Arman Financial Posts Profit Turnaround, But 9-Month Performance Dips

Arman Financial Navigates Mixed Fortunes in Q3 FY26

Arman Financial Services Limited has unveiled its latest quarterly results, painting a picture of a company showing signs of a strong short-term recovery, yet facing headwinds in its longer-term performance and within its key subsidiary.

Financial Deep Dive

The company announced a significant turnaround in its Q3 FY26 performance, reporting a Profit After Tax (PAT) of ₹22 Crore. This marks a substantial improvement from a loss of ₹7 Crore in the same quarter last year (Q3 FY25) and a dramatic 177.5% jump from ₹8 Crore in the preceding quarter (Q2 FY26). The quarterly recovery was driven by improved income and a likely optimization of costs or provisions.

However, the picture for the first nine months of the financial year (9MFY26) tells a different story. Consolidated PAT plummeted by 60.3% to ₹16 Crore, down from ₹39 Crore in 9MFY25. This decline highlights ongoing challenges that offset the recent quarterly gains.

Consolidated Assets Under Management (AUM) saw a slight year-on-year dip of 0.2% to ₹2,274 Crore in Q3 FY26, compared to ₹2,280 Crore in Q3 FY25. Despite this, there was a healthy 6.8% sequential growth from ₹2,130 Crore in Q2 FY26, indicating renewed business momentum on a quarter-on-quarter basis.

Segment Performance: A Tale of Two Halves

Arman Financial's core segments – Two-Wheeler, MSME, and Loan Against Property (LAP) – showcased resilience. For 9MFY26, AUM in these segments grew by a strong 28.2% year-on-year to ₹657 Crore, with Gross Total Income rising 20.2% to ₹157 Crore. This segment's performance offers a positive counterpoint to the overall mixed results.

In stark contrast, the microfinance subsidiary, Namra Finance, faced significant pressure. Its AUM declined by 8.5% year-on-year to ₹1,618 Crore in Q3 FY26. Namra reported a net loss of ₹16 Crore for 9MFY26, a reversal from a profit of ₹8 Crore in the prior year period. This subsidiary's struggles directly impact Arman's consolidated performance, contributing to the overall 9-month PAT decline.

Financial Health and Liquidity

The company maintained a robust capital position. Shareholders' Equity stood at approximately ₹892 Crore as of December 31, 2025. Capital Adequacy Ratios (CAR) were strong at 38.3% for Arman standalone and an impressive 52.3% for Namra Finance, well above regulatory requirements. Liquidity also appears healthy, with ₹247 Crore in cash and bank balances, complemented by ₹320 Crore in undrawn sanctions from lenders.

Consolidated Gross Non-Performing Assets (GNPA) were reported at 3.40%, with Net NPAs at 0.77%, indicating managed asset quality for the group.

Leadership Transition

A significant development accompanying the results is a planned leadership change. Mr. Jayendra Patel will step down as Vice Chairman & Managing Director, moving to a Whole-Time Director role to offer strategic guidance. Mr. Aalok Patel has been appointed as the new Vice Chairman & Managing Director, with Mr. Vivek Modi taking on added responsibilities as Executive Director alongside his Group CFO role.

Outlook and Sector Context

Management expressed confidence in the structural opportunity within its core segments, citing improving credit trends and a diversified product mix. The company aims for calibrated growth, prioritizing asset quality and long-term sustainability. This outlook comes at a time when the broader microfinance sector is undergoing a 'churn,' focusing on portfolio quality over aggressive expansion due to elevated credit risks and regulatory guardrails, as noted in industry reports [20, 24, 25].

Peer Comparison

Arman Financial's mixed results stand in contrast to many peers in the NBFC and small finance bank space. Competitors like Cholamandalam Investment [1, 4, 12, 21, 23] reported strong YoY profit growth of 18-20% and AUM expansion of 20% in Q3 FY26. Shriram Finance [2, 5, 13, 17, 19] also showed robust revenue growth and sequential profit increases, although its reported YoY profit saw a decline due to a high base. CreditAccess Grameen [3, 7, 8, 16] posted a dramatic profit turnaround of over 350% YoY, highlighting a sector recovery for well-positioned players. Ujjivan Small Finance Bank [6, 11, 14, 15, 18] reported record NII and a 71% YoY profit surge. The performance of these peers suggests that while some segments of the financial services sector are thriving, Arman's specific challenges, particularly within its microfinance arm, are creating a divergence.

Risks

The primary risks for Arman Financial lie in the continued underperformance of its microfinance subsidiary, Namra Finance, which is reporting net losses and AUM contraction. The sharp 60.3% year-on-year decline in consolidated PAT for the nine months also signals underlying operational pressures that need to be addressed. Investors will watch closely how effectively the new leadership navigates these challenges and leverages growth opportunities in its stronger segments.