Startup Deep Dive : Arohan Financial Services — filed for IPO as profit fell 65% in FY25

In May 2026, an NBFC-MFI that most Indians outside West Bengal and Bihar have never heard of filed papers to raise ₹600 crore (about $62.5 million, converted at $1 ≈ ₹96.0) in fresh equity from the public. That company, Arohan Financial Services, had already tried this once before, in 2021, and walked away.

The contradiction sits in the numbers themselves: Arohan’s revenue grew from ₹1,069 crore in FY23 to ₹1,629 crore in FY24, yet its net profit fell in the very next year, from ₹313.8 crore in FY24 to ₹110 crore in FY25, as bad loans in its core lending markets crept back up. A microfinance lender heading to the stock exchange while its profit is sliding is not a contradiction that disappears with a good hook — it is the story.

Quick facts

What they do

Arohan Financial Services is a non-banking finance company registered as a microfinance institution (an NBFC-MFI), lending mainly to women in low-income households across eastern, central and north-eastern India. Its flagship product, branded Saral, is a joint-liability group loan of a few thousand to ₹50,000, used by borrowers for small trade, services and household needs. Alongside this, Arohan runs a smaller book of individual and MSME loans — larger tickets, from ₹5 lakh up to ₹1 crore, aimed at small merchants and online sellers, run through its IntelleCash-branded product line — and it distributes insurance as a registered corporate agent for IRDAI. As of 31 March 2025, the company served 21.4 lakh borrowers through 1,102 branches across 323 districts in 17 states, with assets under management of ₹6,003 crore (about $625 million at $1 ≈ ₹96.0), as reported in its FY25 annual report.

The origin

Arohan began in January 2006 as a registered NBFC and started lending from a single branch in Kolkata that April, founded by Shubhankar Sengupta at a moment when Indian microfinance was still a cottage industry riding on the reputation of Grameen Bank and SKS Microfinance. The founding insight was narrow and specific: eastern India — West Bengal, Bihar, Odisha, Assam — had among the lowest formal credit penetration in the country, and banks were not interested in ₹10,000 loans to women running tea stalls or stitching units. A joint-liability group model, where borrowers vouch for each other and repay in small weekly or fortnightly instalments, could underwrite that risk cheaply enough to make the economics work, as it had elsewhere in the country. Vineet Rai, who had founded the impact-investing firm Aavishkaar around the same period, backed the company early; that relationship would matter more than anyone could have guessed when the wider microfinance industry nearly collapsed a few years later.

The struggle years

Arohan’s first crisis was not its own doing. In 2010, the Andhra Pradesh government moved to choke off microfinance lending after a wave of borrower suicides was linked to coercive collection practices at some large MFIs. The resulting Andhra Pradesh Microfinance Institutions Act froze collections in the state and triggered a sector-wide liquidity crunch, as banks pulled back funding from every NBFC-MFI regardless of its own conduct. Arohan, still a small and thinly capitalised lender, was caught in that undertow; by the time Mumbai-based IntelleCash Microfinance Network, backed by Aavishkaar and Intellecap, moved to acquire majority control in 2012, the deal was reported at roughly ₹52 crore for a company that was, in the words of one contemporaneous account, “sinking like many others” (Intellecap, 2012). That acquisition installed Manoj Kumar Nambiar as managing director, a position he still holds.

The second near-death arrived from COVID-19. Arohan had been profitable through FY20, reporting ₹127 crore in net profit that year, but FY21 turned into a ₹160 crore net loss as gross non-performing assets rose to 11.24% and net NPAs to 3.96% of advances by 31 March 2021, with credit costs jumping from 3.52% to 9.56% of the book (CARE Ratings, 2021). Layered on top was a state-level crisis: after severe flooding in 2019 exposed over-indebtedness among Assam’s borrowers, the state government introduced the Assam Micro Finance Institutions (Regulation of Money Lending) Bill in 2020 to rein in collection practices, and Arohan — which held around 8% of Assam’s microlending portfolio as of January 2021 — had to restructure large portions of its loan book in the third quarter of FY21 to absorb the shock.

The turning point

The clearest inflection point is the return from that COVID-era loss. Arohan went from a ₹160 crore net loss in FY21 to a return on total assets of 1.17% in FY22 (CARE Ratings) and a ₹70.72 crore net profit that same fiscal year on operational revenue of about ₹902 crore. The company followed that with a rapid capital raise in FY23 and FY24 — ₹248 crore and ₹266 crore respectively through compulsorily convertible preference shares — that rebuilt its capital base just as revenue nearly doubled, from ₹901.7 crore in FY22 to ₹1,691.8 crore in operating income by FY25. The rebuild is real, but it set up the current tension: profit peaked at ₹313.8 crore in FY24 and then fell by roughly 65% to ₹110 crore in FY25 as gross NPAs rose again, from 1.64% to 2.77% year-on-year, which is the backdrop against which the company is now asking public investors to buy in.

The money behind it

Arohan has never disclosed one clean lifetime fundraising total, and third-party data aggregators disagree sharply — Tracxn puts cumulative funding near $190 million, PitchBook cites $705 million (a figure that appears to blend equity and debt instruments), and CB Insights shows roughly $79 million. Because these do not reconcile, this piece does not state a single “total raised” figure; instead, here are the individual rounds that are independently documented:

• 2012: IntelleCash/Aavishkaar-led acquisition of majority control, reported at approximately ₹52 crore (Intellecap, 2012) — the deal that saved the company post the Andhra Pradesh crisis and installed today’s management.
• 2015: ₹60 crore raised from Tano Capital, a private equity investor focused on Indian financial inclusion (Business Standard, 2015).
• 2017: ₹155.5 crore raised in a funding round reported by PTI/Business Standard, expanding the equity base ahead of the company’s first attempt at an IPO.
• FY23: ₹248 crore raised through compulsorily convertible preference shares (CCPS), part of the post-COVID capital rebuild.
• Q1 FY24: A further ₹266 crore raised through CCPS from private equity investors.

Named backers and what each brought: Aavishkaar Group (through Aavishkaar Venture Management Services and AavishkaarGoodwell India Microfinance Development Company) is the controlling promoter group and supplied both capital and the management team (MD Manoj Nambiar) after 2012; TR Capital and Maj Invest Financial Inclusion Fund II are among the private equity investors who backed the FY23–24 capital raises as the company prepared for listing; and development finance institutions FMO (the Dutch entrepreneurial development bank) and funds such as Impact Fund Denmark have provided both debt and equity lines aimed specifically at financial-inclusion lenders. As of the FY26 rating cycle, Arohan has lending relationships with 43 lenders spanning private banks, public sector banks, NBFCs and financial institutions (CARE Ratings, 2026), which is its real day-to-day funding lifeline rather than any single headline round.

How it makes money

Arohan is a spread business: it borrows from banks and financial institutions, then lends that money out at a materially higher rate to borrowers who have no other formal credit access, and lives on the difference minus its own operating costs and loan losses.

• Money in: interest and fee income on microfinance and MSME loans; the FY25 operating income of ₹1,691.8 crore was earned mostly on the group-lending book.
• Cost of funds: approximately 9.4% annualised in H1 FY26, drawn from its 43-lender panel of banks, NBFCs and financial institutions (CARE Ratings, 2026).
• Where the margin sits: Arohan’s own pricing policy caps its effective yield spread — cost of funds, operating expense, credit-risk premium and margin — at a self-imposed ceiling of 12 percentage points over cost of funds, a discipline the company points to as borrower protection as much as regulatory hygiene (Arohan pricing policy document, 2024).
• Costs out: a branch-and-field-officer model across 1,102 branches is inherently labour-intensive; credit costs are the biggest swing factor, having ranged from 3.52% of the book in FY20 to 9.56% in the COVID-hit FY21.
• What people get wrong: Arohan is often filed away as “just another microfinance NBFC,” but a meaningful and growing share of its lending is now larger-ticket MSME and individual credit rather than pure joint-liability group loans, a shift the company has been deliberately building since the mid-2020s to diversify away from a book that is inherently unsecured and concentrated in a handful of low-income states.

The numbers

Figures below are standalone, in ₹ crore, for fiscal years ending 31 March, as reported in Arohan’s annual reports and cited by CARE Ratings and Planify’s summaries of those filings. FY22 net profit is not included: available secondary sources report FY22 only as a return-on-assets ratio (1.17%), not a rupee profit figure, so it has been cut rather than estimated.

The trend that matters for the IPO: profit roughly quadrupled from FY23 to FY24, then fell by about 65% into FY25 as asset quality weakened again — a sharper swing than the steady revenue line alone would suggest.

Where the money comes from

Arohan’s growth story and its principal risk are the same fact: its loan book is heavily concentrated in a small number of low-income eastern and northern states.

• West Bengal: 27% of the microfinance AUM as of 30 September 2025 (CARE Ratings, 2026) — the highest single-state exposure and Arohan’s home market.
• Bihar: 19% of the microfinance AUM as of 30 September 2025 (CARE Ratings, 2026).
• Top three states combined: 58% of AUM as of 30 September 2025, down from 61% as of 31 March 2025 and from 69% a year earlier as of 30 September 2024 — a gradual, deliberate diversification, but still a majority of the book in three states.
• Footprint: 17–18 states and 323 districts as of 31 March 2025, including Assam, Odisha, Jharkhand, Uttar Pradesh, Maharashtra, Tamil Nadu and Karnataka, following a push into new geographies that added 127 new branches in FY25 alone.
• By product: the Saral group-loan product to women borrowers remains the dominant line by volume; the MSME/individual segment through the IntelleCash-branded product is smaller but is the part of the book management highlights as the diversification lever, alongside supplementary solar, mobile and sanitation loans and insurance distribution.

The risks

• Geographic and political concentration. Nearly 60% of AUM sits in West Bengal, Bihar and Uttar Pradesh; a state-level intervention like Assam’s 2020 money-lending bill, or a regional loan-waiver push around elections, can freeze collections and drive up NPAs almost overnight, as happened in 2019–20 (CARE Ratings, 2026; Business Standard, 2021).
• Unsecured, income-shock-sensitive lending. Group microfinance loans carry no collateral and are made to borrowers with thin financial buffers; gross NPAs already rose from 1.64% to 2.77% year-on-year into FY25, even before any major shock, showing how quickly credit quality can move (company FY25 disclosures, cited in Planify and Unlisted Zone summaries).
• Wholesale funding dependence and rate risk. Arohan borrows from a panel of 43 banks and financial institutions rather than taking retail deposits; its margin depends on keeping its ~9.4% cost of funds well below lending yields inside a self-imposed 12-point spread cap, so a system-wide tightening in bank funding costs compresses margin directly (CARE Ratings, 2026; Arohan pricing policy, 2024).

The takeaway

The lesson in Arohan’s two decades is not that microfinance is fragile, though it clearly is — it is that a lending business built on a handful of geographies will keep re-learning the same shock in different disguises: an Andhra Pradesh law in 2010, an Assam flood and a state bill in 2019–20, a pandemic in 2021, and a fresh NPA uptick heading into its second IPO attempt in 2026. Each time, the company survived because it had patient, mission-aligned capital behind it — first Aavishkaar’s 2012 rescue, then a run of private-equity-backed capital raises through FY23 and FY24 — rather than because the underlying model became less exposed. Diversifying the loan book by product and geography is the right response; whether it happens faster than the next shock is the real question public investors are being asked to price.

Frequently asked questions

Is Arohan Financial Services listed on the stock exchange?

No. As of September 2026, Arohan is not listed. It filed a Draft Red Herring Prospectus (DRHP) with SEBI on 15 May 2026 proposing a listing on the BSE and NSE, comprising a ₹600 crore fresh issue and an offer for sale of up to about 4.04 crore equity shares; a listing date has not been announced.

Has Arohan tried to list before?

Yes. Arohan received SEBI approval for an earlier IPO attempt around 2021 but shelved those plans; the 2026 DRHP is its second attempt at a public listing.

Who owns Arohan Financial Services?

Arohan is controlled by entities of the Aavishkaar Group, which took majority control in 2012 through IntelleCash Microfinance Network. Other shareholders include private equity and development-finance investors such as TR Capital, Maj Invest Financial Inclusion Fund II and FMO.

Why did Arohan’s profit fall in FY25 despite rising revenue in prior years?

Revenue and operating income kept growing through FY25, but net profit fell to ₹110 crore from ₹313.8 crore in FY24 because gross and net non-performing assets rose (to 2.77% and 0.47% respectively), pushing up provisioning and credit costs — a pattern consistent with stress across the Indian microfinance sector in that period.

What does Arohan actually lend for?

Mostly small, unsecured joint-liability group loans to women in low-income households for trade, services and household needs (its Saral product, typically a few thousand rupees up to ₹50,000), plus a smaller book of larger MSME and individual loans from ₹5 lakh to ₹1 crore under its IntelleCash-branded line.

Sources

Figures are as of September 2026. Currency converted at $1 ≈ ₹96.0 as of 18 September 2026 (Trading Economics).

• SEBI, Arohan Financial Services Limited — Draft Red Herring Prospectus, filed May 2026 (sebi.gov.in)
• CARE Ratings, “Arohan Financial Services Limited” press release, February 2026 and December 2025 (careratings.com)
• ICRA, Rating Rationale — Arohan Financial Services Limited, January 2026 (icra.in)
• CARE Ratings, “Arohan Financial Services Limited” press release, June 2021 (careratings.com)
• Arohan Financial Services, Annual Report FY 2024-25 (arohan.in)
• Arohan Financial Services, Pricing Policy document, November 2024 (arohan.in)
• Planify, “Key Highlights from the Annual Report of Arohan Financial Services for FY24,” 2025 (planify.in)
• Planify, “Arohan Financial Q3FY25 Result Update,” 2025 (planify.in)
• Unlisted Zone, “Arohan Financial Services is gearing up for an IPO but the numbers tell a nuanced story,” 2026 (unlistedzone.com)
• mStock, “Arohan Financial Services Ltd IPO: Everything You Need to Know,” 2026 (mstock.com)
• Groww, “Arohan Financial Services Files DRHP With SEBI,” May 2026 (groww.in)
• IPO Central, “Aavishkaar-Backed Second Largest NBFC In Eastern India Files Paper For IPO,” 2026 (ipocentral.in)
• Business Standard, “Arohan Financial Services opens over 100 branches in underserved states,” April 2023 (business-standard.com)
• Business Standard, “MFIs may have to recalibrate business in Assam following state curbs,” January 2021 (business-standard.com)
• Business Standard / PTI, “Arohan Financial Services raises Rs 155.5 cr,” May 2017 (business-standard.com)
• Business Standard, “Arohan raises Rs 60-cr funding from Tano Capital,” March 2015 (business-standard.com)
• Intellecap, “IntelleCash acquires majority stake in Arohan Microfinance,” 2012 (intellecap.com)
• MFIN India, “Arohan Financial Services: Extending holistic support to…” Assam case study, May 2022 (mfinindia.org)
• Aavishkaar Group, “Arohan” group-company profile (aavishkaargroup.com)
• Altius Investech, “Driving Growth: Arohan Financial Services,” profile of MD Manoj Kumar Nambiar (altiusinvestech.com)
• Tracxn, “Arohan” company profile, 2026 (tracxn.com)

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