Arohan Financial Services in final lap to file DRHP for Rs 1400 crore IPO

Microfinance company Arohan Financial Services is planning to apply for a Rs 1,400 crore initial public offering (IPO) within a month, at a time when the segment is showing signs of recovery from the severe asset quality stress seen over the past two years.

The Aavishkaar Group company would like to split the IPO between Rs 600 crore of primary issue and Rs 800 crore of offer for sale (OFS), said Arohan Financial Services managing director Manoj Nambiar.

Aavishkaar and Intellecap together are classified as the promoter group and they cumulatively own 14.2% stake at present. The promoters will not sell any shares through the IPO. Long-time investors such as Michael & Susan Dell Foundation are Tano Capital are likely to sell shares through the OFS window.

“We are planning to file the DRHP (draft red herring prospectus) soon. The idea is to be ready with a valid ticket when things settle down. The year-end commentary is positive and the first quarter has started off well,” Nambiar told ET.

The process to get an approval takes about three-four months and then it carries a 12-month validity to list.

Arohan Financial Services has decided to file the DRHP on the basis of its December 2025 financials and business numbers. Its assets under management stood at Rs 6,300 crore, with Bihar, Uttar Pradesh and West Bengal together contributing about half. The gross non-performing assets ratio improved to 1.6% from 2.9% a year ago.

The non-banking finance company-microfinance institution had in January announced a Rs 1,500 crore IPO plan with an equal share of primary issue and OFS. The company has scaled down the size of IPO and the size of the primary issue a bit following the Iran war, which led to a steep fall in the stock market.

The company has been planning to go public since 2019 and had received the market regulator's go-ahead once in 2021, but stress in microfinance in quick succession over the past six years forced it to hold the plan.

The sector came under severe stress after the Covid-19 pandemic in 2021, and then again after 2024 when it was trying to break the shackles and grew at a rapid pace.

The sector's total book size stood at Rs 3.29 lakh crore at the end of February, up 2.5% over the previous month, according to a monthly update by credit bureau Equifax India, reversing a prolonged phase of contraction as lenders slowed lending to overleveraged borrowers. The market size stood at Rs 4.43 lakh crore at the end of March 2024.

Lenders’ portfolio quality improved, too, sequentially while the ageing bad loan ratio declined for the first time in the past 24 months.