Arohan Financial Services Ltd, which had put its expansion plans on hold and had also stalled its capital raising plans in the wake of Covid-19, is gearing up to raise capital by the fourth quarter of this fiscal. The company, which is expecting its collection efficiency to come back to near normal levels by the end of this fiscal, is looking to gain market share and grow its disbursements starting FY22. In an exclusive interview with BusinessLine, Manoj Kumar Nambiar, Managing Director, Arohan, spoke about the various challenges faced during the current year and the way forward. Excerpts:

The pandemic has posed challenges both in terms of collections and disbursements. How has it been for Arohan so far?

The lockdown happened in the second half of March so it was an uneventful closing to last year and pretty much an uneventful opening to the new (financial) year as there was a lockdown in April. Luckily, the geographies where we were present (in the 11 States) were mostly in the orange and green zones. So we could mobilise our branches, sanitise and get our staff ready mostly by the first or second week of May. Meanwhile, we continued with our customer contact activity on the phone and simulate a virtual centre meeting. To facilitate digital cashless payments, we tied up with mobile wallets, the internet banking sites available and also Bharat BillPay.

The collection efficiency, which was less than one per cent as in April this year, steadily improved to around 75 per cent in July. We wanted collections to further improve in August so that when the opening up happens in September we are in a better position, but that did not happen. This is primarily because the infection increased at a much faster rate around that time and the reverse migration had brought down household income. This apart, natural calamities in certain areas like the floods in Assam and Bihar, impacted livelihood. In the first half of September, we realised that there was a fair bit of stress, particularly in some geographies. So we created a product called ‘Sakriya’ based on RBI circular and used that effectively in September and November; this is the last month we can use this scheme. Close to 5-6 lakh customers are likely to benefit from this product of our total customer base of around 23 lakh.

So by November we have touched 95 per cent collection efficiency and in December we should either improve further or atleast remain at similar levels. We expect to be back to 98-99 per cent collection efficiency by February-March 2021.

The disbursements have remained far below normal so far during this fiscal. How has it been for Arohan? Do you see it improving anytime soon?

When unlocking happened, the focus was more on activating customers, explaining moratorium and managing collection. Disbursement was limited to existing customers and that too after doing additional credit check so that we know that her livelihood has come back to a level where we know she can repay. Disbursement-wise, we have been muted because we have been focusing on collections, extending loans to existing customers and also because of the additional credit checks introduced. There is demand but addressable demand in terms of fairly high level of credit quality backing that demand is certainly lesser.

As of November-end, we are still around 50-60 per cent of the disbursements during a normal month. But from December onwards, normalcy is slowly coming back and in Q4 the focus would be more balanced between collection and disbursement. In Q4, we hope to come back to complete normalcy on disbursement front. We closed last year March at ₹5,000 crore, we would close this year March at pretty much same number, and if the pain continues then we may also be slightly lower.

What about your plans to raise capital and expand this fiscal?

We were about to close what would have been India’s largest capital raise of around $265 million in February-March this year but unfortunately due to the pandemic everything was put on hold.

We are in talks with at least three investors and two of them have even indicated some terms to us which we are negotiating and we are hoping to close something by Q4. We are looking to raise close to ₹250-500 crore depending on the valuations.

Fortunately, for us, we are of a certain shape and size where our credit rating, networth, portfolio size, standing among other institutions and our lender relationships has been strong. So we have been surplus on cash and sanctions. So disbursements not happening is not because of the money but because of things already mentioned.

RBI measures to infuse liquidity including refinance, TLTRO, the central government schemes all of that have been very useful atleast for a company of our size.

The year 2021 was clearly a blip year but with the improvement we have seen in the last three months by January-February we should be as closer to normalcy as a normal year. Once that happens, the focus is going to be on growth, we have to catch up on whatever we have lost this year and also there is a very great potential opportunity to gain market share because a lot of small and medium enterprises would find it difficult to raise capital, to be liquid and be viable.There I see a lot of opportunity for a player like us to gain market share.

We are today the second lowest-priced NBFC-MFI in the country. We have launched India’s first balance transfer product in the MFI industry. We go and talk to customers and tell them about our product and the amount of savings they can have.

We were planning to expand into three more States – Rajasthan, Punjab and Haryana but now based on the quantum of fund raised we will decide whether to go into three or two States next year.

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