Arman Financial Services Ltd Management Discussions

Indian Economy

Amid evolving global headwinds, India sustained its position as one of the worlds fastest-growing major economies. The Indian economy demonstrated commendable resilience and steady momentum throughout the financial year 2024–25, underpinned by prudent fiscal management, a calibrated monetary policy continuity of structural reforms.

Real GDP is estimated to have expanded by 6.5% during FY 2024–25, with nominal GDP growth pegged at 9.9%, as per the Ministry of Statistics and Programme Implementation. This expansion was broad-based, supported by robust domestic consumption, infrastructure-led public investment a recovering services sector.

Infiation and Consumption Trends

Infiation remained within manageable bounds. Retail inflation, measured by the Consumer Price Index (CPI), moderated to 2.92% in April 2025, its lowest in over a year, while wholesale food inflation decelerated to 2.55%. This decline, driven by easing food and energy prices, significantly relieved consumers and businesses. Private Final Consumption Expenditure (PFCE), a key driver of growth, expanded by 7.2%, reflecting revived consumer confidence and increased discretionary spending. However, rural demand lagged in urban recovery, highlighting uneven economic revival.

Rate Cuts

The Reserve Bank of India continued its measured approach toward supporting growth. In April 2025, it reduced the benchmark repo rate by 25 basis points to 6.00%, marking the second such cut in the calendar year. This move will lower borrowing costs and stimulate credit growth across sectors.

Currency and Capital Flows

The Indian rupee experienced volatility, depreciating by 2.4% in FY25, with a sharp 4% decline following the U.S. elections due to a stronger dollar and persistent foreign portfolio investor (FPI) outflows from equity markets. Yet, the rupees performance was relatively stable compared to other global currencies. A late-year rally, supported by FPI debt inflows and a softening dollar, saw it recover 2.4% in a single month.

Financial Market Stability

The financial system remained stable and sufficiently liquid. Notably, Non-Banking Financial Companies (NBFCs) tapped into overseas funding aggressively, accounting for 43% of total External Commercial Borrowings (ECBs) in FY25, a significant increase from historical levels. This suggests improved investor confidence and increased access to capital.

Outlook

Indias economy in FY26 is poised for stable growth, sustaining high momentum driven by stable government policies and reforms. Despite geopolitical tensions, Indias diversified trade and resilient domestic demand ensure stability. Infrastructure investments, digital transformation renewable energy initiatives will fuel consumption and industrial growth. With declining inflation and strategic trade partnerships, India is poised to strengthen its global economic position, leveraging its youthful workforce and policy continuity to achieve sustained prosperity.

Rural India – the Backbone of Economic Development

India lives in its villages; this Gandhian belief continues to resonate, as over 65% of Indias population is located in rural areas (Census 2011, projected 2024 estimates). A robust rural economy is not only crucial for equitable development but also vital for national stability, food security long-term economic sustainability.

Despite the rapid urbanisation and technological advancement, rural India remains confronted with challenges such as poverty, underemployment, low productivity migration. The development of the rural economy transcends mere economic objectives, it constitutes a social, cultural political necessity for India.

Performance in FY25

During FY25, India witnessed a dynamic economic landscape, with rural regions demonstrating notable resilience. This strength was underpinned by a robust agricultural sector, rising rural consumption proactive government initiatives.

In the first half of the fiscal year, the rural economy encountered several challenges. Erratic monsoons, elevated food and fuel inflation limited non-farm employment opportunities weighed on income levels and dampened consumption capacity.

However, the second half of FY25 signalled a turnaround. Improved agricultural output, favourable rainfall enhanced rural liquidity catalysed a revival in economic activity. This rebound was evident in the rising demand for two-wheelers, increased investment in rural housing improved credit flow from financial institutions.

The fast-moving consumer goods (FMCG) sector reflected these shifts. While rural consumption remained cautious early in the year, it gained strong momentum in Q3 2025, eventually outpacing urban consumption. As FMCG volume grew 5.7% nationally, rural demand led the surge with a 6.0% growth in the third quarter.

The food segment posted solid gains, whereas home and personal care products experienced comparatively muted growth. This divergence highlighted an uptick in purchasing power and growing consumer confidence across rural markets.

In 2023-24, the average monthly per capita expenditure (MPCE) stood at C4,122 in rural India and C6,996 in urban areas. Notably, the urban–rural gap in MPCE has narrowed significantly from 84% in 2011–12 to 71% in 2022–23 further to 70% in 2023–24.

The narrowing gap in monthly per capita expenditure between rural and urban India signifies a positive shift towards greater economic inclusivity. As rural consumption rises, it leads to stronger demand for goods and services, encouraging businesses to expand their presence in rural markets. This can create employment opportunities, stimulate local economies attract investment in infrastructure.

Higher rural spending also enhances the viability of financial services, such as microfinance and insurance, driving deeper financial inclusion. However, due to expenses rising faster than income in some regions, a subdued demand for microfinance was observed, as rural households prioritised essential consumption over borrowing.

Livelihood for Women in Rural India

Rural women in India constitute a vital component of the nations socio-economic framework, making significant contributions to agriculture, informal labour household-based enterprises. Despite their involvement, many remain underemployed or unpaid due to limited access to formal employment opportunities. Persistent structural challenges, including entrenched gender norms, inadequate education, insufficient infrastructure constrained mobility, continue to hinder their economic engagement.

The labour force participation rate among rural women in India has shown variable trends, largely influenced by macroeconomic shifts, agricultural cycles evolving public policy. Although many women actively participate in farm and household-based activities, their contributions are frequently underreported in national statistics, primarily due to the informal and unrecognised nature of their work.

To address these challenges, government and civil society interventions have focused on enhancing employability and entrepreneurship through initiatives such as the National Rural Livelihoods Mission (NRLM), the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) various women-centric capacity-building programs. These efforts aim to broaden access to skill development, credit facilities income-generating opportunities.

Enabling rural women to participate more fully in the workforce not only strengthens their agency but also serves as a catalyst for poverty alleviation, improved household welfare holistic rural development. Notably, the increased integration of rural women into the workforce has significantly driven the overall rise in female labour force participation across India.

According to the Economic Survey 2024–25, the Female Labour Force Participation Rate (FLFPR) has shown a steady and significant rise over the past seven years, increasing from 23.3% in 2017–18 to 41.7% in 2023–24.

Non-Banking Financial Companies (NBFCs) and Microfinance Institutions (MFIs) have emerged as key players in bridging the employment gap for rural Indian women, facilitating financial inclusion, economic empowerment social upliftment for millions of rural women.

However, sustainable and inclusive employment for rural women requires continuous efforts towards education, digital inclusion social security.

As of March 2025, the microfinance sector has reached a total loan portfolio of C3.81 lakh crore. Indian women from semi-urban and rural areas now account for 60% of the countrys total female borrowers, underscoring the expanding reach of formal credit beyond metro cities. This underscores the vital role of microfinance in promoting financial inclusion and enabling rural women to participate in the economic mainstream.

Microfinance – Reaching

Financial Support

Indias microfinance sector has undergone significant evolution from its humble beginnings, offering small-ticket loans to underserved individuals. Today, it is crucial in promoting financial inclusion, particularly in rural and semi-urban regions. The sector has transformed into a more comprehensive micro-banking ecosystem, offering a broad suite of financial products tailored to meet the diverse needs of its expanding customer base.

Banks and microfinance institutions have diversified their offerings, addressing the full spectrum of financial needs, from savings and insurance to credit and remittances. However, despite these advancements, several challenges persist. The sector continues to serve a highly diverse customer base, including small-scale farmers, street vendors daily wage labourers, each with unique financial behaviour and needs.

By empowering communities with knowledge and access, the sector has accelerated the mission of inclusive economic growth, making financial services more equitable, accessible sustainable across India.

NBFC-MFI Sector Dynamics

In FY25, the NBFC-MFI (Non-Banking Financial Company – Microfinance Institution) sector remained in the throes of a crisis. Specifically, loan growth for NBFCS witnessed a slowdown in FY25, compared to the previous year. Simultaneously, Asset Under Management (AUM) growth is expected to decline to 20% in FY25, from 24% in FY24.

This subdued demand was primarily attributed to weaker credit requirements, softer macroeconomic conditions regulatory tightening by the Reserve Bank of India (RBI). The central banks revised guidance on lending to unsecured and microfinance loans has led to a recalibration of credit exposure among NBFCS, particularly in high-risk segments such as consumer finance, personal loans MFIS.

The growing indebtedness of borrowers emerged as a critical concern, with higher loan values and multiple loans burdening low-income borrowers, resulting in excessive leverage and repayment challenges. Additionally, the declining strength of the Joint Liability Group (JLG) model is contributing to the strain on MFI operations.

The gross non-performing asset (NPA) for the sector rose sharply to 16% by the end of FY25, nearly doubling from 8.8% in the previous year. In absolute terms, NPAs increased significantly, from C38,000 crore in March FY24 to C61,000 crore in March FY25.

Non-Banking Financial Companies–Microfinance Institutions (NBFC-MFIs) reported that over 12% of their C1.48 lakh crore exposure was classified as stressed by the end of March 2025. This sharp rise in defaults has led lenders across the sector to scale back new disbursements significantly. Consequently, the sectors total gross loan portfolio contracted by nearly 7%, declining to C3.81 lakh crore as of March 2025.

In contrast, two-wheeler loans and affordable housing portfolios have shown resilience it is expected to recover more quickly, which will help to strengthen the broader macroeconomic climate.

Furthermore, recent measures by the RBI, particularly the reduction in the repo rate for bank lending, reflect a supportive policy stance that is likely to ease funding access, especially for smaller non-banking financial companies (NBFIs).

Although stress in the microfinance segment has yet to spill over into secured loan books meaningfully, lenders will continue to priorities disciplined portfolio diversification and rigorous risk management frameworks.

In conclusion, the outlook for the sector remains cautious, with overall growth expected to decline to 4% in FY25. The slowdown is primarily attributed to dilution of JLG culture and widespread borrower overleveraging. The sector remains a cornerstone of financial inclusion in India its long-term performance will be closely tied to the countrys economic recovery and effective policy implementation.

The MSME Landscape

Indias Micro, Small Medium Enterprises (MSME) sector presents a dual narrative in FY25. On one hand, proactive policy frameworks and enhanced regulatory oversight have significantly broadened credit access, reflecting the sectors growing strategic importance within the national economy.

On the other hand, a notable increase in enterprise closures highlights persistent structural challenges that could undermine this momentum. The key imperative now lies in transforming improved financial access into long-term operational resilience.

The Economic Survey underscores the pivotal role of MSMEs in Indias credit landscape. Credit to the sector expanded by 13% year-on-year (YoY), notably outpacing the 6.1% growth observed among large enterprises. This robust credit growth signals the sectors rising contribution to employment generation and GDP, positioning MSMEs as instrumental to Indias ongoing economic recovery.

Additionally, agricultural credit reported a 5.1% uptick, while industrial credit growth improved from 3.2% in the previous year to 4.4%, signalling broad-based economic revival.

However, the sector also faces critical headwinds. Since 2020, 75,082 MSMEs have ceased operations, with nearly 47.4% of those closures occurring in the current fiscal year alone, almost double the previous years tally of 19,828. The primary cause remains inadequate access to working capital, underscoring the disconnect between credit availability and its effective utilisation.

In this context, platforms such as the Trade Receivables Discounting System (TReDS) are playing an increasingly important role by enabling more efficient access to liquidity. To fully realise their potential, further efforts are required to increase awareness, promote adoption beyond urban centres enhance ecosystem integration to support the sustainability of MSMEs.

Beyond financial access, the government is focusing on enhancing financial inclusion, driving digitalisation strengthening the supply chain to provide the necessary infrastructure for MSMEs to thrive. These initiatives are being implemented to alleviate regulatory burdens, foster innovation promote efficient operations, thereby contributing more significantly to Indias GDP growth. This, in turn, creates a ripple effect that enhances overall economic growth and job creation.

Strengthening the MSME Sector

Indias Micro, Small Medium Enterprises (MSME) sector remains a cornerstone of the countrys economic framework, making substantial contributions to employment generation, innovation GDP expansion. Over time, this sector has demonstrated notable resilience, effectively navigating economic disruptions and adapting to evolving market conditions. In the aftermath of the pandemic, MSMEs demonstrated exceptional adaptability through accelerated digital adoption, diversification of business models deeper integration into both domestic and global value chains.

In recognition of the sectors strategic importance, the Government of India has implemented a comprehensive array of support measures. These include enhanced access to credit, digital infrastructure initiatives policy instruments such as the Emergency Credit Line Guarantee Scheme (ECLGS), Production-Linked Incentive (PLI) schemes streamlined regulatory frameworks. Non-Banking Financial Companies (NBFCs) have also played a vital role in addressing credit access gaps by extending collateral-free financing and tailored advisory services to emerging enterprises.

Nevertheless, the sector continues to encounter structural impediments, including limited access to formal financial systems, workforce skill de_ciencies infrastructural challenges, particularly in rural and semi-urban regions. Despite these hurdles, the collaborative momentum among government bodies, private stakeholders technology-driven solutions is steadily reshaping the MSME ecosystem.

As India charts its path toward achieving a US$5 trillion economy, the MSME sector is positioned to catalyse inclusive economic growth and long-term sustainable development.

The Union Budget – A Supportive Stance

Indias Micro, Small Medium Enterprises (MSME) sector remains a cornerstone of the countrys economic framework, making substantial contributions to employment generation, innovation GDP expansion. Over time, this sector has demonstrated notable resilience, effectively navigating economic disruptions and adapting to evolving market conditions. In the aftermath of the pandemic, MSMEs demonstrated exceptional adaptability through accelerated digital adoption, diversification of business models deeper integration into both domestic and global value chains.

In recognition of the sectors strategic importance, the Government of India has implemented a comprehensive array of support measures. These include enhanced access to credit, digital infrastructure initiatives policy instruments such as the Emergency Credit Line Guarantee Scheme (ECLGS), Production-Linked Incentive (PLI) schemes streamlined regulatory frameworks. Non-Banking Financial Companies (NBFCs) have also played a vital role in addressing credit access gaps by extending collateral-free financing and tailored advisory services to emerging enterprises.

Nevertheless, the sector continues to encounter structural impediments, including limited access to formal financial systems, workforce skill de_ciencies infrastructural issues, particularly in rural and semi-urban areas. Despite these obstacles, the collaborative momentum among government bodies, private stakeholders technology-driven solutions is steadily reshaping the MSME ecosystem.

As India charts its path towards achieving a US$5 trillion economy, the MSME sector is poised to act as a catalyst for inclusive economic growth and long-term sustainable development.

About Our Business

Arman Financial Services Limited, a Reserve Bank of India (RBI)- registered Non-Banking Financial Company – Investment & Credit Company (NBFC-ICC) - is primarily engaged in providing two-wheeler financing and unsecured loans to Micro, Small Medium Enterprises (MSMEs). The Company has recently expanded its product portfolio to include asset-backed loans against property and Individual Business Loans.

Through its wholly owned subsidiary, Namra Finance Limited, an NBFC-MFI, the Company also extends microfinance solutions with a targeted focus on empowering women entrepreneurs.

Operating across 11 states Arman maintains a strategic presence in rural and semi-urban markets, catering to the traditionally underserved informal sector. The Company offers small-ticket retail loans backed by robust in-house operations, comprehensive credit assessments customised collection mechanisms designed to suit its operational landscape.

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Microfinance:

Making a Difference

Through its subsidiary Namra, Arman delivers small-ticket loans to women entrepreneurs to support income-generating ventures. From modest origins, the Company has evolved into a respected and recognised leader in the NBFC-MFI sector. Microfinance remains the Companys flagship vertical, providing a strong foundation for expansion into complementary business domains.

>Performance in FY25

In light of heightened volatility in the microfinance ecosystem and persistent collection challenges, the Company undertook a deliberate slowdown in business activity, resulting in a subdued performance. Staying true to our core principle of maintaining asset quality, we made higher provisioning, largely reflecting the ongoing stress in rural pockets and ensured these provisions remained aligned with on-ground realities.

Responding proactively to evolving market dynamics and rising competitive intensity, which have notably influenced customer behaviour, we implemented strategic enhancements to our operating model. Rolled out in FY26, these initiatives are focused on strengthening asset quality and driving sustainable profitability.

At an industry level, increasing concerns around asset quality led to the collective adoption of guardrails aimed at supporting customer deleveraging. We remain fully compliant with these measures. Moreover, all disbursements made post-November 2024 are now covered under the CGFMU scheme, offering further risk protection. To reinforce credit discipline and improve efficiency, we have also restructured our internal framework by separating the credit function at the branch level and establishing a dedicated collections vertical.

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MSME Loans:

Strengthening Indias Industrial Backbone

Since its launch in 2017, Armans strategic business diversification has delivered remarkable results. Its grassroots-level engagement provided deep insights into the vast potential within Indias rapidly expanding Micro, Small Medium Enterprises (MSME) sector.

Recognising this opportunity, the Company adopted a calibrated approach by offering MSME loans in states where it had already established a strong footprint through its microfinance operations. This measured strategy enabled Arman to capitalise on its in-depth understanding of the local demographic, culture, business dynamics credit landscape. Notably, the MSME segment delivers the Companys highest Return on Assets (ROA). With an increasing focus on strengthening the MSME ecosystem by governments, the growth outlook for this segment remains highly favourable.

Operating Model

Dual credit bureau check for both customer and spouse on CRIF (for MFI loans) and CIBIL (for non-MFI loans) High-touch monthly cash collection model Cash Flow assessment using tailored appraisal techniques Locally drawn field force with personal knowledge of the market In-house teams for pre-lending field investigations and appraisals with centralised final credit approval

Performance in FY25

Despite a challenging macroeconomic environment, Arman delivered consistent growth, underscoring its operational resilience and financial strength. Assets Under Management (AUM) rose to C454 crore, driven by healthy disbursement volumes and sustained borrower demand. Total income increased to C150 crore, reflecting stronger portfolio performance and improved operational efficiency. The stable average ticket size highlights a disciplined lending approach, with a clear focus on maintaining portfolio quality.

While the Rural MSME portfolio was not immune to broader macroeconomic headwinds, which exerted some pressure on NPAs, its performance remained better than expected, demonstrating the segments inherent resilience and the effectiveness of Armans risk management strategies. Collectively, these outcomes reafirm Armans readiness to scale further in a dynamic market environment.

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2-Wheeler Loans:

Sustaining Stability

Arman initiated its business operations by extending credit facilities to self-employed and cash-salaried individuals operating within the informal sector, primarily in semi-urban and rural geographies, to support the acquisition of two-wheelers. This lending vertical laid the strategic groundwork for Armans long-term growth trajectory.

Over the years, the Company has forged robust partnerships with key stakeholders, including dealers and original equipment manufacturers (OEMs), which have played a pivotal role in sustaining its market presence and driving expansion. Currently, this vertical is geographically focused in Gujarat, where Arman has established a deeply rooted footprint, enabling consistent and stable performance.

Operating Model

Focus on quick turnaround time Excellent relationships with dealers and OEMs In-house feet-on-street model for rigorous collections

Performance in FY25

The two-wheeler segment remained stable in FY25, with favourable monsoons and government initiatives for rural development helping to boost rural sales, indicating a strengthening market trend. This trend resulted in a disbursement of C62 crore in FY25, compared to C67 crore in FY24. AUM remained stable at C78 crore in FY25, compared to C 79 crore in FY24.

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LAP Loans:

Bridging the Credit Gap

Launched in Q4 2024, this vertical was introduced to deepen market penetration across suburban and rural regions, focusing on individuals with semi-formal incomes who traditional financial institutions often overlook. The initiative is designed to bridge the credit gap by providing accessible and affordable financial solutions to underserved communities. Initially rooted in Gujarat, operations have recently expanded into Telangana and Madhya Pradesh, where Arman has cultivated a strong and deeply embedded presence, driving consistent and stable performance.

Operating Model

Loan-to-Value (LTV) ratio (up to 65%) Credit bureau checks the legal evaluation of the property Practical income and FOIR analysis In-house teams conduct pre-lending field investigations and appraisals, while final credit approval is centralised to ensure consistency and risk control.

Performance in FY25

As of March 2025, the Loan Against Property (LAP) loans accounted for approximately 1.2% of the total AUM. In FY25, this product experienced consistent traction in semi-urban and rural markets, with an average loan amounting to C4.35 lakh and tenure options ranging from 36 to 84 months. The total income generated from this segment was C2.97 crore, accompanied by disbursements totalling C9 crore throughout the year. This growth was primarily fuelled by the increasing demand for secured credit among self-employed individuals and semi-formal income groups in underserved areas. Furthermore, government initiatives focused on rural development, coupled with the ongoing recovery of the rural economy, significantly contributed to the products momentum.

Human Resource

At Arman, our people are the bedrock of our sustained success. Their unwavering dedication and disciplined drive continue to propel the Company toward ambitious growth targets and inspire a culture of innovation and excellence.

In recognition of this critical asset, Arman remains committed to investing in talent development. We focus on enhancing capabilities, deepening expertise, fostering leadership, and positioning the organisation as a hub of continuous learning and knowledge enrichment.

The Human Resources (HR) function plays a strategic role in attracting, nurturing retaining our intellectual capital. With a strong emphasis on operational safety, particularly given the inherent risks associated with cash handling, Arman ensures robust protocols are in place to safeguard our teams.

The Company uphold a performance-driven culture that recognises and rewards merit. It is equally committed to cultivating a positive and inclusive work environment where every team member feels respected, supported empowered.

RISK MANAGEMENT

Overcoming challenges to unlock sustainable growth

At Arman, risk management constitutes a continuous and integral component of our operations at all levels of the organisation, enterprise, functional branch. We have established a comprehensive risk management framework designed to proactively identify, assess mitigate potential risks. This framework serves to safeguard our assets and reputation by providing clear guidelines that define, measure, control report risks at the enterprise level, thereby ensuring informed decision-making and organisational resilience.

COMPLIANCE RISK

Regulatory non-compliance poses risks to both brand credibility and business continuity.

Mitigation Measures

The Risk team actively monitors regulatory developments to ensure the Company remains aligned with evolving requirements.

IT systems keep the team alert of forthcoming compliances, ensuring timely adherence.

Integrated MIS systems streamline compliance by delivering required reports within mandated deadlines.

Compliance is a critical priority that is periodically reviewed by the leadership team and the Board.

COLLECTION RISK

Customer defaults in EMI repayments may adversely affect business performance and sustainability.

Mitigation Measures

The borrower evaluation process is tailored to meet the specific requirements of each business segment, ensuring a precise assessment of creditworthiness.

A robust field force continuously connects with customers to guide their cash management practices and promote consistent EMI collections.

Improvements in business processes promise to further enhance collections and quality going forward.

GROWTH RISK

Maintaining growth momentum on an expanded base presents a potential challenge.

Mitigation measures

The Companys business is based on the rural economy, which is a high priority for the government.

The government continues to implement supportive policies and schemes aimed at accelerating the growth of the rural economy.

The Company operates across multiple revenue verticals, each offering strong growth potential in the near to long term.

PRODUCT CONCENTRATION RISK

The Companys strong dependence on the microfinance segment, accounting for more than 70% of business, makes vulnerable to sector-specific challenges.

Mitigation Measures

Favourable demographics and unmet credit demand indicate a strong and enduring growth trajectory for Indias microfinance sector.

The MSME and individual loan segments are anticipated to substantially enhance business volumes and profitability within the next 3–5 years. Meanwhile, the overall contribution of the MFI segment has declined compared to the previous year.

GEOGRAPHIC CONCENTRATION RISK

Concentrating business operations in a limited region can limit scalability and pose challenges to long-term growth.

Mitigation Measures

The Company has expanded its microfinance footprint from 5 states in 2017 to 11 states by 2025.

The Company is strategically leveraging its strong microfinance presence to expand other business verticals across these states.

The Company follows a measured expansion approach, ensuring regional cultural and financial landscapes are well understood before advancing operations.

FUNDING RISK

Access to funding will be crucial for seizing emerging business opportunities.

Mitigation measures

Consistent and timely loan repayments have earned the Company a strong reputation among its funding partners.

The Companys solid financials, strong credit standing, and comfortable equity base, complemented by a healthy CAR position it to tap into diverse funding opportunities.

IT RISK

Existing IT infrastructure may face limitations in supporting scalable and efficient operations.

Mitigation Measures

The Company has made strong technological strides in recent years, aiming to become an industry leader. Its integrated tech platform, combining the Loan Origination System (LOS), Loan Management System (LMS), and accounting modules, ensures seamless connectivity across the organisation and all product lines, enhancing efficiency and scalability.

The Company leverages an IT-enabled HRMS platform to manage the complete employee life cycle for its workforce of over 4,800.

Arman consistently allocates substantial resources towards modern technology adoption to streamline operations and boost productivity.

FINANCIAL PERFORMANCE

Despite persistent headwinds in the microfinance sector, our performance for the quarter and full year ended March 31, 2025, underscores resilience and operational discipline. Gross Total Income for FY25 reached C730 crores, marking a 10% year-on-year growth.

Net Income rose to C491 crores, reflecting a robust 24% increase over FY24.

Pre-Provisioning Operating Profit (PPOP) stood at C333 crores, up 14% year-on-year.

Profit After Tax was C52 crores, impacted by elevated provisioning, resulting in a 70% decline compared to the previous year.

Asset Quality & Provisioning

Our continued focus on strengthening collection and underwriting frameworks has led to notable improvements in asset quality:

The gross NPA declined to 3.37% as of March 31, 2025, representing an improvement of 75 basis points from 4.13% in December 2024.

We adopted a prudent and forward-looking provisioning strategy, with cumulative provisions totalling C117 crores for FY25.

This covers 5.23% of consolidated AUM and 6.55% of on-book AUM.

Capital Strength

We remain well-capitalised to support future growth: Capital Adequacy Ratio stood at 37.34% for the standalone entity.

Namra Finance reported a robust 48.37% increase, reinforcing its Balance Sheet strength and lending capacity.

Key Ratios

Particulars	Consolidated		Standalone		Change as compared to the immediately previous financial year		Remarks
	2024- 25	2023- 24	2024- 25	2023- 24	Consolidated	Standalone	Consolidated	Standalone
(i) details of signif- icant changes (i.e. change of 25% or more as com- pared to the im- mediately previ- ous financial year) in key financial ratios, along with detailed expla- nations therefor, including:
(i) Debtors Turn- over	NA	NA	NA	NA	NA	NA	NA	NA
(ii) Inventory Turnover	NA	NA	NA	NA	NA	NA	NA	NA
(iii) Interest Cover- age Ratio	NA	NA	NA	NA	NA	NA	NA	NA
(iv) Current Ratio	NA	NA	NA	NA	NA	NA	NA	NA
(v) Debt Equity Ratio	1.41	2.12	0.7	0.54	-33.49%	29.63%	Consolidated Debt Equity Ratio reduced from 2.12 to 1.41 due to reduction in Consolidated OnBook AUM from C2146.66 Crs to INR 1793.70.	Standalone Debt Equity Ratio in- creased from 0.54 to 0.70 due to in- crease in OnBook AUM from C428.78 Crs to C557.53.
(vi) Operating Profit Margin (%)	NA	NA	NA	NA	NA	NA	NA	NA

Rs

	Consolidated		Standalone		Change as compared to the immediately previous financial year		Remarks
Particulars	2024- 25	2023- 24	2024- 25	2023- 24	Consolidated	Standalone	Consolidated	Standalone
(vii) Net Profit Margin (%) or sector-specific equivalent ratios, as applicable.	7.13%	26.24%	23.74%	28.39%	-72.83%	-16.38%	Microfinance sector witnessed a signifi- cant deterioration in asset quality during FY 2024–25, which ad- versely impacted the financial performance of Namra Finance Ltd., the wholly owned subsidiary. As a result, the company report- ed a sharp increase in impairment allowance amounting to C235 crore, reflecting a 306.57% rise com- pared to FY 2023–24, leading to a notable reduction in consol- idated net profit for the year.	NA
(j) details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explana- tion thereof.	5.96%	21.36%	7.37%	7.09%	-72.12%	4.01%	The sharp increase in impairment allowance of C235 crore in FY 2024–25, owing to the deterioration in asset quality across the microfinance sector, significantly reduced Namra Finance Ltd.s net profit. Conse- quently, this decline in profitability also led to a contraction in the companys Return on Net Worth (RoNW) during the year, as the reduced earnings impacted overall return metrics despite a stable capital base.	NA