Will file DRHP for ₹1,500 crore IPO by March, says Arohan Financial Services MD

Talk to us about your IPO plans…

Promoters intend to hold their shares in the IPO, reflecting continued confidence. However, early-stage investors (2008-2017) may partially divest. The total IPO size is projected at ₹1,500 crore, split evenly between primary share issuance and secondary sales. We expect DRHP filing by early March, followed by a 2-3 month review period. Listing could occur by June, with a one-year window to execute. Our sustained profitability across credit cycles (excluding FY21) demonstrates robust governance and underwriting discipline.

Large MFIs saw Q2 disbursement growth amid improved collections. Are MFIN guidelines still necessary?

These guardrails should have been implemented from April 2022. Pre-March 2022, NBFCs followed RBI microfinance guidelines, but post that period lacked standardized borrower protections (lender caps, household debt limits, NPA lending restrictions). The RBI’s 2022 margin cap removal created perverse incentives—some lenders prioritized growth over risk assessment by budgeting for higher credit costs. Consequently, our industry rank dropped from 5th to 9th/10th as competitors accelerated loan expansion. The sector’s portfolio doubled from ₹2.25 lakh crore (March 2020) to ₹4.3 lakh crore (March 2024), raising concerns about end-use transparency. Stress emerged from rapid growth, governance lapses, inadequate KYC verifications, delayed credit bureau data, and regional political factors. Given these dynamics, guidelines remain essential.

Does the sector continue facing funding challenges?

Major public sector banks (PSBs) halted new MFI lending over the past year, though existing credit lines remain intact. Their withdrawal influenced smaller PSBs and development finance institutions (exceptions: SIDBI). Private banks now drive sector funding due to greater micro-loan exposure. While established players like us maintain access, lower-rated MFIs face significant constraints.

What is your loan growth and asset quality outlook?

Our Vision 2030 targets include a ₹6,000 crore portfolio by March 2025, growing to ₹7,000 crore+ in FY26. Despite sector headwinds, we maintained quarterly profitability through disciplined underwriting and governance—including an industry-first dedicated recovery unit leveraging Lok Adalats. Current gross NPAs stand below 2% (net NPAs under 1%), with projections of 2-3% and sub-1% respectively. AI integration now spans our value chain: recruitment, credit scoring, risk-based pricing, account management, and collections/recovery. By 2030, we aim to impact 20 million lives with a ₹20,000 crore portfolio, returning to FY24 profitability levels by FY25.

Are you considering a small finance bank (SFB) conversion?

Current priorities center on scaling operations per Vision 2030. While SFB status merits evaluation, our immediate focus remains organic growth within the existing framework.