/ -- Arman Financial Services Limited (Arman) would like to formally provide a brief business update amid the COVID-19 outbreak to various stakeholders. Below is a gist of how things are shaping up on the ground and what measures Arman is taking to deal with the situation.
Key Business Metrics as on 31st March 2020
FY20 Consolidated AUM stood at ? 862 Crore - higher by 26% over FY19 and 6% over Q3 FY20
COVID related disruption led to a lower booking in AUM of around Rs 75 Crore. Excluding this, the AUM would have seen a growth of 35-40% YoY (AUM in Feb-20 was ? 890 Crore - compared to ? 650 Crore in Feb-19)
Segment-wise AUM Breakdown
Microfinance AUM: ? 624 Crore (+29% YoY)
MSME AUM: ? 145 Crore (+46% YoY)
Two-Wheeler AUM: ? 93 Crore (-8% YoY)
Consolidated disbursements for FY20 stood at ? 871 Crore (higher by 11% over FY19)
Adequately Capitalized - Consolidated debt-to-equity ratio stood at 4.05x (excludes direct assignment)
'Business as Usual' till 20th March 2020
Collections:
For the 'Microfinance' and the 'MSME' segments,'collections are carried out on a cash basis' (via 'center collections in Microfinance' and 'door-step collections in MSME'). In the case of '2-wheeler loans,' collections are received via 'NACH / Direct Debit.'
MFI and MSME:
On-time center meetings and door-step collections continued till 20th March
Collection efficiency in the first 2 months of Q4 FY20 (Jan'20 - Feb'20) stood at 98.7% (marginally better than Q3 FY20)
85%). Hence, even for March, Arman was able to collect ~95% of the amount due (despite the announcement of nation-wide lockdown)
Two-wheelers:
Overdue recovery in all the segments was hampered - but the amount is negligible
Disbursements:
Consolidated disbursements grew by 33% YoY for the first 2 months of Q4FY20 (Jan'20 - Feb'20)
Business Continuity
Arman had anticipated the possibility of disruption in operations due to COVID-19, and accordingly, were ready with the 'Business Continuity Plan (BCP)' two weeks before the shutdown. 'Arman is now executing the best it can'
Following the government advisory, Arman hastemporarily closed all the Branches and the Head Office awaiting further notice. Centre meetings and door-step collections have been suspended
Branch managers (BMs) and field officers (FOs) have been asked to return to their homes till lockdown ends
The Management team is completely hands-on and making necessary decisions while closely monitoring the evolving situation (based on the data collected from FOs, RBI announcements, Government announcements)
Resilient Customer Base in Microfinance & MSME
80% of the AUM). Fortunately, the impact of COVID has been limited in Rural India so far
Moreover, the recently announced food security and economic relief measures by the government will hopefully aid in augmenting the repayment ability of borrowers in Rural India
Healthy Liquidity Position and Liability Profile
Considering the existing cash reserves and the debt capital raised recently, Arman has enough liquidity to cover the: (1) Necessary operational expenses for the next 6 months, and (2) Other immediate liabilities
De-risking Balance Sheet: 'Direct Assignment' and 'Securitization' transactions comprise 14% of the AUM (?122 Crore)as on 31st March 2020
'Direct Assignment' constitutes 8.3% of the consolidated AUM ( ? 71 Crore) as on 31st March 2020. In these transactions, the underlying portfolio risk lies with the assignee
Arman will increasingly focus on executing more assignment transactions going forward
Credit Rating has remained stable at BBB+ (CARE Ratings)
Action Plan - Post the end of Lockdown
Collection Plan
It would avoid providing a blanket moratorium and will start the collection process after the lockdown ends as most of the customers have indicated their ability to repay
Disbursements
Many customers will also need incremental loans. Arman will support them without compromising on the credit discipline (protecting the asset quality of the book has always been and will remain Arman's top priority)
About Arman Financial Service Limited
Disclaimer: No Business Standard Journalist was involved in creation of this content