| 60 Annual Report | 2024-2025 Management Discussion & Analysis 8,000 6,000 4,000 2,000 0 Net Worth INR in Crs 6,016 1,915 4,703 2,025 FY2025 Debt Outstanding Net Worth FY2024 0 2000 4000 6000 8000 5293 Organic Sourcing & Collection Term Loan Off Book Buyout 71 354 FY 2025 113 172 Gross Loan Portfolio Growth in INR Crs Ratios FY 2024-25 FY 2023-24 Variance Yield 23.71% 23.87% (0.67%) Finance cost 11.52% 11.70% (1.54%) Qualifying assets 75.90% 78.95% (3.86%) Opex 8.00% 7.44% 7.53% CRAR 34.09% 29.01% 17.51% Leverage 2.32 3.14 (26.11%) BALANCE SHEET ANALYSIS Loan Portfolio Arohan had a 16% de-growth in the Gross Loan Portfolio from the previous year and stands at INR 6,003 Cr mark which is mainly due to the Cease & Desist order served on us by the Reserve Bank of India, dated October 17, 2024. Net Worth & Outstanding Borrowings: Outstanding borrowing has decreased by 22% due to de-growth in AUM as resulted from the Cease & Desist order served on us by the Reserve Bank of India, dated October 17, 2024, and Networth has increased by 6% in FY 2025 over FY 2024 due to retained earning and increased capital base respectively. Funding Business Growth, among customer-centric challenges and shifts FY 2025 was a pivotal year for the microfinance industry, marked by evolving regulations and a heightened focus on customer protection. The sector experienced a decline in portfolio quality mid-year, which led to a slowdown in disbursements across the industry. In response, MFIN (Microfinance Institutions Network) introduced Guardrail 1.0, effective July 1, 2024. This framework was designed to strengthen responsible lending practices by placing limits on the number of lenders per customer, capping overall indebtedness, and restricting lending to customers with delinquent histories. While these measures aimed to safeguard borrower well-being and promote financial discipline, they also resulted in a noticeable contraction in disbursements by NBFC-MFIs— declining by 17% compared to the previous fiscal. Additionally, stricter lender shortlisting criteria contributed to the overall reduction in credit flow. The stress in the portfolio quality has also reduced funding to NBFC-MFIs from banks and other lenders. According to Micrometer (Issue 53), debt funding to NBFC-MFIs declined by 35.7% compared to the previous financial year. After witnessing green shoots in the portfolio quality, the industry witnesses higher funding in Q4, FY 2025 as compared to previous quarters. This reflects lenders’ growing comfort with structured transactions, even amid a more cautious credit environment. These shifts underscore the industry’s continued efforts to strike a balance between growth and responsible, customer-focused lending. MANAGING LIQUIDITY AT AROHAN DURING THE YEAR Arohan’s approach to liquidity management in FY 2025 was guided by a core objective: to maintain a strong liquidity position while optimising the cost of borrowings by leveraging the Company’s robust financial and operational performance. Arohan started the financial year by raising debt funding of INR 2142 Cr in H1 FY 2025 from 22 lenders and carried an average liquidity of over INR 1000 Cr on a monthly basis. Arohan’s strong capital adequacy ratio of over 30% and superior
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