Arohna Financial Services Ltd, India’s leading NBFC-MFI (Non-Banking Financial Company Microfinance Institution), released its audited financial results for FY26, showing reduced revenue but increased profitability and better provisions ahead of its IPO DRHP filing.
In this blog, we will discuss the financial statements, changes in profitability, and asset quality recovery of Arohan Financial Services.
Financial Year 2025-26 Overview
Particulars (Rs in Crores) | FY26 | FY25 | YoY Change |
Total Revenue from Operations | 1,544.88 | 1,691.75 | -8.7% |
Total Income | 1,551.55 | 1,695.26 | -8.5% |
Total Expenses | 1,388.14 | 1,557.18 | -10.9% |
Profit Before Tax | 163.41 | 138.09 | +18.3% |
Net Profit After Tax | 122.33 | 109.69 | +11.5% |
EPS (Basic) | 8.02 | 7.20 | +11.4% |
A. Revenue declined, but core income is still stable
Arohan Financials recorded a revenue from operations of Rs 1,544.88 crore in FY26, which is 8.7% less than the FY25 figures of Rs 1,691.75 crore. The major contributor is interest income:
FY26 Interest Income: Rs 1,415.50 crore.
FY25 Interest Income: Rs 1581.18 crore.
This could be pressure on loan disbursements due to the visible slowing of lending activity across the MFI industry. This is sector-wide and not just related to Arohan.
However, the fees and commission income improved from Rs 69.54 cr in FY25 to Rs 95.43 cr in FY26, showing some diversification of income.
B. 24% Reduction In Credit Costs
Arohan Financials reduced its impairment costs by 24% in just 1 year.
Particulars | FY26 | FY25 |
Impairment on Financial Instruments | Rs 303.37 crore | Rs 397.51 crore |
This is a highly significant improvement for an NBFC-MFI, indicating better collection rates, improved asset quality, and reduced credit losses. This can be a great investment signal because in the microfinance business, profitability often depends more on falling credit costs than revenue growth.
C. Visible Profitability Recovery
Despite lower revenue. The NBFC improved its profitability due to better cost control and lower provisions. PAT grew by 11% from Rs 109.69 cr in FY25 to Rs 122.33 cr in FY26. Have a look at Arohan’s quarterly recovery:
Quarter | PAT |
March 2025 | Loss of Rs 42.51 crore |
December 2025 | Profit of Rs 36.47 crore |
March 2026 | Profit of Rs 61.59 crore |
This is a direct, visible turnaround of operational normalisation, shown from quarterly losses to profits in the latest two quarters.
D. Balance Sheet Analysis
23% Loan Book Expansion despite sectoral challenges, showing a continued borrower demand.
Particulars | FY26 | FY25 |
Loans | Rs 7,006.99 crore | Rs 5,705.11 crore |
34% Borrowing Increase
Particulars | FY26 | FY25 |
Borrowings | Rs 5,489.93 crore | Rs 4,090.71 crore |
Higher borrowings support loan growth. Investors should monitor leverage carefully.
The debt-to-equity ratio is 2.73 times, which is less than the usual 3-6 times in the lending-focused NBFC. (Carehealth Ratings India).
E.Improvement in Asset Quality and Capital Strength
Key Ratios | FY26 | FY25 | What It Indicates? |
Capital Adequacy Ratio | 27.61% | 34.09 | Lowered in 1 year but comfortable above the regulator requirement of at least 15%. |
Gross Stage 3 Ratio | 1.07% | 2.77% | Lower stressed assets and better loan collection efficiency. |
Net Stage 3 Ratio | 0.18% | 0.47% | |
Provision Coverage Ratio (PCR) | 83.25% | 83.42% | Adequate provisioning against potential bad loans. |
Overall, this sharp improvement in Stage 3 assets, along with stable provisions, is a direct signal of Arohan’s stronger balance sheet in FY26.
Risks In Arohan’s Business Model
Investing in NBFC MFI companies comes with high growth potential but also with unique cyclical risks. Here are some of them:
A) Credit Risk And Asset Quality Stress
Microfinance loans mostly lack collateral. Income shocks faced by borrowers, like inflation or agricultural stress, can directly affect repayment capacity and increase the company’s NPA.
B) Socio-Political Climate
MFIs are heavily dependent on the local economy. Any local sociopolitical movements like protests, farm loan waivers, or local political changes create a “no repayment” atmosphere, directly affecting MFI’s income.
C) Regulatory Risks
RBI heavily regulates the microfinance sector to protect low-income borrowers. Heavy compliance requirements like income caps or lending margin limit changes directly impact profitability.
Is Arohan On A Recovery?
Arohan Financial’s FY26 results have shown some significantly positive indicators, such as:
Lower Credit Costs
Improved Profitability
Strong provisioning
Better Asset Quality &
Strong Capital Adequacy
Although the revenue growth remains weak, the financial health of Arohan Financial Services has recovered significantly compared to FY25. Thus, Arohan Financial Services Unlisted Shares can attract major eyeballs from investors, especially when the company files its DRHP for an IPO.
