Arohan Financial Prepares for ₹1,500 Crore IPO

Non-Banking Financial Company – Microfinance Institution (NBFC-MFI) Arohan Financial Services is preparing to enter the capital markets with a ₹1,500 crore initial public offering (IPO) in the middle of the next financial year, a move that comes as the microfinance sector begins to find its footing again after a prolonged period of pressure.

Managing Director Manoj Kumar Nambiar said the company has already appointed merchant bankers and expects to file its draft red herring prospectus with the market regulator, the Securities and Exchange Board of India (SEBI), within the next two months. The IPO is expected to hit the market in the second quarter of the next financial year.

How The IPO Is Structured

The proposed ₹1,500 crore issue will be split evenly. About ₹750 crore will be raised through fresh equity, while the remaining ₹750 crore will be raised through an offer for sale by existing investors. Those looking to pare their holdings include Tano Capital and the Michael and Susan Dell Foundation.

Nambiar said the promoters are not expected to sell any shares in the IPO. The fresh funds raised will be used to strengthen the company’s capital position, which management believes is critical as Arohan prepares for its next phase of growth. Beyond capital, the company also sees the listing process as a way to improve governance standards, board oversight, and transparency.

For Arohan, going public is being positioned less as a one-time fundraising event and more as a structural shift. The company wants to build a balance sheet that allows it to grow steadily without stretching risk limits, especially in a sector that has seen sharp cycles over the past few years.

Why The Sector Backdrop Is Changing

The timing of the IPO is closely linked to improving conditions in the microfinance space. After several quarters marked by stress, collections have started to stabilise. A better harvest and GST rate rationalisation have helped improve cash flows in rural areas, which form the backbone of microfinance lending.

At Arohan, collection efficiency currently stands at 99.7%. The company has also increased its use of technology, including AI-based tools, to track repayments and identify early warning signs. According to management, this has helped teams intervene sooner rather than waiting for accounts to slip.

However, challenges remain. Nambiar pointed out that delays in credit bureau data updates continue to be a concern, as lenders may not always have a real-time view of borrower exposure. He also said the industry is watching for a possible government-backed credit guarantee scheme, which could encourage banks to lend more confidently to MFIs.

The sector has seen a decline in both outstanding loan volumes and borrower numbers, but Arohan expects this to reverse gradually as confidence returns.

What Lies Ahead For Arohan

On the business side, Arohan is targeting an outstanding loan portfolio of about ₹7,000 crore by the end of the current financial year. Over the longer term, it aims to scale this to ₹20,000 crore by 2030.

The company also plans to diversify beyond unsecured microloans. It is preparing to enter secured lending segments such as gold loans and loans against property, a move aimed at reducing risk and smoothing earnings over time.

As the microfinance sector slowly moves out of a difficult phase, Arohan’s planned listing reflects cautious optimism. For investors, the IPO will be closely watched as a test of whether the sector’s recovery can translate into sustainable, long-term growth.

Sources

Economic Times
TheHindu