Microfinance company Arohan Financial Services is poised to file for a major initial public offering (IPO) within the next month. The planned ₹1,400-crore offering marks a significant development for a sector that has shown signs of recovery after enduring severe asset quality stress over the past two years.
The Aavishkaar Group company structured the IPO to comprise a primary issue of ₹600 crore and an offer for sale (OFS) of ₹800 crore, as detailed by Arohan Financial Services managing director Manoj Nambiar. The promoters, including Aavishkaar and Intellecap, currently hold a cumulative 14.2% stake and confirmed they will not sell any shares through the IPO.
Long-term investors, specifically the Michael & Susan Dell Foundation and Tano Capital, are anticipated to contribute to the OFS window. Nambiar noted the strategic timing of the move, stating the company is waiting for a "valid ticket" while the year-end commentary remains positive, with the first quarter starting well.
Arohan Financial’s Filing Strategy and Scale-Down
Arohan Financial Services plans to file its Draft Red Herring Prospectus (DRHP) using its financial statements and business metrics from December 2025. The company had previously announced a ₹1,500-crore IPO plan with an equal split of primary and OFS components.However, the size of the planned offering has been scaled down following market volatility, specifically after the steep fall in the stock market triggered by geopolitical events. The full process for receiving regulatory approval typically takes 3-4 months, followed by a 12-month validity period for listing.
Improving Asset Quality and Core Metrics
From a corporate standpoint, Arohan Financial Services reported that its assets under management stood at ₹6,300 crore. Geographically, Bihar, Uttar Pradesh, and West Bengal collectively contribute approximately half of this operational base.Crucially, the company’s asset quality metrics show marked improvement. The gross non-performing assets ratio (GNPA) improved significantly to 1.6%, a marked improvement from the 2.9% ratio recorded one year earlier.
Signs of Revival in the Broader Microfinance Sector
The company’s plans align with a broader positive trend observed across the microfinance sector. Industry data indicates that the sector is exiting a prolonged phase of contraction.According to Equifax India's monthly update, the sector's total book size reached ₹3.29 lakh crore at the end of February, marking a 2.5% increase from the previous month. The overall market size was noted at ₹4.43 lakh crore as of the end of March 2024.
Sector indicators confirm that portfolio quality is improving sequentially. Furthermore, the ageing bad loan ratio saw a decline for the first time in the past 24 months, suggesting lenders are successfully navigating the stress period.
The microfinance industry had faced severe stress both after the Covid-19 pandemic in 2021 and more recently in 2024. Despite these headwinds, the current data suggests a reversal in lending patterns, as lenders slow down their lending to overleveraged borrowers.
Disclaimer: Due care and diligence have been taken in compiling and presenting news and market-related content. However, errors or omissions may arise despite such efforts.
The information provided is for general informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Readers are advised to rely on their own assessment and judgment and consult appropriate financial advisers, if required, before taking any investment-related decisions.
Any views, opinions, or statements expressed, where applicable, are those of the respective analysts or experts and do not reflect the views of this website. The website has no association with such viewpoints and does not assume any responsibility for them.