Key highlights from Arman Financial Services Limited (ARMANFIN) Q2 FY23 Earnings Concall
Q&A Highlights:
- [00:10:28] Virat with Shah Investments enquired about AUM and disbursement growth target for FY23. Jayendra Patel MD said that typically, ARMANFIN tries to grow between 35-40% CAGR over the long run. So it will be about in line with that.
- [00:11:07] Virat with Shah Investments asked how does the company plan to utilize the fund raise of INR115 crores. Jayendra Patel MD said that in NBFC there are capital adequacy ratio to maintain and ARMANFIN is approaching close to that. The funds will be used for onward lending and to leverage that to increase AUMs.
- [00:12:11] Anjana from Shah Investments asked about the reduction of MFI book pie from 80% to 60%. Jayendra Patel MD said that there is a long term plan to diversify the product line into other ancillary products. The long term goal is to get more into micro-ancillary products than the JLG products. However, the company still plans to be in the micro retail segment.
- [00:14:23] Anjana from Shah Investments also asked how the company is seeing its two-wheeler and MSME business panning out. Jayendra Patel MD replied that MSME is doing extremely well. On two-wheeler industry, it has been in the doldrums since COVID and before that. ARMANFIN expects tough times in future also for the two-wheeler segment.
- [00:16:17] Anjana from Shah Investments asked about future disbursement of loans under IBL segment in coming quarter. Jayendra Patel MD said that in coming quarter, it’s too early to tell. But in next couple of years, the idea is to graduate a lot of microfinance customers to graduate them away from the group based loans into individual loans. Also, the natural progression is to get away from cash based collection to cashless collection.
- [00:19:52] Savi Jain of 2Point2 Capital asked if the company’s liquidity challenges in 2Q23 has been normalized. Jayendra Patel MD replied that it’s completely normalized. ARMANFIN in fact is facing a reverse issue.
- [00:22:47] Savi Jain of 2Point2 Capital asked about the difference between individual loan and the MSME loans. Jayendra Patel MD clarified that it’s similar, but the clientele is slightly different. In MSME, ARMANFIN is finding cash customers. And in individual, it’s graduated microfinance customers. So the underwriting might not be as stringent.
- [00:26:47] Savi Jain of 2Point2 Capital enquired if provisioning with respect to COVID is over in 2Q23. Jayendra Patel MD said that everything pre-COVID, that is assets dispersed prior to March 2020 is written off or provided for.
- [00:34:51] Srinath V from Bellwether also asked if the company has opened any new geographies or micro markets. Jayendra Patel MD said the company has not done it yet, but it’s in the plan for long run. ARMANFIN moved into Bihar and plans to expand on that. On micro markets, the last few quarters have been challenging. Moving to micro markets will be slower.
- [00:38:58] Yash Mandawewala with Mandawewala Family Office asked if the new software installation is done and where the company is seeing value add from new software. Jayendra Patel MD replied that already the company’s TAT has reduced by about 30-40%. Overall it’s been a big success.
- [00:41:38] Balkrushna Vaghasia at Axanoun Investment enquired about the avg. customer turnaround time for micro finance and MSME business. Jayendra Patel MD answered that for micro finance it’s approx. 4.6 days. In MSME, it’s now at 8 days from 12 days and there is still lot of room for improvement there.
- [00:43:50] Balkrushna Vaghasia at Axanoun Investment asked about the change in avg. lending rate in microfinance. Jayendra Patel MD replied that about 2.5% has been the increase.
- [00:48:11] Amit Mantri of 2Point2 Capital enquired that on a static pool basis, what was the credit cost of the MFI book. Jayendra Patel MD answered that it was 10-12%.