Ladies and gentlemen, good day, and welcome to the Q1 FY27 earnings call of Arman Financial Services hosted by Equirus Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone. I now hand the conference over to Mr. Shripal Joshi from Equirus Securities. Thank you, and over to you, sir.

Operator: Ladies and gentlemen, good day, and welcome to the Q1 FY27 Earnings Call of Arman Financial Services hosted by Equirus Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone. I now hand the conference over to Mr. Shreepal Doshi from Equirus Securities. Thank you, and over to you, sir.

Speaker #1: As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. I now hand the conference over to Mr. Shripal Joshi from Aquarius Securities.

Speaker #1: Thank you, and over to you, sir.

Speaker #2: Thank you, Sumit. Good evening, everyone. I welcome you all to the earnings conference call of Arman Financial Services to discuss the Q1 FY27 financial performance and business update.

Shripal Joshi: Thank you, Sumit. Good evening, everyone. I welcome you all to the earnings conference call of Arman Financial Services to discuss the Q1 FY27 financial performance and business update. Today, we have Mr. Aalok Patel, Vice Chairman and Managing Director, Mr. Vivek Modi, Executive Director and Group CFO. I will now hand over the call to Mr. Aalok Patel for his opening remarks, post which we can open the forum for question and answer. Over to you, sir.

Shreepal Doshi: Thank you, Sumit. Good evening, everyone. I welcome you all to the earnings conference call of Arman Financial Services to discuss the Q1 FY27 financial performance and business update. Today, we have Mr. Aalok Patel, Vice Chairman and Managing Director, Mr. Vivek Modi, Executive Director and Group CFO. I will now hand over the call to Mr. Aalok Patel for his opening remarks, post which we can open the forum for question and answer. Over to you, sir.

Speaker #2: Today, we have Mr. Alok Patel, Vice Chairman and Managing Director, and Mr. Vivek Modi, Executive Director and Group CFO. I will now hand over the call to Mr. Alok Patel for his opening remarks, after which we can open the forum for questions and answers.

Speaker #2: Over to you, sir.

Speaker #3: Yeah, thank you, Shripal, and a very good afternoon to everybody. Thanks to everyone for joining us today for the Arman Financial Services Q1 FY27 earnings conference call.

Aalok Patel: Yeah. Thank you, Shripal, and a very good afternoon to everybody. Thanks to everyone for joining us today for the Arman Financial Services Q1 FY27 earnings conference call. As Shripal mentioned, I am joined on the call by Mr. Vivek Modi, our ED and Group CFO, along with the investor relationship team. I hope all of you had an opportunity to review our financial results, the investor presentation, and also the press release. Let me start first with the operating environment. Q1 of FY27 has been an encouraging start to the year, and more importantly, the improvement that we started seeing during the second half of FY26 has continued into this quarter. Collection trends have remained stable, fresh delinquencies are moderated, and borrower behavior has continued to improve across most of our operating geographies.

Aalok Patel: Yeah. Thank you, Shreepal, and a very good afternoon to everybody. Thanks to everyone for joining us today for the Arman Financial Services Q1 FY27 earnings conference call. As Shreepal mentioned, I am joined on the call by Mr. Vivek Modi, our ED and Group CFO, along with the investor relationship team. I hope all of you had an opportunity to review our financial results, the investor presentation, and also the press release. Let me start first with the operating environment. Q1 of FY27 has been an encouraging start to the year, and more importantly, the improvement that we started seeing during the H2 of FY26 has continued into this quarter. Collection trends have remained stable, fresh delinquencies are moderated, and borrower behavior has continued to improve across most of our operating geographies.

Speaker #3: As Shripal mentioned, I am joined on the call by Mr. Vivek Modi, our ED and Group CFO, along with the investor relations team. I hope all of you have had an opportunity to review our financial results, the investor presentation, and the press release.

Speaker #3: So, let me start first with the operating environment. Q1 of FY27 has been an encouraging start to the year, and more importantly, the improvement that we started seeing during the second half of FY26 has continued into this quarter.

Speaker #3: Collection trends have remained stable; fresh delinquencies have moderated, and borrower behavior has continued to improve across most of our operating geographies. That said, I would still hesitate to say that the sector has completely normalized.

Aalok Patel: That said, I would still hesitate to say that the sector has completely normalized. We are clearly operating from a much stronger footing than we were a year ago, but there continues to be uncertainties in the broader economy, and we remain watchful. Volumes have been a bit lower than expected in Q1, but that is not unusual in the first quarter of the fiscal year, particularly given our continued emphasis on quality over quantity. I made a point on our previous call, which I think continues to remain relevant. The improvement that we are seeing should not necessarily be interpreted to mean that the ground-level environment has suddenly become easy. A meaningful part of the improvement is because we are selecting better, monitoring better, and also collecting better. That is obviously encouraging, but the macroeconomic environment continues to remain complicated.

Aalok Patel: That said, I would still hesitate to say that the sector has completely normalized. We are clearly operating from a much stronger footing than we were a year ago, but there continues to be uncertainties in the broader economy, and we remain watchful. Volumes have been a bit lower than expected in Q1, but that is not unusual in the Q1 of the fiscal year, particularly given our continued emphasis on quality over quantity. I made a point on our previous call, which I think continues to remain relevant. The improvement that we are seeing should not necessarily be interpreted to mean that the ground-level environment has suddenly become easy. A meaningful part of the improvement is because we are selecting better, monitoring better, and also collecting better. That is obviously encouraging, but the macroeconomic environment continues to remain complicated.

Speaker #3: We are clearly operating from a much stronger footing than we were a year ago, but there continue to be uncertainties in the broader economy, and we remain watchful.

Speaker #3: Volumes have been a bit lower than expected in Q1, but that is not unusual in the first quarter of the fiscal year, particularly given our continued emphasis on quality over quantity.

Speaker #3: I made a point on our previous call, which I think continues to remain relevant: the improvement that we are seeing should not necessarily be interpreted to mean that the ground-level environment has suddenly become easy.

Speaker #3: A meaningful part of the improvement is because we are selecting better, monitoring better, and also collecting better. That is obviously encouraging, but the macroeconomic environment continues to remain complicated.

Speaker #3: For us, the important thing is not to conclude that the cycle is behind us and simply go back to business as usual. At the same time, let me also say that cycles come and go, and they are part of the business that we have chosen.

Aalok Patel: For us, the important thing is not to conclude that the cycle is behind us and simply go back to business as usual. At the same time, let me also say that cycles come and go, and they are part of the business that we have chosen. The important thing is to learn, monitor, adapt, and to move forward. Against this backdrop, I am pleased to share that our consolidated AUM reached a record high of INR 2,925 crore as of 26 June, representing a growth of 36% year-on-year. Consolidated disbursements during the quarter were INR 686 crore, up 76% year-on-year, and represented our highest ever first quarter disbursements. Despite the strong AUM, I want to make it clear that it does not represent a change in our risk posture. Our rejection rates continue to remain relatively high, and we are comfortable with that.

Speaker #3: The important thing is to learn, monitor, adapt, and to move forward. Against this backdrop, I am pleased to share that our consolidated AUM reached a record high of ₹2,925 crore, as of June 26.

Speaker #3: Representing a growth of 36% year on year. Consolidated disbursements in the quarter were ₹686 crore, up 76% year on year, and represented our highest ever first quarter disbursements.

Speaker #3: Despite the strong AUM, I want to make it clear that it does not represent a change in our risk posture. Our rejection rates continue to remain relatively high, and we are comfortable with that.

Speaker #3: We continue to see healthy traction in our individual loan portfolio, which now accounts for 33% of our overall book and is becoming an increasingly important part of our microfinance business.

Aalok Patel: We continue to see healthy traction in our individual loan portfolio, which now accounts for 33% of our overall book and is becoming an increasingly important part of our microfinance business. The objective here is not simply to increase ticket size or move away from traditional JLG-based group lending. The objective is to move progressively towards more individualized credit assessment, where we understand the customer's household cash flow, credit behavior, and repayment capacity more closely and structure the loan accordingly. As this portfolio scales, the underwriting architecture becomes even more important. Wherever applicable, we are increasingly relying on, of course, credit history and bureau behavior, but also customer-level cash flow assessment and digital repayment mechanisms such as UPI mandates and eNACH. We believe that gives us a much better understanding of the individual borrower than relying purely on group behaviors or standardized one-size-fits-all credit filters.

Speaker #3: The objective here is not simply to increase ticket size or move away from traditional JLG-based group lending. The objective is to move progressively towards more individualized credit assessment, where we understand the customer's household cash flow, credit behavior, and repayment capacity more closely, and structure the loan accordingly.

Speaker #3: As this portfolio scales, the underwriting architecture becomes even more important. Wherever applicable, we are increasingly relying on, of course, credit history and bureau behavior, but also customer-level cash flow assessment and digital repayment mechanisms such as UPI mandates and eNACH.

Speaker #3: We believe that gives us a much better understanding of the individual borrower than relying purely on group behaviors or standardized, one-size-fits-all credit filters. Overall collection efficiency for Q1 stood at 96.6%, and we saw a steady improvement throughout the quarter.

Aalok Patel: Overall collection efficiency for Q1 stood at 96.6%, and we saw a steady improvement throughout the quarter. By June, overall collection efficiency had improved further, which gives us comfort on the behavior of the more recently originated portfolio. Our asset quality has continued to improve over the past four quarters with consolidated GNPA now at 2.76% and NNPA improving to 0.84%. Early-stage delinquencies have also remained largely stable at approximately 99.5% zero DPD flow forwards. One of the biggest changes that we have made over the last few quarters has been to bring greater independence and accountability into our credit and collection processes. We have strengthened the credit function at the point of origination and separately built dedicated collection teams. This has helped us become more disciplined in borrower selection and bring greater focus to collections. When we introduced these changes, they came with a meaningful increase in operating cost.

Speaker #3: By June, overall collection efficiency had improved further, which gives us comfort regarding the behavior of the more recently originated portfolio. Our asset quality has continued to improve over the past four quarters, with consolidated GNPA now at 2.76% and NNPA improving to 0.84%.

Speaker #3: Early-stage delinquencies have also remained largely stable at approximately 99.5% zero DPD flow forwards. One of the biggest changes that we have made over the last few quarters has been to bring greater independence and accountability into our credit and collection processes.

Speaker #3: We have strengthened the credit function at the point of origination and separately built dedicated collection teams. This has helped us become more disciplined in borrower selection and brought greater focus to collections.

Speaker #3: When we introduced these changes, they came with a meaningful increase in operating costs. We had said at the time that asset quality had to take priority over near-term operating expenses.

Aalok Patel: We had said at the time that the asset quality had to take priority over near-term operating expenses. I think we are now beginning to see the other side of that investment. The new structure is now pretty well embedded across the organization, and we are seeing better accountability, sharper credit decisions, and more focused collection execution. At the same time, as the portfolio has started growing again, our operating cost ratios are beginning to improve as well. Apart from improving asset quality, the independent credit structure has also given us greater confidence to scale the individual loan portfolios. Our consolidated pre-provisioning operating profit increased to INR 77 crore during the quarter from INR 59 crore in Q4 FY26. Cost to income improved meaningfully to 44.3% from 51.7% in the previous quarter.

Speaker #3: I think we are now beginning to see the other side of that investment. The new structure is now pretty well embedded across the organization, and we are seeing better accountability, sharper credit decisions, and more focused collection execution.

Speaker #3: At the same time, as the portfolio has started growing again, our operating cost ratios are beginning to improve as well. Apart from improving asset quality, the independent credit structure has also given us greater confidence to scale the individual loan portfolios.

Speaker #3: Our consolidated pre-provisioning operating profit increased to ₹77 crore during the quarter, from ₹59 crore in Q4 FY26. Cost to income improved meaningfully to 44.3%, from 51.7% in the previous quarter.

Speaker #3: Of course, there is still considerable work to be done on operating efficiency, and we are not exactly where we ultimately want to be, particularly in the microfinance business, but the direction is, of course, encouraging.

Aalok Patel: Of course, there is still considerable work to be done on operating efficiency, and we are not exactly where we ultimately want to be, particularly in the microfinance business, but the direction is, of course, encouraging. Our objective remains to bring operating costs down through a combination of portfolio scale, productivity improvements, and technologies without reversing the credit and recovery controls that have helped improve the quality of the book. We have also continued to strengthen portfolio protection through CGFMU scheme. As of 30 June 2026, approximately 94% of the eligible microfinance portfolio was covered under this scheme. That said, I also want to mention that we do not view CGFMU as a substitute for underwriting. The first line of defense always remains customer selection and collections.

Speaker #3: Our objective remains to bring operating costs down through a combination of portfolio scale, productivity improvements, and technology, without reversing the credit and recovery controls that have helped improve the quality of the book.

Speaker #3: We have also continued to strengthen portfolio protection through the CGFMU scheme. As of 30 June 2026, approximately 94% of the eligible microfinance portfolio was covered under the scheme.

Speaker #3: That said, I also want to mention that we do not view CGFMU as a substitute for underwriting. The first line of defense always remains customer selection and collections.

Speaker #3: The guarantee provides an additional layer of protection against tail-end events and, over time, should make credit losses more manageable and more predictable through cycles. On the consolidated financial performance, gross total income for the quarter stood at ₹202 crore, up 34% year-on-year and 15% sequentially.

Aalok Patel: The guarantee provides an additional layer of protection against tail-end events and over time should make credit losses more manageable and more predictable through cycles. On the consolidated financial performance, gross total income for the quarter stood at INR 202 crores, up 34% year-on-year and 15% sequentially. Net total income increased to INR 138 crores and PPOP, as I mentioned earlier, was INR 77 crores. Provisions and write-off for the quarter were INR 20 crores. Profit after tax stood at 45 crores compared with a loss of INR 15 crores in Q1 FY26, and INR 41 crore in Q4 FY26. Apart from the profit numbers, it is encouraging to see that profitability has improved alongside AUM growth, better collections, low fresh delinquencies, improving asset quality, and some early improvements in operating efficiency. That combination is much healthier than a recovery driven only by lower provisionings.

Speaker #3: Net total income increased to ₹138 crore, and PPOP, as I mentioned earlier, was ₹77 crore. Provisions and write-offs for the quarter were ₹20 crore.

Speaker #3: Profit after tax stood at Rs. 45 crores, compared with a loss of Rs. 15 crores in Q1 FY26 and Rs. 41 crores in Q4 FY26.

Speaker #3: Apart from the profit numbers, it is encouraging to see that profitability has improved alongside AUM growth, better collections, low fresh delinquencies, improving asset quality, and some early improvements in operating efficiency.

Speaker #3: That combination is much healthier than a recovery driven only by lower provisionings. Our consolidated MIN remained healthy at 17.4%, while annualized return on average AUM was 6.4%.

Aalok Patel: Our consolidated NIM remained healthy at 17.4%, while annualized return on average AUM was 6.4%. Return on equity was 18.9% for the quarter, annualized, of course. On capital and liquidity, we remain comfortably positioned. Capital adequacy stood at 33.6% for Arman standalone and 38.8% for Namra Finance. As of June 2026, our consolidated shareholders' equity was INR 979 crores. We also maintain a healthy liquidity position with INR 286 crores across cash and bank balances, liquid investments and undrawn CC limits. In addition, we have INR 335 crores of undrawn sanctions from existing lenders, providing us with sufficient headroom to support our funding requirement and growth plans. Moving on to the key financial and operational performance of Namra standalone. AUM for the quarter stood at INR 758 crores for our month, registering a 26% year-on-year and 4% sequential growth. Disbursement during the quarter improved to INR 156 crores, with MSME segment driving the growth.

Speaker #3: Return on equity was 18.9% for the quarter—annualized, of course. On capital and liquidity, we remain comfortably positioned. Capital adequacy stood at 33.6% for Arman standalone, and 38.8% for Namra Finance.

Speaker #3: As of June 2026, our consolidated shareholders' equity was ₹979 crores. We also maintained a healthy liquidity position, with ₹286 crores across cash and bank balances, liquid investments, and undrawn CC limits.

Speaker #3: In addition, we have ₹335 crore of undrawn sanctions from existing lenders, providing us with sufficient headroom to support our funding requirement and growth plans.

Speaker #3: Moving on to the key financial and operational performance numbers on a standalone basis. AUM for the quarter stood at ₹758 crore for Arman, registering a 26% year-on-year and 4% sequential growth.

Aalok Patel: Moving on to the key financial and operational performance of Namra standalone. AUM for the quarter stood at INR 758 crores for our month, registering a 26% year-on-year and 4% sequential growth. Disbursement during the quarter improved to INR 156 crores, with MSME segment driving the growth.Gross total income for the quarter stood at INR 66 crore, up 30% year-on-year, while PPOP stood at INR 24 crores. Profitability also improved with PAT at INR 15 crores, up 17% year-on-year and 48% quarter-on-quarter. Moving on to the key financial and operational performance of Namra Finance, our microfinance subsidiary. Namra AUM grew 39% year-on-year, and 8% sequentially to INR 2,167 crores as of June 2026. Disbursement during the quarter stood at INR 530 crores.

Speaker #3: Disbursements during the quarter improved to ₹156 crore, with the MSME segment driving the growth. Gross total income for the quarter stood at ₹66 crore, up 30% year-on-year, while PPOP stood at ₹24 crore.

Aalok Patel: Gross total income for the quarter stood at INR 66 crore, up 30% year-on-year, while PPOP stood at INR 24 crores. Profitability also improved with PAT at INR 15 crores, up 17% year-on-year and 48% quarter-on-quarter. Moving on to the key financial and operational performance of Namra Finance, our microfinance subsidiary. Namra AUM grew 39% year-on-year, and 8% sequentially to INR 2,167 crores as of June 2026. Disbursement during the quarter stood at INR 530 crores. This growth also reflected in operating performance. Gross total income for the quarter stood at INR 138 crores compared with INR 101 crores in Q1 FY26, registering a 35% year-on-year growth. PPOP increased INR 52 crores up 64% year-on-year and 26% quarter-on-quarter. The improvement in operating performance, along with lower provisions, translated into a meaningful improvement in profitability with PAT at INR 30 crores compared to a loss of INR 28 crores in Q1 FY26.

Speaker #3: Profitability also improved, with PAT at ₹15 crore, up 17% year-on-year and 48% quarter-on-quarter. Moving on to the key financial and operational performance of Namra Finance, our microfinance subsidiary.

Speaker #3: Number of AUM grew 39% year-on-year and 8% sequentially, to ₹2,167 crores as of June 2026. Disbursements during the quarter stood at ₹530 crores. This growth also reflected in operating performance: gross total income for the quarter stood at ₹138 crores, compared with ₹101 crores in Q1 FY26, registering a 35% year-on-year growth.

Aalok Patel: This growth also reflected in operating performance. Gross total income for the quarter stood at INR 138 crores compared with INR 101 crores in Q1 FY26, registering a 35% year-on-year growth. PPOP increased INR 52 crores up 64% year-on-year and 26% quarter-on-quarter. The improvement in operating performance, along with lower provisions, translated into a meaningful improvement in profitability with PAT at INR 30 crores compared to a loss of INR 28 crores in Q1 FY26.

Speaker #3: PPOP increased to ₹52 crore, up 64% year-on-year and 26% quarter-on-quarter. The improvement in operating performance, along with lower provisions, translated into a meaningful improvement in profitability, with PAT at ₹30 crore compared to a loss of ₹28 crore in Q1 FY26.

Speaker #3: We also saw an improvement in the underlying economies of the portfolio. We improved to 15.37% during the quarter, supported by better yields and a growing share of individual loans in the portfolio mix.

Aalok Patel: We also saw an improvement in the underlying economies of the portfolio. We improved to 15.37% during the quarter, supported by better yields and growing share of individual loans in portfolio mix. Our asset quality GNPA has, excuse me. On the asset quality, GNPA has improved significantly from its peak of 3.8% to 2.59% currently. This is encouraging and reflects the steady improvement we are seeing in collection and repayment behavior across the portfolio. Overall performance across both businesses remain healthy with stable growth, improving profitability and continued improvement in the portfolio quality. Looking ahead to the remainder of FY27, our approach remains largely unchanged. We want to grow, but we want that growth to be careful, calibrated and supported by quality of the underlying portfolio.

Speaker #3: Our asset quality—GNPA, excuse me, on the asset quality, GNPA has improved significantly from its peak of 3.8% to 2.59% currently. This is encouraging and reflects the steady improvement we are seeing in collection and repayment behavior across the portfolio.

Speaker #3: Overall performance across both businesses remained healthy, with stable growth, improving profitability, and continued improvement in portfolio quality. Looking ahead to the remainder of FY27, our approach remains largely unchanged.

Speaker #3: We want to grow, but we want that growth to be careful, calibrated, and supported by the quality of the underlying portfolio. We will continue to recalibrate growth based on what we see in collections, early delinquency trends, borrower cash flows, and, of course, overall macroeconomic conditions.

Aalok Patel: We will continue to recalibrate growth based on what we see in collections, early delinquency trends, borrower cash flows and, of course, overall macroeconomic conditions. There have been geopolitical uncertainties, some of which we discussed last quarter, disruptions arising from the situation in West Asia and weather-related uncertainties during the quarter. Given this operating environment, I had actually expected to see some marginal softening in the repayment behavior. Thankfully, so far, this has not shown up materially in our numbers. Of course, I would not conclude from this that there will be no impact, because macro events can sometimes affect our customer segments with a lag. At this stage, the portfolio has held up better than I had expected, and we will continue to monitor the situation very closely over the coming quarters.

Speaker #3: There have been geopolitical uncertainties, some of which we discussed last quarter, as well as disruptions arising from the situation in West Asia and weather-related uncertainties during the quarter.

Speaker #3: Given this operating environment, I had actually expected to see some marginal softening in the repayment behavior. Thankfully, so far this has not shown up materially in our numbers.

Speaker #3: Of course, I would not conclude from this that there will be no impact, because macro events can sometimes affect our customer segments with a lag. But at this stage, the portfolio has held up better than I had expected, and we will continue to monitor the situation very closely over the coming quarters.

Speaker #3: Overall, I believe we have entered FY27 from a considerably stronger position than we were 12 months ago. Importantly, that strength is not just reflected in asset quality or profitability.

Aalok Patel: Overall, I believe we have entered FY27 from a considerably stronger position than we were 12 months ago. Importantly, that strength is not just reflected in asset quality or profitability. We have also come through this cycle with a more disciplined underwriting framework, a stronger collections architecture, and better understanding of where we need to continue improving as an organization. Our priorities therefore remain very straightforward. Protect asset quality, maintain underwriting discipline, improve operating efficiency, grow responsibly, and continue building a sustainable lending practice. With that, thank you, and I would like to open the floor for questions.

Speaker #3: We have also come through this cycle with a more disciplined underwriting framework, a stronger collections architecture, and a better understanding of where we need to continue improving as an organization.

Speaker #3: Our priorities, therefore, remain very straightforward: protect asset quality, maintain underwriting discipline, improve operating efficiency, grow responsibly, and continue building a sustainable lending franchise. With that, thank you, and I would like to open the floor for questions.

Speaker #1: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone.

Operator 4: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ronald Chanda from Awriga Capital Advisors LLP. Please go ahead.

Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

Speaker #1: If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question.

Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ronap Chanda from Avreega Capital Advisors LLP.

Operator: The first question is from the line of Ronald Chanda from Awriga Capital Advisors LLP. Please go ahead.

Speaker #1: Please go ahead.

Speaker #2: Yeah, hi. I'm audible?

Ronald Chanda: Yeah. Hi. Am I audible?

Ronak Chheda: Yeah. Hi. Am I audible?

Speaker #3: Yes, hi.

Aalok Patel: Yes.

Operator 4: Yeah.

Operator: Yeah.

Speaker #2: Yeah, hi. Firstly, congratulations to the team on the results. Alok, in your opening remarks, you mentioned that things are not really behind us in terms of the cycle.

Ronald Chanda: Yeah. Hi. Firstly, congratulations to the team on the results. Aalok, in your opening remarks, you mentioned that things are not really behind us in terms of the cycle. But if I were to take a devil's advocate position here, actually it's not reflecting in the data which we presented or even your listed peers have published on the collection side, on the X bucket numbers, on the par numbers. What is it that is making you still cautious? Is it the scar of the last cycle, or are there some data points which keep you worried at night? Just wanted to pick up your thoughts on this one first.

Ronak Chheda: Yeah. Hi. Firstly, congratulations to the team on the results. Aalok, in your opening remarks, you mentioned that things are not really behind us in terms of the cycle. But if I were to take a devil's advocate position here, actually it's not reflecting in the data which we presented or even your listed peers have published on the collection side, on the X bucket numbers, on the par numbers. What is it that is making you still cautious? Is it the scar of the last cycle, or are there some data points which keep you worried at night? Just wanted to pick up your thoughts on this one first.

Speaker #2: But if I were to take a devil's advocate position here, it actually is not reflected in the data that we presented, or even in what your listed peers have published.

Speaker #2: On the collection side, on the X bucket numbers, on the PAR numbers, what is it that is making you still push? Is it the scar of the last cycle, or are there some data points which keep you worried at night?

Speaker #2: Just wanted to get your thoughts on this one first.

Speaker #3: No, surprisingly, all the data points are favorable. Perhaps it is a little bit of PPSB, but the macros at the ground level just don't seem to be— I mean, I have no data to back it up, just my own observations at the field level.

Aalok Patel: Surprisingly, all the data points are favorable. Perhaps it is a little bit of PTSD. But the macros on the ground level just don't seem to be as I have no data to back it, just my own observations on the field level, that as far as income growth, which you would expect to see in the rural, has not been happening for a while. Inflation is increasing. Jobs are there, but not the jobs that people want. Those kinds of factors kind of, I don't know, judgmentally, I wouldn't say scare me, but of course, concern me slightly. But apart from that, the data is favorable, the numbers are favorable, everything is good. So I have no reason to be pessimistic at all. But this is just something that we have to keep in the back of our head and be careful. That's all.

Speaker #3: As far as income growth, which you would expect to see in rural areas, that has not been happening for a while. Inflation is increasing.

Speaker #3: Jobs are there, but not the jobs that people want. So those kinds of factors kind of, I don't know—judgmentally, I wouldn't say scare me, but of course, concern me slightly.

Speaker #3: But apart from that, I mean, the data is favorable, the numbers are favorable, everything is good. So I have no reason to be pessimistic at all.

Speaker #3: But this is just something that we have to keep in the back of our minds and be careful, that's all.

Speaker #2: Okay, just on the asset quality again, you said asset quality will take precedence over the near-term investments in OPEX. You're also talking about recalibrated growth.

Ronald Chanda: Fair. Just on the asset quality again, you said asset quality will take precedence over the near-term investments in OPEX. You are also talking about recalibrated growth. You want to focus on the quality of the growth rather than the volumes. The rejection rates continue to be high. Just in this backdrop, how do you envisage this all playing out over the next two to three years? What is the kind of expectation from a credit cost performance which you would expect, saying that this was all worth it in the end? What is that goal on the credit cost which you expect out of the entire shift of focus towards a better quality book? If you could just comment.

Ronak Chheda: Fair. Just on the asset quality again, you said asset quality will take precedence over the near-term investments in OPEX. You are also talking about recalibrated growth. You want to focus on the quality of the growth rather than the volumes. The rejection rates continue to be high. Just in this backdrop, how do you envisage this all playing out over the next two to three years? What is the kind of expectation from a credit cost performance which you would expect, saying that this was all worth it in the end? What is that goal on the credit cost which you expect out of the entire shift of focus towards a better quality book? If you could just comment.

Speaker #2: You want to focus on the quality of the growth, rather than the volumes. The rejection rates continue to be high. Just in this backdrop, how do you emphasize how this all plays out over the next two to three years?

Speaker #2: I mean, what is the kind of expectation from a credit cost performance that you would expect, saying that this was all worth it in the end?

Speaker #2: What is the goal on the credit cost that you expect out of the entire shift of focus towards a better quality book? If you could just comment.

Speaker #3: You know, I have commented on things like that, and I have always really been wrong on it, because when cycles shift, it's never like, oh, you go from 2% credit cost to 3%, and you're like, okay, another 1%—who cares, right?

Aalok Patel: I have commented on things like that, and I have always really been wrong on it, because when cycles shift, it's never like, oh, you go from 2% credit cost to 3% and you are like, okay, another 1%, who cares, right? My balance sheet supports it, and why should I sacrifice growth today in exchange for maybe a 1% better credit cost a year down the road? But unfortunately, it does not work like that. When things go out of control, they go out of control very, very quickly. We made a lot of mistakes, but we are quick learners in that sense. Again, maybe I sounded more pessimistic than I should have in hindsight in my opening remarks. I am not talking about growth opportunities being there, but being scared. I am not scared. I am still confident.

Speaker #3: I mean, my balance sheet supports it, and why should I—why should I sacrifice growth today in exchange for maybe a 1% better credit cost a year down the road?

Speaker #3: But unfortunately, it does not work like that. When things go out of control, they go out of control very, very quickly. And so, that is—I mean, we made a lot of mistakes, but we are quick learners in that sense.

Speaker #3: So again, I don't want to—maybe I sounded more pessimistic than I should have, in hindsight, in my opening remarks. I am not talking about growth opportunities not being there, but about being scared.

Speaker #3: I am not scared. I'm still confident. It's just that I don't want the same euphoria that happened post-COVID, where everyone, including myself, went a little crazy and just started dispersing left and right.

Aalok Patel: It's just, I don't want the same euphoria that happened post-COVID, where everyone, including myself, went a little crazy and just started dispersing left and right. That's all I was trying to communicate.

Speaker #3: That's all I was trying to communicate.

Speaker #2: Okay. Okay. And last question to come back in the queue is on the standalone book on the MSME side. Now that most of these MFI players are also talking about individual loans, talking about cash flow-based underwriting, do you see the segment becoming crowded over time and probably people will start loosening their credit filters to chase growth?

Ronald Chanda: Fair. Last question, if I come back in the queue, is on the standalone book on the MSME side. Now that most of these MFI players are also talking about individual loans, talking about cash flows, underwriting, do you see the segment become crowded over time and probably people will start losing their credit filters to chase growth? Just how are you seeing the competitive intensity on that side of the business?

Ronak Chheda: Fair. Last question, if I come back in the queue, is on the standalone book on the MSME side. Now that most of these MFI players are also talking about individual loans, talking about cash flows, underwriting, do you see the segment become crowded over time and probably people will start losing their credit filters to chase growth? Just how are you seeing the competitive intensity on that side of the business?

Speaker #2: Just how are you seeing the competitive intensity on that side of the business?

Speaker #3: I mean, there are good players doing good business right now. I don't think anybody is going crazy in terms of sacrificing quality in exchange for growth, at least not yet.

Aalok Patel: Well, there are good players doing good business right now. I don't think anybody is going crazy in terms of sacrificing quality in exchange for growth. At least not yet. But of course, people have short memories. 6 months, 12 months down the road, some pressure, investor, promoter pressure, whatever it may be, will take over and people will start saying that, "Well, that was a year ago, that was 2 years ago. Things have changed." Just with this filter, let's reduce the scoring here. What do we gain? What do we lose? Those kinds of decisions are very common, and I'm not immune to it myself. So yeah, I think it's basic human behavior that life goes on sometimes, and you forget the bad stuff, and then you start becoming slightly more optimistic. By the time the next cycle hits, hopefully, you're not in a bad shape.

Speaker #3: But of course, people have short memories. Six months, 12 months down the road, some pressure—investor, promoter pressure, whatever it may be—will take over, and people will start saying, well, that was a year ago, that was two years ago, things have changed.

Speaker #3: Let's just tweak this filter. Let's are we being let's reduce the scoring here. What do we what do we gain? What do we lose?

Speaker #3: You know, those kinds of decisions are very common, and I'm not immune to it myself. So yeah, I think it's basic human behavior. Life goes on sometimes, and you forget the bad stuff, and then you start becoming slightly more optimistic.

Speaker #3: And by the time the next cycle hits, hopefully you're not in bad shape.

Speaker #2: Okay, perfect. Thank you. I'll look forward to your thoughts. Best of luck to the team.

Ronald Chanda: Perfect. Thank you, Aalok, for your thoughts. Best of luck to the team.

Ronak Chheda: Perfect. Thank you, Aalok, for your thoughts. Best of luck to the team.

Speaker #3: Thank you.

Aalok Patel: Thank you.

Speaker #1: Thank you. Ladies and gentlemen, to ensure that every participant gets an opportunity, please restrict your questions to two per participant.

Operator 4: Thank you. Ladies and gentlemen, to ensure that every participant gets an opportunity, please restrict your question to two per participant. The next question is from the line of Karthik from Unifi Mutual Fund. Please go ahead.

Operator: Thank you. Ladies and gentlemen, to ensure that every participant gets an opportunity, please restrict your question to two per participant. The next question is from the line of Karthik from Unifi Mutual Fund. Please go ahead.

Speaker #1: The next question is from the line of Karthik from Unifi Mutual Fund. Please go ahead.

[Company Representative] (Unifi Mutual Fund): Thanks for the opportunity and congratulations on the good set of numbers. I just had one question. Just on the recovery on write-offs and bad debt, how are we seeing that trending? Because most of the listed peers have also recorded good recoveries in their portfolio. I just wanted to understand how is it for us, and how will it be going forward.

Karthik Srinivas: Thanks for the opportunity and congratulations on the good set of numbers. I just had one question. Just on the recovery on write-offs and bad debt, how are we seeing that trending? Because most of the listed peers have also recorded good recoveries in their portfolio. I just wanted to understand how is it for us, and how will it be going forward.

Speaker #3: Thanks for the opportunity, and congratulations on a good set of numbers. I just had one question. Just on the recovery on write-offs and bad debt, how are we seeing that trending?

Speaker #3: Because most of the listed peers have also recorded good recoveries in their portfolios, I just wanted to understand how it is for us and how it is going forward.

Speaker #2: Bad debts recovery, Vivek, you have.

Aalok Patel: Bad debts recovery, Vivek, you have.

Speaker #3: So Karthik, when you talk of bad debts recovery, they've been pretty encouraging here as well. That could kind of give you a slightly detailed answer.

Vivek Modi: Karthik, in terms of bad debt recovery, it has been pretty encouraging here as well. Let me kind of give you a slightly detailed answer. The recent write-off that we have seen in the last, let us say, 24 months, include about INR 185 crores of write-off pool that we have done an ARC transaction on. We sold about INR 185 crores of pool under an ARC in March 2025. There, this has seen a recovery which is almost close to about 10%, and the overall recoveries in the write-off recovery has been about 34%. Which is on a comparative basis, seems to be a good recovery, and we are still not over with it. There is a good period of another at least 12 to 18 months left before these accounts kind of completely go stale.

Speaker #3: The decent write-off that we've seen in the last, let's say, 24 months includes about ₹185 crore of write-off pool that we've done in the ARC transaction.

Speaker #3: On this course, we sold about ₹185 crore of pool under an ARC in March '25. There, this has seen a recovery which is almost close to about 10%.

Speaker #3: And the overall recovery in the write-off recovery has been about 34%, which, on a comparative basis, seems to be a good recovery.

Speaker #3: And we are still not over with it. There is a good period of at least another 12 to 18 months left before these accounts completely go stale.

Speaker #2: Got it, sir. Sir, my second question is on the liquidity. So sir, post the so since last year, we have been a little high on liquidity because for obvious reasons.

[Company Representative] (Unifi Mutual Fund): Got it, sir. Sir, my second question is on the liquidity. Sir, since last year, we have been a little high on liquidity because for obvious reasons. We just wanted to understand when will you start having lower liquidity and moving into a more disbursement phase. Are you eyeing that phase now, or do you still want to understand the market dynamics better and then before you move to that zone?

Karthik Srinivas: Got it, sir. Sir, my second question is on the liquidity. Sir, since last year, we have been a little high on liquidity because for obvious reasons. We just wanted to understand when will you start having lower liquidity and moving into a more disbursement phase. Are you eyeing that phase now, or do you still want to understand the market dynamics better and then before you move to that zone?

Speaker #2: So, we just wanted to understand when this will go— I mean, when will you start having lower liquidity and move into a more disbursement phase?

Speaker #2: Is it are you eyeing that phase now, or are you still want to understand the market I mean, dynamics better and then before you move to that zone?

Speaker #3: I think our liquidity is already sufficiently low. I would not necessarily call our liquidity high. I mean, probably on average, we are maintaining, what, Vivek, about ₹300 crores?

Aalok Patel: I think our liquidity is already sufficiently low. I would not necessarily call our liquidity high. Probably on average, we are maintaining what, Vivek? About INR 300 crores.

Speaker #2: 300 crores is like

Vivek Modi: INR 300 is like-

Vivek Modi: INR 300 is like about one and a half months of repayment requirements, repayment obligations, and maybe maintaining one month's disbursement requirement, so to say.

Aalok Patel: About one and a half months of repayment requirements, repayment obligations, and maybe maintaining one month's disbursement requirement, so to say.

Speaker #3: about one and a half months of repayment requirements, repayment obligations. And we're maintaining one month's disbursement requirement, so to say, which is, I think, a standard requirement that we've been following.

Vivek Modi: Yeah

Aalok Patel: Yeah

Aalok Patel: Which is, I think, a standard requirement that we've been following so far. I would not necessarily call our current liquidity position as high. I would say it is probably not low either. It's probably Goldilocks just right.

Vivek Modi: Which is, I think, a standard requirement that we've been following so far.

Speaker #3: I would not necessarily call our current liquidity position high. I would say it is probably not low, either. It's probably Goldilocks—just right.

Aalok Patel: I would not necessarily call our current liquidity position as high. I would say it is probably not low either. It's probably Goldilocks just right.

Speaker #2: Got it, sir. That's it from my side. Thanks. Thanks so much, and all the very best.

[Company Representative] (Unifi Mutual Fund): Got it, sir. That's it from my side. Thanks so much, and all the very best.

Karthik Srinivas: Got it, sir. That's it from my side. Thanks so much, and all the very best.

Speaker #1: Thank you. The next question is from the line of Rohan Mehta from Fecom Family Office. Please go ahead.

Operator 4: Thank you. The next question is from the line of Rohan Mehta from Ficomm Family Office. Please go ahead.

Operator: Thank you. The next question is from the line of Rohan Mehta from Ficomm Family Office. Please go ahead.

Speaker #4: Hi. Am I audible?

Rohan Mehta: Hi, am I audible?

Speaker #3: Yep.

Operator 4: Yep.

Operator: Yep.

Speaker #4: Great, great. Thank you so much for the opportunity. Before I ask the question, I'll just give some context on three points. So, on yield: one of the larger peers is weighing about a 50 basis point cut in the lending rate.

Rohan Mehta: Great. Thank you so much for the opportunity. Before I ask the question, I will just give some context on three points. On yield, one of the larger peers, they are weighing about a 50 basis point cut in the lending rate this particular year. Another peer, they have now stopped raising rates, and they may pass those yields back to the customers. This is on yield. On funding, your current incremental borrowing cost is at 11.7%, and that has been coming down from the 12%-odd levels, but purely on the level at which you borrow is higher versus the peers. Of course, it also depends on the size of the book. The third point is your OPEX. If I annualize your OPEX, it comes to about 8.5% versus the target that you are aiming for at about 7% for FY27.

Speaker #4: This particular year, another peer has stopped raising rates, and they may pass those gains back to the customers. So, this is on yield.

Speaker #4: On funding, your current incremental borrowing cost is at 11.7%, and that has been coming down from the 12%-odd levels. But purely on the level at which you borrow, it is higher versus the peers. Of course, it also depends on the size of the book.

Speaker #4: But and the third point is your OPEX. So if I annualize your OPEX, it comes to about 8 and a half percent versus the target that you're aiming for at about 7% for FY27.

Speaker #4: So with that context in mind, at about 25 to 30 percent AUM growth that you have guided, what is the FY27 outlook on each of those three points which I earlier mentioned—which were yield, your funding cost, and your OPEX—and according to you, which is the one that will contribute the most towards profitability?

Rohan Mehta: With that context in mind, that about 25% to 30% AUM growth that you have guided, what is the FY27 outlook on each of those three points, which I earlier mentioned, which was yield, your funding cost, and your OPEX? According to you, which is the one that will contribute the most towards profitability? Right now, which one do you see has the most lever? Just one more thing on the cost front, are you focusing more on-

Speaker #4: Right now, which one do you see has the most leverage? And just one more thing on the cost front—are you focusing more?

Aalok Patel: Wait. Stop. I have already forgotten the first two-thirds of your question. Let's go one step at a time. What was your first question?

Speaker #5: Wait, wait, stop. I’ve already forgotten the first two-thirds of your question. Let’s go one step at a time. What was your first question?

Vivek Modi: Do we envisage reducing the coupons or the ROIs in the coming future?

Speaker #3: So, let me—regarding reducing the coupons or the ROIs in the coming quarters...

Vivek Modi: Do we envisage reducing the coupons or the ROIs in the coming future?

Speaker #5: Why?

Speaker #3: So his contention is that some of the larger ones have kind of hinted that they might bring it down.

Aalok Patel: Why?

Vivek Modi: His contention is that some of the larger ones have kind of hinted that they might be bringing down.

Speaker #5: I mean, so if I understood your question—listen, there are largely four components in doing this business. There is interest income, interest expense, you have your opex, and your credit cost, right?

Aalok Patel: If I understood your question, listen, there are largely four components in doing this business. There is interest income, interest expense, you have your OPEX and your credit cost. I think you are asking about all four at this point. Specifically on the yields, I think the only thing that really protects you is your top line when everything hits the fan. Already we are being watched by as many people as possible to keep the rates reasonable, specifically RBI, and we are always justifying what rates we are charging and how much we are charging. The other side of the coin is as far as the customers, are we losing customers because we are charging too high? Is it affordable to the customers? These are all kind of questions that we have to consider.

Speaker #5: And so, I think you are asking about all four at this point. So, specifically on the yields, I think the only thing that really protects you is your top line.

Speaker #5: When everything hits the fan, and already we are being watched by as many people as possible to keep the rates reasonable, specifically RBI, and we are always justifying what rates we are charging and how much we are charging.

Speaker #5: Now, the other side of the coin is, as far as the customers—are we losing customers because we are charging too high? Is it affordable to the customer?

Speaker #5: So, these are all kinds of questions that we have to consider. If we reach a point where we are making too much money, I'm okay with reducing rates.

Aalok Patel: If it reaches point where we are making too much money, I am okay with reducing rates, but I have not given it much thought at this point. That is, I think, the first line item. The second, I think you were talking about interest expense, the debt cost. Yes, that has been marginally coming down. I think if you are comparing to the peers, a lot of it has a function of size as well. That being said, it is a constant endeavor. Obviously, we possibly could do better in reducing it even further. I believe we are approaching rating agencies and stuff at this point also for upgrades, so hopefully that should meaningfully reduce it by, I do not know, Vivek, 20, 30 basis.

Speaker #5: But I've not given it much thought at this point, so that's, I think, the first line item. The second, I think you were talking about interest expense—the debt cost.

Speaker #5: So yes, that has been marginally coming down. I think if you are comparing to the peers, a lot of it is a function of size as well.

Speaker #5: But that being said, it's a constant endeavor. Obviously, we could possibly do better in reducing it even further. I believe we are approaching rating agencies at this point also for upgrades.

Speaker #5: So hopefully, that should meaningfully reduce it by, I don't know, Vivek, 20 or 30 bps at least.

Vivek Modi: Yeah, sure.

Speaker #3: Yeah, sure. Yeah, fully on that.

Aalok Patel: On the plate. The important thing is that while everybody in the industry, minus, let's say, the top 10 players who are facing issues related to liquidity, I cannot recall the last time that we needed money and we couldn't find it. Reducing interest cost obviously becomes the biggest endeavor. As far as OPEX, I've already mentioned in previous meetings and in my opening remarks that yes, it is high, and it's high for a reason. We have added the BCM structure. We have separated collection team, and over and above that, we are also subscribing to CGFMU. But I think that number that is at 8% was probably closer to 9% last quarter, and it'll probably reduce further in the next quarter as well. So OPEX is not increasing as fast as AUM.

Speaker #5: On the plate. The important thing is that while everybody in the industry—miners like, let's say, the top 10 players—were facing issues related to liquidity, I cannot recall the last time that we needed money and we couldn't find it, right?

Speaker #5: Reducing interest cost obviously becomes the biggest endeavor. Now, as far as OPEX, I've already mentioned in previous meetings and in my opening remarks, KS, it is high, and it's high for a reason.

Speaker #5: We have added the BCM structure. We have separated the collection team. And, over and above that, we are also subscribing to CGFMU. But I think that number, which is at 8%, was probably closer to 9% last quarter.

Speaker #5: And it'll probably reduce further in the next quarter as well. So, we have OPEX not increasing as fast as AUM. So, from a percentage standpoint, that should start coming down further in the coming quarters.

Aalok Patel: From a percentage standpoint, that should start coming down further in the coming quarters. And the goal is to get it down to 7%, which is what I had stated earlier, I don't know if it was one quarter or two quarters ago, by the end of March. So we are well on track to do that. I think, what was his third point on- Yeah.

Speaker #5: And the goal is to get it down to 7%, which is what I had stated earlier. I don't know if it was one quarter or two quarters ago.

Speaker #5: By the end of March, so we are well on track to do that. I think, what was his third point on?

Speaker #3: So, are we missing out on something beyond that?

Vivek Modi: on that.

Speaker #5: Yeah.

Speaker #4: Right. Right. Thank you for the clarification. So my last question is, when I look at the MSME PAR level—I'm talking 31 to 90.

Rohan Mehta: Right. Thank you for the clarification. My last question is on, when I look at the NSAM, par level, I am talking 31 to 19, that has marginally moved up from 0.7 to 0.9. If I take a look at also LAP, the GNPA has doubled, and considering that there is an LTV of 65% maximum. My question to you is, has there something seasonally changed in terms of competition or in terms of the quality of the collateral?

Speaker #4: So that has marginally moved up from 0.7 to 0.9. And if I take a look also at LAP, the GNP has doubled.

Speaker #4: And considering that there's an LTV of 65% maximum, my question to you is: has something seasonally changed in terms of competition, or in terms of the quality of the collateral?

Speaker #3: Well, there are some issues—there are...

Aalok Patel: There are some issues going on in Telangana. I think that is why, am I correct?

Aalok Patel: There are some issues going on in Telangana. I think that is why, am I correct? I mean, that would be the last

Speaker #5: Some issues are going on in Telangana, I think—that is why, am I correct? I mean, that would be the largest, a bit of slightly higher stress, which is again, I think, sectoral.

Vivek Modi: I mean, that would be the last have been consistent, but Telangana is being a bit of slightly higher stress, which is again, I think sectoral. I think everybody is being reporting some concern in Telangana, and that is why you see about 10 to 15 basis kind of upward.

Vivek Modi: have been consistent, but Telangana is being a bit of slightly higher stress, which is again, I think sectoral. I think everybody is being reporting some concern in Telangana, and that is why you see about 10 to 15 basis kind of upward.

Speaker #5: I think everybody's been reporting some concern in Telangana, and that's why you see about 10 or 15 basis points upward. I'm sure there are other reasons also.

Aalok Patel: I am sure there are other reasons also.

Speaker #3: Yeah, there are other reasons.

Vivek Modi: Yeah, there are other reasons.

Speaker #5: There are other reasons.

Speaker #4: Right, right. Any particular segments or pockets, apart from states, where you see there is too much exuberance rather than real demand, or any initial signs that you see upfront?

Rohan Mehta: Right. Any particular segments or pockets apart from states, like where you see there is too much exuberance rather than real demand or any initial signs that you see upfront?

Aalok Patel: None that I can think of on the spot.

Speaker #5: None that I can think of on the spot.

Speaker #4: Sure, sure, sure. Thank you. Thank you so much. I'm wishing you all the best.

Rohan Mehta: Sure. Thank you so much and wishing you all the best.

Speaker #5: Thank you.

Aalok Patel: Thank you.

Speaker #2: Thank you. The next question is from the line of Sonal from Prescient Capital. Please go ahead.

Operator 4: Thank you. The next question is from the line of Sonal from Prescient Capital. Please go ahead.

Operator: Thank you. The next question is from the line of Sonal from Prescient Capital. Please go ahead.

Speaker #6: Hi, this is Sonal Minas. Hi, I'm ordering?

Sonal Manas: Hi, this is Sonal Manas. Hi, Arman Financial?

Sonal Minhas: Hi, this is Sonal Manas. Hi, Arman Financial?

Speaker #5: Yeah, hi. Go ahead, please.

Aalok Patel: Yeah, hi. Go ahead, please.

Speaker #6: Yeah, yeah. So, my first question was with regard to the provisions that we have. If we see them quarter on quarter, we increased the provisions from 17.2 to 19.5.

Operator 3: Yeah. My first question was with regard to the provisions that we have. If you see them quarter-on-quarter, we increased the provisions from 17.2 to 19.5. Just wanted to understand some bit of subjective commentary on where some extra provisioning has been done on a quarter-on-quarter basis. That is one. The second question is that much like other NBFCs and other institutions, if you can add a chart or a table on your gross NPA additions, slippage on the similar schedule for provisions. That will just help us around this 360 degree. Thanks.

Sonal Minhas: Yeah. My first question was with regard to the provisions that we have. If you see them quarter-on-quarter, we increased the provisions from 17.2 to 19.5. Just wanted to understand some bit of subjective commentary on where some extra provisioning has been done on a quarter-on-quarter basis. That is one. The second question is that much like other NBFCs and other institutions, if you can add a chart or a table on your gross NPA additions, slippage on the similar schedule for provisions. That will just help us around this 360 degree. Thanks.

Speaker #6: I just wanted to understand some subjective commentary on where extra provisioning has been done on a quarter-on-quarter basis. That's one.

Speaker #6: And the second question is, just like other NBFCs and other institutions, if you can add a chart or a table on your gross NPA addition, slippage on a similar schedule for provisions—that just helps us get a 360-degree view.

Speaker #6: Thanks.

Speaker #5: Provisions have increased by ₹3 crores?

Aalok Patel: Provisions have increased by INR 3 crores. We are talking of provision increasing now, Arman, in absolute terms. Am I

Aalok Patel: Provisions have increased by INR 3 crores.

Vivek Modi: We are talking of provision increasing now, Arman, in absolute terms. Am I

Speaker #3: You're talking about provision increasing now, Arman? In absolute terms?

Speaker #6: Yeah, yeah. So provisions at the consolidated level have gone up from 17.2 to 19.5. Just wanted to understand that. Yeah.

Sonal Manas: Yeah. Provisions at the consolidated level have gone up from 17.2 to 19.5. Just want to understand that. Yeah.

Sonal Minhas: Yeah. Provisions at the consolidated level have gone up from 17.2 to 19.5. Just want to understand that. Yeah.

Speaker #3: You're talking about the P&L number, right?

Aalok Patel: You are talking of a P&L number, right?

Speaker #6: Yes. Yes. Yes.

Sonal Manas: Yes.

Sonal Minhas: Yes.

Sonal Manas: It is primarily, I think the portfolio. The portfolio would have grown, the portfolio would have grown, that is right. The portfolio has grown.

Aalok Patel: It is primarily, I think the portfolio. The portfolio would have grown, the portfolio would have grown, that is right.

Speaker #3: It's primarily, I think, that the portfolio would have grown. That's right—the portfolio has grown.

Vivek Modi: The portfolio has grown.

Speaker #6: Okay. Is it linked to increasing the LAP NPA for the LAP portfolio?

Operator 3: Okay. Is it linked to increasing the NPA for the LAP portfolio?

Sonal Minhas: Okay. Is it linked to increasing the NPA for the LAP portfolio?

Sonal Manas: No. In fact, NPAs have kind of come down.

Vivek Modi: No. In fact, NPAs have kind of come down.

Speaker #3: In fact, NPAs have kind of come down, but they have come down. But overall, the portfolio has expanded by about ₹200 crore in microfinance and about ₹100 crore in Arman standalone.

Sonal Manas: NPAs have come down.

Aalok Patel: NPAs have come down.

Aalok Patel: Come down. Overall, the portfolio expanded by about INR 200 crores in Microfinance and about INR 100 crores in Arman standalone. As the portfolio grows, just that number will go up.

Vivek Modi: Come down. Overall, the portfolio expanded by about INR 200 crores in Microfinance and about INR 100 crores in Arman standalone. As the portfolio grows, just that number will go up.

Speaker #3: So, as the portfolio grows, just that upper number would go up.

Speaker #6: Okay. And if you could just take care of the request on the schedule or disclosure for NPAs, as well as provisions, that will just help us understand the math in numeric terms.

Sonal Manas: Okay. If you could just take care of the request on the schedule or disclosure for NPAs as well as provisions, that will just help us understand the maths in the number terms.

Sonal Minhas: Okay. If you could just take care of the request on the schedule or disclosure for NPAs as well as provisions, that will just help us understand the maths in the number terms.

Speaker #3: You want the disclosure on what exactly? A table on how the NPA was arranged?

Aalok Patel: You want the disclosure on what exactly? A table on how the NPA was arriving?

Speaker #6: Opening and closing of NPAs, and opening and closing of provisions. Yeah.

Sonal Manas: Opening closing of NPAs and opening closing of provisions.

Sonal Minhas: Opening closing of NPAs and opening closing of provisions.

Sonal Manas: Yeah. Okay. We will try to build it in. Vivek, he is talking about the total provisions and write-offs on a P&L number, not the balance sheet number.

Vivek Modi: Yeah. Okay. We will try to build it in.

Speaker #3: Okay. All right.

Speaker #5: Oh, we're kind of building in there.

Speaker #3: Vivek, he's talking about the total provisioning and write-offs on a P&L number, not the balance sheet number.

Aalok Patel: Vivek, he is talking about the total provisions and write-offs on a P&L number, not the balance sheet number.

Speaker #6: The balance sheet number as well, because the balance sheet number leads to the—the balance sheet number leads to the P&L number.

Sonal Manas: The balance sheet number as well, because the balance sheet number leads to the P&L number, basically.

Sonal Minhas: The balance sheet number as well, because the balance sheet number leads to the P&L number, basically.

Speaker #5: As far as Q4 of '26, which is what you are seeing, I mean, that was substantially lower because we had over-provided during the rest of it.

Aalok Patel: As far as Q4 of 2026, which is what you are seeing, that was substantially lower because we had over-provided during the rest of it. For the full year, it was like INR 150 crores. So it is not really comparable. It is not really comparable. The 17.2 and the 19.5 you were mentioning, that is the P&L number in provisions and write-offs. There was too much stuff going on last year, so it is not really very comparable from Q4 to Q1.

Speaker #5: For the full year, it was around ₹150 crore, so it's not really comparable. Yeah, it's not really comparable. The ₹17.2 crore and the ₹19.5 crore he was mentioning—that's a P&L number in provisions and write-offs.

Speaker #5: There was too much stuff going on last year, so it's not really very comparable from Q4 to Q1.

Speaker #6: Okay. All right. Thank you.

Sonal Manas: Okay. All right. Thank you.

Sonal Minhas: Okay. All right. Thank you.

Speaker #5: Sorry, it was a little confusing. I was thinking of the balance sheet number.

Aalok Patel: Sorry, I was a little confused. I was thinking of the balance sheet number.

Speaker #6: All right. Thank you.

Sonal Manas: All right. Thank you.

Sonal Minhas: All right. Thank you.

Speaker #5: Go ahead. Next question, please.

Aalok Patel: All right. Next question, please.

Speaker #2: Thank you. The next question is from the line of Keshav Karwa from White Pine Investment Management Private Limited. Please go ahead.

Operator 4: Thank you. The next question is from the line of Keshav Karwa from White Pine Investment Management Private Limited. Please go ahead.

Operator: Thank you. The next question is from the line of Keshav Karwa from White Pine Investment Management Private Limited. Please go ahead.

Speaker #4: Hi, sir. Thank you for the opportunity, and congratulations on the good set of numbers. Sir, I had two questions. One is on how the July collection trends are—did you see any stress in any of the books as such?

Keshav Karwa: Hi, sir. Thank you for the opportunity, and congratulations on a good set of numbers. Sir, I have two questions. One is on how were the July collection trends. Did you see any stress in any of the books as such?

Speaker #5: I mean, marginally, there were issues related to rain in Gujarat and stuff like that. But that has subsequently been covered up. So it's hard to assess, to be honest, with basis point differences.

Aalok Patel: Marginally, there were issues related to rain in Gujarat and stuff like that, but that has subsequently been covered up. It is hard to assess, to be honest, with basis point differences. Was July slightly lower than June? Yes, marginally, in terms of repayment rates of on a static pool basis and in zero DPD, I believe it was three basis different. But three basis points can be just a blip for severe downpour in Gujarat, similarly in north UP and parts of Bihar. Those are more cyclical in nature, and I think they will be taken care of. Nothing that concerns me immediately.

Speaker #5: Was July slightly lower than June? Yes, marginally, in terms of repayment rates on a static pool basis and in zero DPD, I believe.

Speaker #5: Different. But as to three basis points, it can just be a blip or—

Speaker #3: Severe downfall in South Gujarat; similarly, not in UP and parts of Bihar. So, those are more technical in nature, and I think they will be taken care of.

Speaker #5: Yeah, yeah. So, nothing that concerns me immediately.

Speaker #6: Okay. And second is on credit cost. Are we still maintaining the guidance at 3%, or planning to improve it further for the rest of the year?

Keshav Karwa: Okay. Second is on credit cost. Are we still maintaining the guidance at 3% or planning to improve it further for the rest of the year?

Speaker #5: Did we give such guidance?

Aalok Patel: Did we give such a guidance? No, we did say that we expect the credit cost to remain about 3% to 3.5% going forward. I think that is not a guidance that we would like to say that way, but if you probably include the cost of the CGFMU, then yes, probably 3% sounds about right. Maybe 2.5%, if we are lucky. Let us see how the quarter progresses.

Speaker #3: No, we did say that we expect the credit cost to remain about 3 to 3.5%. Going forward, I think that's not a guidance that you would like to state that way.

Speaker #3: But then.

Speaker #5: See, if you probably include the cost of the CGFMU, then yes, probably 3% sounds about right. Maybe 2.5%, 2% if you're lucky.

Speaker #5: Let's see how the year progresses.

Speaker #6: Okay.

Keshav Karwa: Okay.

Keshav Karwa: No. I'm not sure. I have no idea, to be honest.

Aalok Patel: No. I'm not sure. I have no idea, to be honest.

Speaker #5: No, I'm not sure. I have no idea, to be honest.

Speaker #6: Okay. Okay, sir.

Keshav Karwa: Okay, sir.

Speaker #2: Thank you. The next question is from the line of Siddhartha Venkatesh from Vayu Capital. Please go ahead.

Operator 4: Thank you. The next question is from the line of Siddharth Venkatesh from Vayu Capital. Please go ahead.

Operator: Thank you. The next question is from the line of Siddharth Venkatesh from Vayu Capital. Please go ahead.

Siddharth Venkatesh: Hi, sir. Thank you for the opportunity, and really congratulations on the great set of numbers. My question is broadly on the industry perspective. We are seeing players diversifying away from JLG-based lending to more towards individual lending. There is this talk that JLG model is going to become unsustainable. I just wanted your commentary on how you are seeing this JLG lending and what is the ground level for Arman. In the next two, three years, how do you see this JLG book split versus your more individual split? That is my question.

Siddartha Venkatesh: Hi, sir. Thank you for the opportunity, and really congratulations on the great set of numbers. My question is broadly on the industry perspective. We are seeing players diversifying away from JLG-based lending to more towards individual lending. There is this talk that JLG model is going to become unsustainable. I just wanted your commentary on how you are seeing this JLG lending and what is the ground level for Arman. In the next two, three years, how do you see this JLG book split versus your more individual split? That is my question.

Speaker #6: Hi, sir. Thank you for the opportunity, and really, congratulations on the great set of numbers. My question is broadly on the industry perspective.

Speaker #6: So, we are seeing players diversifying away from JLG-based lending to more sorts of individual lending. And there is a thought that the JLG model is going to become unsustainable.

Speaker #6: So I just wanted your commentary on how you are seeing this JLG lending and what is the ground level for Arman. And in the next two to three years, how do you see this JLG book split versus your more individual split?

Speaker #6: So that is my question.

Speaker #5: So, I mean, as far as JLG, I have made my feelings quite clear for, I think, at least the last eight quarters, maybe six quarters.

Aalok Patel: JLG, I have made my feelings quite clear for I think at least the last eight odd quarters, maybe six quarters. JLG, yes. I would use the term broken and stuff, but earlier it used to provide sufficient risk mitigation where you could replace it with individualized credit assessment, if that kind of makes sense. Today with changing scenarios, with multiple cycles, with easy availability, with multiple players, most importantly culture of the emerging new generations and stuff like that, it was no longer providing the kind of risk mitigation that we were used to, let's say, 10 years ago. It is okay to still do group-based lending. It still offers some advantage, especially in terms of OPEX if you are dependent on cash collections. Because instead of going to one place to collect from one customer, you can go to one place and collect from multiple customers.

Speaker #5: JLG, yes, I would use the term 'broken' and stuff, but earlier, it used to provide sufficient risk mitigation, where you could replace it with individualized credit assessment, if that kind of makes sense.

Speaker #5: Today, with changing scenarios, multiple cycles, easy availability, multiple players, and most importantly, the culture of the emerging new generations and things like that, it was no longer providing the kind of risk mitigation that we were used to, let's say, 10 years ago.

Speaker #5: And so therefore, it's okay to still do group-based lending. It's still offers some advantage. Especially in terms of OPEX, if you are dependent on cash collections because instead of going to one place, you can go to or instead of going to one place to collect from one customer, you can go to one place and collect from multiple customers.

Speaker #5: So there are definitely advantages to still not completely dismiss JLG, but in my humble opinion—and there are many in my peer groups who are more experienced and may disagree with me as well.

Aalok Patel: There are definitely advantages to still not completely dismiss JLG. But in my humble opinion, and there are many in my peer groups that are more experienced who disagree with me also, and nothing wrong with that using JLG and not doing individualized credit assessment or relying too much on JLG's ability to mitigate risk is not sufficient in today's day and age. My opinion is that you have to do an individualized credit assessment. What I mean by that is that you cannot have a one-size-fits-all credit policy that under 2 lakh is a good customer and over 2 lakh outstanding is a bad customer, and 12,500 is the magic EMI that he should be servicing. Stuff like that, like one size fits all.

Speaker #5: There's nothing wrong with that. However, using it for JLG and not conducting individualized credit assessments, or relying too much on JLG's ability to mitigate risk, is not sufficient in today's day and age.

Speaker #5: And so my opinion is that you have to do an individualized credit assessment. What I mean by that is you cannot have a one-size-fits-all credit policy where under ₹2 lakh is a good customer and over ₹2 lakh outstanding is a bad customer, and ₹12,500 is the magic EMI that you should be servicing.

Speaker #5: Stuff like that—one size fits all. So unfortunately, the business has become more complicated, and therefore, just like any other lending product, each customer will require their own assessment.

Aalok Patel: Unfortunately, the business has become more complicated and therefore, just like any other lending product, each customer will require their own assessment. I hope that sufficiently answers your question. I think I am going all over the place.

Speaker #5: I hope that sufficiently answers your question. I think I was going all over the place.

Speaker #6: Yes, yes. Thank you, sir. That's it from my side. Thank you.

Siddharth Venkatesh: Yes. Thank you, sir. That is from my side. Thank you.

Siddartha Venkatesh: Yes. Thank you, sir. That is from my side. Thank you.

Speaker #2: Thank you. The next question is from the line of Sreenath from Bellwether. Please go ahead.

Operator 4: Thank you. The next question is from the line of Srinath from Bellwether. Please go ahead.

Operator: Thank you. The next question is from the line of Srinath from Bellwether. Please go ahead.

Speaker #6: Hi, Alok. Am I audible?

[Company Representative] (Bellwether): Hi, Aalok, am I audible?

Srinath V.: Hi, Aalok, am I audible?

Speaker #3: Yes, yes. Hi, Sreenath.

Aalok Patel: Yes. Hi, P..

Speaker #6: Yeah. Congratulations on the fantastic set of numbers. Ronak and I are going to take you for a drink to cheer you up after that opening statement.

[Company Representative] (Bellwether): Yeah. Congratulations on the fantastic set of numbers. Yeah, me and Ronak are going to take you for a drink to cheer you up after that opening statement. Generally, wanted to get a feel that last time in 2023 towards the end, we did about INR 530 crores of disbursement with something like 275 to 280 branches. Now we are at 400, 425 branches. With this current infrastructure and whatever extra people we have put in for credit, do you think our current infrastructure can take us to like INR 700, 750 crore kind of disbursement? Whenever that happens, but just do we have the infrastructure to support that kind of scale?

Srinath V.: Yeah. Congratulations on the fantastic set of numbers. Yeah, me and Ronak are going to take you for a drink to cheer you up after that opening statement. Generally, wanted to get a feel that last time in 2023 towards the end, we did about INR 530 crores of disbursement with something like 275 to 280 branches. Now we are at 400, 425 branches. With this current infrastructure and whatever extra people we have put in for credit, do you think our current infrastructure can take us to like INR 700, 750 crore kind of disbursement? Whenever that happens, but just do we have the infrastructure to support that kind of scale?

Speaker #6: So generally, I wanted to get a feel that last time, in 2023, towards the end, we did about ₹530 crore of disbursement with something like 275 to 280 branches.

Speaker #6: Now we are at 400, 425 branches. So with this current infrastructure and whatever extra people we have put in for credit, do you think our current infrastructure can take us to, like, Rs 700–750 crore kind of disbursement?

Speaker #6: Whenever that happens. But just, do we have the infrastructure to support that kind of scale?

Speaker #3: 750 per month or per quarter? Per quarter.

Aalok Patel: INR 750 per month or per quarter?

[Company Representative] (Bellwether): Per quarter.

Vivek Modi: Per quarter.

Speaker #5: Yeah, 100%. It's more than sufficient.

Aalok Patel: Per quarter. Yeah, 100%.

[Company Representative] (Bellwether): Yeah.

Srinath V.: Yeah.

Aalok Patel: This is more than sufficient.

Speaker #6: Perfect.

[Company Representative] (Bellwether): Perfect.

Srinath V.: Perfect.

Speaker #5: So, as I mentioned, Q1 was slightly slower on the volumes than I expected. But that's okay—I mean, that's not really unexpected. But with everything kind of being deleveraged and stuff like that, I was expecting slightly higher volumes.

Aalok Patel: So as I mentioned, Q1 was slightly slower on the volume than I expected. But that is okay. That is not really unexpected. But with everything kind of being de-leveraged and stuff like that, I was expecting slightly higher volumes. But that is fine. You cannot force these things. Obviously, the team has also been more on collection mode than growth mode for the past two years. So that will come back in the next couple of quarters. So I am not too worried about that. But yeah, I think the current infrastructure can. We have already done it.

Speaker #5: But that's fine. You cannot force these things, obviously. The team has also been more in collection mode than growth mode for the past two years.

Speaker #5: So that will come back in the next couple of quarters, so I'm not too worried about that. But yeah, I think the current infrastructure can—I mean, we've already done it in Q4.

Vivek Modi: Quarter 4

Speaker #5: Quarter four was 700-plus, I think.

Aalok Patel: Quarter 4 was 700 plus, I think.

Speaker #6: No, I was only speaking about microfinance, not the total business—just microfinance.

[Company Representative] (Bellwether): No. I only spoke about microfinance, not the total business. Just microfinance.

Srinath V.: No. I only spoke about microfinance, not the total business. Just microfinance.

Speaker #3: Yeah. Yeah, yeah. So Sreenath.

Vivek Modi: Yeah. P.

Speaker #5: Just microfinance was how much?

Aalok Patel: Just microfinance was how much?

Speaker #3: Quarter four, microfinance alone: ₹638 crore.

Vivek Modi: Q4 microfinance alone,

[Company Representative] (Bellwether): INR 738 crore. Yeah.

Srinath V.: INR 738 crore. Yeah.

Speaker #6: Yeah.

Speaker #3: Okay. Okay.

Aalok Patel: That was BGA, sir. The RNR was for BGA, sir. Yeah. It is definitely doable.

Srinath V.: That was BGA, sir. The RNR was for BGA, sir. Yeah. It is definitely doable.

Speaker #5: That was DGFM. We were, that was. The RNR was for DGFM. Yeah. All right. Yeah. So it's definitely doable.

Speaker #6: Got it. So, we have the kind of infrastructure to support growth. It's just about how credit and how the profiles flow to you, and how comfortable you feel.

[Company Representative] (Bellwether): Got it. We have the kind of infrastructure to support growth. It is just about how credit and how the profiles flow to you and how comfortable you feel. Is that a fair understanding?

Srinath V.: Got it. We have the kind of infrastructure to support growth. It is just about how credit and how the profiles flow to you and how comfortable you feel. Is that a fair understanding?

Speaker #6: Is that a fair understanding?

Speaker #5: That is, I would say, a fair understanding, yes.

Aalok Patel: That is, I would say, a fair understanding, yes.

Speaker #6: Perfect. Can you spend a little time on that?

[Company Representative] (Bellwether): Perfect. Can you spend a little time on the-

Srinath V.: Perfect. Can you spend a little time on the-

Speaker #5: One second. One second. Hold on.

Aalok Patel: One second. Hold on.

Speaker #3: Sreenath, just to correct the number, I think it's slide 30 on the presentation—it says disbursement for microfinance. The number for quarter four was 738 crores.

Vivek Modi: Srinath, just to correct the number, I think slide 30 on the presentation, it says disbursement for microfinance number for Q4 was INR 738 crore.

Speaker #6: Oh, oops. So, my error in my model. Cool.

[Company Representative] (Bellwether): Oh, oops. My bad. Cool.

Srinath V.: Oh, oops. My bad. Cool.

Speaker #3: No problem. One more drink for that.

Aalok Patel: No problem. One more drink for that.

Speaker #6: Yeah, sure, sure, sure. If we can broadly get some understanding of how the LAP business is doing—geographical expansion, credit experience, the experience of dealing with these loan papers, the hypothecation—and also, by now, I would have felt that this business could have reached, like, a ₹40-50 crore disbursement per quarter. So, where are we?

[Company Representative] (Bellwether): Yeah. Sure. If we can broadly give some understanding of how the LAP business is doing a geographical expansion, credit experience, the experience of dealing with these loan papers, the hypothecation. Also by now, I would have felt that this business could have reached like a 40, 50 crore disbursement per quarter. So where are we? How do you assess our progress in the product? So a complete 360 on this product would be great.

Srinath V.: Yeah. Sure. If we can broadly give some understanding of how the LAP business is doing a geographical expansion, credit experience, the experience of dealing with these loan papers, the hypothecation. Also by now, I would have felt that this business could have reached like a 40, 50 crore disbursement per quarter. So where are we? How do you assess our progress in the product? So a complete 360 on this product would be great.

Speaker #6: How do you assess our progress in the product? A complete 360 on this product would be great.

Aalok Patel: It is not a bad product. We have seen enough files now and done enough business. But it is not an easy product for us. We are unsecured people. We are microfinance. We like to open branches, and people come to us to borrow money. LAP is a slight change in our normal culture where, in the secured side, there is a lot of competition, and the tags are very, very high. Getting the documents prepared is also a bit of a hassle. So I agree, things could have looked better. That said, these things take time. MSME, when we started it in 2018, for two, three years, things were negligible in terms of disbursement. Then eventually we found our footing and things expanded. You cannot force these things. It will take its own time. But as I mentioned, this is not our normal cup of tea.

Speaker #5: It's not a bad product. I mean, we have seen enough files now and done enough business. But it's not an easy product for us.

Speaker #5: I mean, we are unsecured people, right? We are microfinance. We like to open branches and people come to us to borrow money. LAP is a slight change in our normal culture, where on the secured side, there's a lot of competition.

Speaker #5: And the taxes are very, very high. Getting the documents prepared is also a bit of a hassle, so I agree—things could have looked better.

Speaker #5: That said, I'm not—these things take time. MSME, when we started it in 2018, for two, three years, things were negligible in terms of disbursement.

Speaker #5: And then, eventually, we found our footing and things expanded. So you cannot force these things; it will take its own time. But, as I mentioned, this is not our normal cup of tea.

Speaker #5: I'm still comfortable with it. But there's a lot of competition for LAP loans and secured loans in general in the market. Everybody wants to do it.

Aalok Patel: I am still comfortable with it. But there is a lot of competition for LAP loans and secured loans in general in the market. Everybody wants to do it. Even MFIs want to do it, SFBs want to do it, banks want to do it, and FinTechs want to do it. Everybody wants to do it, so there is a lot of competition.

Speaker #5: Even MFIs want to do it, and SFBs want to do it, and banks want to do it, and fintechs want to do it. Everybody wants to do it.

Speaker #5: So, there's a lot of competition.

Speaker #6: So basically, here, more than the profiles and our infrastructure, the issue is that there are basically three guys wanting to lend to the same person, and therefore, that is the main issue in scaling up this product?

[Company Representative] (Bellwether): Basically here, more than the profiles and our infrastructure, the issue is that there are basically three guys wanting to lend to the same person and therefore that is the main issue in scaling up this product?

Srinath V.: Basically here, more than the profiles and our infrastructure, the issue is that there are basically three guys wanting to lend to the same person and therefore that is the main issue in scaling up this product?

Speaker #5: Correct. I would say the main issue is probably competition, yes.

Aalok Patel: Correct. I would say, the main issue is probably competition.

Speaker #6: Perfect. Perfect. Cool. Thanks a lot, guys. And I hope this year, even with your opening statement, it will sparkle. Thank you.

[Company Representative] (Bellwether): Perfect. Cool. Thanks a lot, guys, and hope this year, even with your opening statement, it will sparkle. Thank you.

Srinath V.: Perfect. Cool. Thanks a lot, guys, and hope this year, even with your opening statement, it will sparkle. Thank you.

Speaker #5: Yes. Yes.

Aalok Patel: Yes.

Speaker #1: Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star one on your touchscreen telephone. Ladies and gentlemen, if you wish to ask a question, please press star one on your touchscreen telephone.

Operator 4: Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on your touchtone telephone. Ladies and gentlemen, if you wish to ask a question, please press star and one on your touchtone telephone. The next question is from the line of Pratyush, an individual investor. Please go ahead.

Operator: Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on your touchtone telephone. Ladies and gentlemen, if you wish to ask a question, please press star and one on your touchtone telephone. The next question is from the line of Pratyush, an individual investor. Please go ahead.

Speaker #1: The next question is from the line of Pratyush, an individual investor. Please go ahead.

Speaker #5: Thank you, Alok sir and Vivek sir for the opportunity. I have two questions. Firstly, for the ROA, in the previous concourse, you had guided about four and a half to five percent ROA.

[Company Representative]: Thank you, Aalok sir and Vivek sir for the opportunity. I have two questions. Firstly, for the ROA. In the previous con call, you had guided about 4.5% to 5% ROA, and this time in the investor presentation you mentioned 5% to 6%, and this quarter we have actually done 6.4%. Is there any structural upside that you see in the ROA?

[Shareholder] (Private Investor): Thank you, Aalok sir and Vivek sir for the opportunity. I have two questions. Firstly, for the ROA. In the previous con call, you had guided about 4.5% to 5% ROA, and this time in the investor presentation you mentioned 5% to 6%, and this quarter we have actually done 6.4%. Is there any structural upside that you see in the ROA?

Speaker #5: And based on the time in the investor presentation, you mentioned five to six. In this quarter, we've actually done 6.4. So is there any structural upside that you have seen in the ROA?

Aalok Patel: Okay. Its quality is just a little higher than we predicted. See, ROA is a function of leveraging also. As the leveraging goes up, that number naturally comes down, and then ROEs tend to go up. When I say such things, sometimes I just say it. There is not a lot of thought and calculation that goes. Neither I give tables saying that, "Well, at this leverage it should be this percent, and then debt-equity ratio of this, it will go down to that." I don't give any guidance on ROAs, very frankly. I don't. Where did we put 5% to 6%?

Speaker #5: Okay, so yeah, apologies. It's a little higher than I predicted. But no, see, ROA is a function of leveraging also. So as the leveraging goes up, that number naturally comes down.

Speaker #5: And then ROEs tend to go up. So when I say such things, sometimes I just say it. I mean, there's not a lot of thought and calculation that goes, neither do I give tables saying that, well, at this leverage, it should be this percent, and then debt-equity ratio of this, it will go down to that.

Speaker #5: I mean, I just— I don't give any guidance on ROAs, very frankly. So I don't— where did we put five to six percent?

Speaker #3: So, historically, we've been able to deliver something like 5 to 6 percent ROAs.

[Company Representative] (Bellwether): Historically we've been able to deliver something like 5%, 6% ROAs approximately.

Vivek Modi: Historically we've been able to deliver something like 5%, 6% ROAs approximately.

[Company Representative]: Okay, sir. Secondly,

[Shareholder] (Private Investor): Okay, sir. Secondly,

Speaker #5: So, secondly, there is nothing. Okay. So, I'm sorry. I'm sorry I didn't answer your question. Yes, ROAs were fairly good this quarter. Do I have any guidance to give towards ROA?

Aalok Patel: There is nothing. Okay. I'm sorry I didn't answer your question. Yes, ROAs were fairly good this quarter. Do I have any guidance to give towards ROA? Well, ROA is a function of many things, including leveraging, including the four things which I mentioned. A lot of those things are in flux. It's very difficult for me to give guidance. All I can do is say, historically, we have done about 4.5% maybe on a fully leveraged basis. Today, the operating costs are slightly higher than what we are used to. On a fully operate, let's say on a 20% capital adequacy, you might be at 3.5%, 4%. But difficult for a person like me also. Of course, we have simulations and we have business plans and a lot of things. But it's very difficult to predict these things.

Speaker #5: Well, ROA is a function of many, many things, including leveraging, including the four things which I mentioned. A lot of those things are in flux.

Speaker #5: So it's very difficult for me to give guidance. All I can do is say, historically, we have done about 4.5 percent, maybe, on a fully leveraged basis.

Speaker #5: Today, the operating costs are slightly higher than what we are used to. So, on a fully operated—let's say, on a 20% capital adequacy—you might be at three and a half, four percent.

Speaker #5: But it's difficult for a person like me also. Of course, we have simulations and we have business plans and a lot of things, but it's very difficult to predict these things.

Speaker #5: Okay, sir. Sir, one more thing: In the microfinance DLG versus the individual business loans, can you quantify in terms of yield or gross NPA?

[Company Representative]: Okay, sir. So one more thing. In the microfinance JLG versus the individual business loans, can you quantify in terms of yield or gross NPA, how is it different, and is there actually a significant benefit that you are able to see in the individual business loan as compared to microfinance JLG product?

[Shareholder] (Private Investor): Okay, sir. So one more thing. In the microfinance JLG versus the individual business loans, can you quantify in terms of yield or gross NPA, how is it different, and is there actually a significant benefit that you are able to see in the individual business loan as compared to microfinance JLG product?

Speaker #5: How is it different, and is there actually a significant benefit that you're able to see in the individual business loan as compared to microfinance DLG models?

Speaker #3: So, without getting into specific numbers and percentages and things like NPA, I can tell you two or three things. Number one, as of today, individual is performing better than DLG.

Aalok Patel: So without getting into specific numbers and percentages and things like NPA, I can tell you two or three things. Number one, as of today, individual is performing better than JLG. Vivek, I hope you agree with that. The second part is that as far as individual loans are concerned, the biggest issue is the OPEX. We have to make sure that we are able to collect a significant portion directly from their bank accounts. When we run the NACH and the UPI mandates for the individual loans, about 68% to 70% clears. By the end of the month, we manage clearing about 85% through cashless, and the balance, whatever, 14%, we are going door to door and collecting cash.

Speaker #3: So, Vivek, I hope you agree with that. The second part is that, as far as individual loans are concerned, the biggest issue is the OPEX.

Speaker #3: And so, we have to make sure that we are able to collect a significant portion directly from their bank accounts. So, when we run the NACH and the UPI mandates for the individual loans, about 68 to 70 percent clears.

Speaker #3: By the end of the month, we manage clearing about 85% through cashless. And the balance, whatever—14%—we are going door to door and collecting cash.

Speaker #3: So right now, OPEX is also largely under control for individual, as long as we are here, as long as we are able to maintain the cashless collections on the individual side.

Aalok Patel: Right now, OPEX is also largely under control for individual, as long as we are able to maintain the cashless collections in the individual side. But it is a new product. Everything does well in the first year or two. I cannot definitively say that individual is better than JLG, but definitely, without giving long-winded disclaimers, I like it better personally.

Speaker #3: So, but I mean, it's a new product. Everything does well in the first year or two. So I cannot definitively say that Individual is better than DLG, but definitely, without giving long-winded disclaimers, I like it better.

Speaker #3: Personally.

Speaker #5: Okay, got it. And just one last thing on the solar loan part. This is a new product, so in terms of yield or in terms of the expected gross NPA, how would this fare in relation to the other products you have?

[Company Representative]: Okay, got it. Just one last thing. On the solar loan part, this is a new product. In terms of yield or in terms of the expected gross NPA, how would this fare in relation to the other products you have? Is it in line with the yield of MSME or LAP? How does it place?

[Shareholder] (Private Investor): Okay, got it. Just one last thing. On the solar loan part, this is a new product. In terms of yield or in terms of the expected gross NPA, how would this fare in relation to the other products you have? Is it in line with the yield of MSME or LAP? How does it place?

Speaker #5: Is it in line with the yield of MSME or lab? How does it play out?

Speaker #3: No, no, no, sir. Much solar is just an idea at this point, so we are not doing significant volumes. We are probably doing around ₹50 lakh a month at this point in selected areas.

Aalok Patel: No, so much. Solar is just an idea at this point. We are not doing significant volumes. We are probably doing around INR 50 lakhs a month at this point in selected areas. So far there have been no defaults, so NPA is zero. As far as the ROEs or ROIs are concerned, we are doing it at, what are we doing? About average of 18% to 20%.

Speaker #3: So far, there have been no defaults, so NPA is zero. And as far as the ROEs or ROIs are concerned, we are doing it at—what are we doing?

Speaker #3: About an average of 18 to 20 percent. So it's a kind of low-risk, low-return product.

[Company Representative]: Yeah.

Vivek Modi: Yeah.

Aalok Patel: It is a kind of a low risk, low return product.

Speaker #5: Okay, got it, sir. Thank you so much.

[Company Representative]: Okay, got it, sir. Thank you so much.

[Shareholder] (Private Investor): Okay, got it, sir. Thank you so much.

Speaker #1: Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one on your touchscreen telephone. Ladies and gentlemen, if you wish to ask a question, please press star and one on your touchscreen telephone.

Operator 4: Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one on your touchstone telephone. Ladies and gentlemen, if you wish to ask a question, please press star and one on your touchstone telephone. That was the last question. I would now like to hand the conference over to the management for closing comments.

Operator: Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one on your touchstone telephone. Ladies and gentlemen, if you wish to ask a question, please press star and one on your touchstone telephone. That was the last question. I would now like to hand the conference over to the management for closing comments.

Speaker #1: That was the last question. I would now like to hand the conference over to the management for closing comments.

Speaker #3: Yeah, great. Well, thank you everybody for joining and being part of this call. We hope we have answered all your questions. Thanks to Shripal and Aquarius for hosting the call.

Aalok Patel: Well, thank you everybody for joining and being part of this call. We hope we have answered all your questions. Thanks, Shripal and Equirus for hosting the call. If you need any additional information, please feel free to contact us or the investor relations team. Thanks again for your time. Sumit, please, you can disconnect the call.

Speaker #3: And if you need any additional information, please feel free to contact us or the investor relations team. Thanks again for your time. Sumit, please, you may disconnect the call.

Operator 4: Okay. Thank you. On behalf of Equirus Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Operator: Okay. Thank you. On behalf of Equirus Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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Q1 2027 Arman Financial Services Ltd Earnings Call

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