Arohan Financial Services Limited IPO

01At a glance

What the company does: a non-bank microfinance institution lending income-generating loans, mostly to women in rural and semi-urban India, through 1,073 branches in 17 states (AP p.4, AP p.9).

Who pays it: about 1.95 million active borrowers at December 2025; West Bengal was 37.73% of AUM, Bihar 18.33% and Uttar Pradesh 11.83% (AP p.9, DRHP p.41).

Why it is raising money: ₹6,000 million to add to its capital base for onward lending, and the rest for general purposes (AP p.5, DRHP p.144).

How fast it has grown: AUM rose from ₹53,574 million in FY23 to ₹71,120 million in FY24, fell to ₹60,026 million in FY25, and was ₹63,084 million at December 2025 (AP p.8).

The one thing to understand: a lender recovering from a regulatory stop. On 17 October 2024 the RBI ordered the company to cease sanctioning and disbursing loans from 21 October, citing excessive pricing, a change in management without approval and breaches of asset-classification rules; the order was lifted on 3 January 2025 (DRHP p.26, DRHP p.27). Profit fell from ₹3,138 million in FY24 to ₹1,097 million in FY25 (AP p.7).

02The business, in plain words

A microfinance lender makes small, unsecured loans to women, mostly through groups, and collects repayments through its branch staff, in cash or digitally. It borrows from banks and other lenders, earns a wide interest margin, and must keep collections high because losses can rise quickly in bad times.

A woman in rural Bihar needs money for a dairy cow → the borrower joins a group at an Arohan branch → Arohan lends about ₹55,000 → the borrower repays in instalments collected by the branch.

Average microfinance ticket size rose from ₹39,525 in FY23 to ₹55,552 in the nine months to December 2025 (AP p.9). Digital collections were 13.53% (AP p.9).

Earnings equation: Profit ≈ AUM × (net interest margin − operating cost − credit cost). In the nine months to December 2025 net interest margin was 9.86%, operating expenses 6.50% of average AUM and credit cost 4.37% (AP p.8, AP p.9).

03Where the money comes from

Source: AP p.8, AP p.9.

Interest income was 91.58% of total income in the nine months to December 2025 (AP p.11).

04The growth record

Source: AP p.7, AP p.8, AP p.9. The nine-month return is not annualised.

Our arithmetic: revenue compounded about 24.7% a year from FY23 to FY25 and profit after tax about 24.5% (AP p.7).

05What the growth is made of

FY24 was the peak: AUM grew 32.75% and profit reached ₹3,138 million (AP p.8). In FY25 the RBI order stopped new lending for about 11 weeks; disbursements fell 30.90%, AUM 15.60%, and credit cost more than doubled to 6.06% (AP p.8, AP p.9, DRHP p.26). AUM grew 5.10% in the nine months to December 2025 (AP p.8).

06Earnings quality

Gross NPAs were 2.85% at March 2025 and 1.69% at December 2025, with net NPAs of 0.39% (AP p.9). Collection efficiency was 108.67% in the nine months (AP p.9). The auditor has issued qualifications that did not require restatement adjustments (AP p.13). Operating cash flow swings with loan growth, as new loans count as operating outflows (AP p.7).

07The balance sheet

Source: AP p.7, AP p.8.

The credit ratings at December 2025 were CARE A- (Stable) and ICRA A (Stable) (AP p.9).

08What the money is for

Source: AP p.1, AP p.5, DRHP p.144.

A pre-IPO placement of up to ₹1,200 million may reduce the fresh issue (AP p.5).

09Who is selling

Source: AP p.1, AP p.2. The last row is our arithmetic from the total of 40,437,529; it includes the Danish SDG Investment Fund, TR Capital, the Michael & Susan Dell Foundation and two Triodos funds.

The offer-for-sale table on the cover names ten investor sellers: Teachers Insurance and Annuity Association of America, up to 9,733,309 shares; Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V., up to 6,241,091; Aavishkaar Goodwell India Microfinance Development Company-II Limited, up to 4,957,208; Tano India Private Equity Fund II, up to 4,461,875; Maj Invest Financial Inclusion Fund II K/S, up to 4,118,081; Danish Sustainable Development Goals Investment Fund K/S, up to 3,994,607; TR Capital III Mauritius, up to 2,598,649;

Michael & Susan Dell Foundation, up to 874,614; Legal owner Triodos Funds B.V. in its capacity as legal owner of Triodos Fair Share Fund represented by Triodos Investment Management B.V, up to 772,027; and Triodos Sicav II (acting on behalf of and for the benefit of its Sub-Fund Triodos Microfinance Fund represented by Triodos Investment Management B.V.), up to 772,028 (DRHP p.1).

10Promoters

The promoters are Aavishkaar Venture Management Services and Intellectual Capital Advisory Services (I-Cap), both Mumbai companies, and Vineet Chandra Rai and Swati Rai (AP p.4, AP p.5). The two promoter companies hold 14.15% between them, and the individual promoters hold no shares (AP p.6). None of the promoters is listed among the sellers (AP p.1, AP p.2).

11Who already owns it

Source: AP p.6.

12What changed just before the IPO

• RBI order: lending stopped from 21 October 2024 to 3 January 2025 (DRHP p.26).

• Remedies: the company amended its pricing policy, sought post-facto approval for board changes and corrected asset classification (DRHP p.27).

• Funding cost: average cost of borrowing was 7.76% for the nine months, against 11.79% in FY25, as reported (AP p.9).

• Borrowers: active borrowers fell for two periods running (AP p.9).

• Public company: converted from a private limited company in May 2018 (DRHP p.398).

• No bonus shares: the company has issued no shares by way of bonus issue (DRHP p.117).

• Last allotment before the IPO: 500,000 shares to the Arohan ESOP Trust at ₹148.35 a share in August 2025 (DRHP p.114).

• Auditors: M S K A & Associates LLP resigned on completion of its tenure in August 2024 and B S R & Co. LLP was appointed the same day (DRHP p.99).

13Capacity and expansion

Growth is limited by capital, funding and regulation rather than physical capacity. The network was 1,073 branches in 320 districts at December 2025 (AP p.9).

14Market size and industry structure

The CARE report cited in the offer document ranks the company the ninth-largest NBFC-MFI in India by AUM, with a 4.71% share, and the second-largest headquartered in eastern India (AP p.4). It says NBFC-MFIs have held between 21.68% and 25.27% of the microfinance industry (AP p.4).

15Competitive position

What the document claims, and what it rests on:

• Scale in eastern India (AP p.4).
• Capital adequacy of 31.20% at December 2025 (AP p.8).

Against that: two-thirds of AUM in three states, a recent RBI order, and several listed peers reporting losses in FY25 (AP p.9, DRHP p.26, DRHP p.153).

16Peers the company named

Source: DRHP p.153. Peer P/E uses prices on 8 May 2026. The document also lists six banks and small finance banks as peers.

No P/E is possible for the company until a price band is set.

17Risks, in plain words

• Regulation. The RBI can again restrict lending (DRHP p.26, AP p.11).
• Asset quality. Unsecured loans; credit cost reached 6.06% in FY25 (AP p.9, AP p.11).
• Concentration. Two-thirds of AUM in West Bengal, Bihar and Uttar Pradesh (AP p.9).
• Funding. Depends on continuing access to borrowing (AP p.11).
• Cash handling. Many small cash transactions expose it to fraud (AP p.11).
• Records. Some past share-allotment records cannot be traced (AP p.11).

18Litigation and regulatory matters

Source: AP p.13.

19Related-party transactions

Not read in detail for this study.

20What the offer document does not say

In the sections read for this study, the document does not give:

• What the criminal proceeding against a key managerial person, involving ₹261.16 million, concerns, in the pages read.
• The size of the capital-base allocation separately from general purposes.
• Whether the average cost of borrowing for the nine months is annualised.
• The auditor's qualifications in detail, in the pages read.
• The price band, lot size or issue dates, which is normal at DRHP stage.

21Five questions for management

1. What interest rates does the company charge today compared with before the RBI order?
2. What does the ₹261.16 million criminal proceeding against a key managerial person concern?
3. Why did active borrowers fall from 2.41 million to 1.95 million?
4. What are the auditor's qualifications about?
5. How has collection efficiency in West Bengal and Bihar compared with the other states?

2Sources and cited facts

This study was read from 2 documents the company filed. The 58 figures it cites are listed under the document each came from, with the page and the sentence as printed.