IPO Synopsis
Arohan Financial Services, Kolkata based microfinance lender, is in its final stage of preparations of IPO. The fresh issue size will be worth Rs. 850 crores (including Pre-IPO placement value) and offer for sale of 2.7 crore equity shares. The lender will be looking to raise up to Rs 150 crore from pre-IPO placement.
Existing investors such as Tano India, Michael & Susan Dell Foundation, Maj Invest, TR Capital and Aavishkaar Goodwell India Microfinance Development Company II (AG II) will be looking to partially exit through the sale.
Qualified institutional buyers (QIBs) can subscribe to up to 50% of the IPO, whereas retail individual investors will have up to 35% of the reserved portion. 15% of the issue size will be set aside for non-institutional investors. Furthermore, eligible employees of this company can subscribe up to 5% of initial offer.
Edelweiss Financial Services, ICICI Securities, Nomura Financial Advisory & Securities and SBI Capital Markets are book running lead managers for the issue.
Objective of the issue
- Fulfilment of general corporate purposes
- Augmenting the capital base
- Prepayment or repayment of the entire or a small part of its outstanding borrowings
About Arohan Financial Services Ltd
Arohan, set up in 2006, is the largest NBFC-MFI in the eastern Indian region with Rs 4600 crore gross loan portfolio in FY21. It raised Rs 189 crore in February from ASK Financial Holding, Kiran Vyapar Ltd and Arohan ESOP Trust at Rs 210 per share.
The Gross Loan Portfolio (“GLP”) was Rs. 48.57 billion and making it the largest NBFC-MFI in Eastern India and the fifth largest NBFC-MFI in India based on Gross Loan Portfolio. Between FY17 to FY20, it had the second highest GLP CAGR of 68.00% among the top five NBFC-MFIs in India, as well as the highest customer growth among the top five NBFC-MFIs at 49.00% CAGR between FY18 to FY20.
It operates in low-income, unpenetrated states of the country. These included 12 of the 14 Low Income States in India. Its microfinance business’ branch network consisted of 710 branches in 11 states and MSME lending business’ branch network consisted of 10 branches in eight states. It serves approximately 2.21 million borrowers in 17 states.
The offerings of Arohan Financial Services include credit as well as insurance products. The former includes income-generating loans and other forms of financial assistance, while the latter covers life and health insurance products.
It is focussed on optimising customer sourcing channels, maintaining well-established loan origination, credit underwriting and loan management processes, as well as adopting and integrating technology into the business to improve lending outcomes and operational efficiency.
Arohan Financial Services Ltd Financial Status
|
Particulars (in Rs. Crores) |
FY20 |
FY19 |
FY18 |
|
Revenue |
934.51 |
651.59 |
327.87 |
|
EBITDA |
556.48 |
437.19 |
175.58 |
|
PAT |
126.80 |
127.64 |
30.98 |
|
EPS (basic in Rs.) |
12.07 |
14.05 |
3.52 |
|
ROE |
13.17% |
18.31% |
8.11% |
|
Particulars (in Rs. Crores) |
FY20 |
FY19 |
FY18 |
|
Total Assets |
5,280.82 |
3,853.10 |
2,303.67 |
|
Share Capital |
110.32 |
102.67 |
88.47 |
|
Total Borrowings |
4,193.11 |
3,023.49 |
1,870.12 |
|
Particulars (in Rs. Crores) |
FY20 |
FY19 |
FY18 |
|
Net cash generated from / (used in) operating activities |
-761.40 |
-1,308.59 |
-1,057.64 |
|
Net cash from / (used in) investing activities |
1,280.73 |
1,329.33 |
1,035.07 |
|
Net cash flow from / (used in) financing activities |
-4.75 |
-5.51 |
-3.38 |
|
Cash and cash equivalents at the end of the year/period |
688.58 |
174.01 |
158.78 |
Peer Comparison
|
Name of the company |
Net Profit |
Basic EPS |
NAV Rs. per share |
PE |
RoNW % |
|
Arohan Financial Services Limited |
126.80 |
12.07 |
87.26 |
NA |
13.17% |
|
Credit Access Grameen Limited |
335.49 |
23.2 |
189.9 |
31.1 |
12.27% |
|
Spandana Sphoorty Financial Limited |
351.83 |
56.21 |
408.29 |
12.16 |
13.40% |
|
Bandhan Bank |
3,023.74 |
18.78 |
94.37 |
17.97 |
19.90% |
|
Ujjivan Small Finance Bank |
349.92 |
2.19 |
18.44 |
16.14 |
10.98% |
Key Points for Arohan Financial IPO are:-
IPO Key Points
-
Strengths
- Largest NBFC-MFI in Eastern India and fifth largest NBFC-MFI in India with a focus on Low Income States
- Seasoned business model incorporating its well-established risk management framework, loan approval processes and recovery drives
- Customer centric approach with diverse product offerings
- Advanced and scalable technology-enabled infrastructure
- Diverse borrowing relationships and access to multiple sources of capital
- Promoter ownership and experienced Board and management teams
-
Risks
- The company could experience headwinds due to a lack of operational efficiency or deterioration in the quality of assets directly affecting the profitability.
- Arohan’s portfolio loans in its microfinance segment are unsecured and backed by group-based social security. Thus, the company has a risky asset class.
- A significant portion of the company’s revenue in FY2020 comprised interest income earned from its microfinance business, thus, there is restricted diversification in relation to this company’s revenue stream.
- Any change in interest rates would affect its interest expenses on its floating interest-bearing liabilities as well as net interest income and net interest margins.
- Operates in natural disaster prone locations, hence any natural or man-made disaster occurrence will have immediate effect on the business.
How to apply for IPO?
-
Login to your 5paisa account and select the issue in the
current IPO section -
Enter the number of lots and price at which you wish to
apply for -
Enter your UPI ID and click on submit. With this, your
bid will be placed with the exchange -
You will receive a mandate notification to block funds in
your UPI app -
Approve the mandate request on your UPI and funds
will be blocked
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IPO FAQs
What is the minimum lot size and investment required for the Arohan Financial Services IPO?
Arohan Financial Services IPO details are yet to be announced.
What is the price band of the IPO?
Arohan Financial Services IPO details are yet to be announced.
When does the Arohan Financial Services issue open and close?
Arohan Financial Services IPO details are yet to be announced.
What is the size of Arohan Financial Services IPO issue?
The IPO includes fresh issue size is worth Rs. 850 crores and an OFS of 2.7 crore equity shares.
Who are the promoters/key personnels of Arohan Financial Services?
Aavishkaar Venture Management Services Private Limited (“AVMS”) and Intellectual Capital Advisory Services Private Limited (“I-Cap”) are part of the Aavishkaar Group
What is the allotment date of Arohan Financial Services?
Arohan Financial Services IPO details are yet to be announced.
What is the Arohan Financial Services listing date?
Arohan Financial Services IPO details are yet to be announced.
Who are the book runners for Arohan Financial Services IPO?
Edelweiss Financial Services, ICICI Securities, Nomura Financial Advisory & Securities and SBI Capital Markets are book running lead managers for the issue.
What is the objective of the issue?
The proceeds will be used for
- Fulfilment of general corporate purposes
- Augmenting the capital base
- Prepayment or repayment of the entire or a small part of its outstanding borrowings
How to apply for the Arohan Financial Services IPO?
To apply for the IPO, follow the steps given below
- Login to your 5paisa account and select the issue in the current IPO section
- Enter the number of lots and price at which you wish to apply for
- Enter your UPI ID and click on submit. With this, your bid will be placed with the exchange
- You will receive a mandate notification to block funds in your UPI app