Arman Financial Services Ltd. (Arman), an Ahmedabad based NBFC listed on the Bombay Stock Exchange (BSE), last week announced that the Board had approved the proposed equity investment from Incofin, an investment management company based in Belgium that manages several private equity funds. This is now awaiting the approval of the shareholders of Arman.
Arman was incorporated on 26th November, 1992 as a private limited company and later as a public limited company after it successfully completed its IPO on 21st August, 1995 and was listed on the BSE. Arman operates in two major business segments: (1) two-wheeler and three-wheeler financing, and (2) microfinance. The company currently operates mainly in Gujarat.
Commenting on the proposed investment, Jayendra Patel (Vice-Chairman & Managing Director of Arman) said, “We strongly feel that the partnership with Incofin is the logical next step for Arman to continue with our growth. Apart from equity, Incofin will also bring in the diverse geographical experience it has working with various microfinance institutions across the globe, which will enable us to implement global best practices and help Arman to better its existing processes, human capital, and corporate governance. Arman will continue to strive for growth and profitability for its shareholders, but with a vision to empower society through financial inclusion and sustainable livelihood.”
As on Tuesday, 22th November, 2011, the company was trading Rs. 30.50/Share, after the news of the proposed investment was announced on BSE. Since 31st March, 2011, the company’s stock price has increased from Rs. 16/share, or a 92% increase in less than 8 months, after achieving remarkable results and triple digit growth for the previous year and the following two quarters. The ballot papers to gain permission for the investment have been dispatched to Arman Shareholders for clearance, and is expected by management to be approved.
The Company’s Board of Directors has approved the preferential share allotment for Rs. 15 crore ($3 mn) at a price of Rs. 56.95/share, which is a significant premium over its book value and stock price. Incofin proposes to subscribe to equity shares of Rs. 7.735 crore, and the remaining amount as compulsorily convertible debentures (CCDs).
“At Incofin, we continue to execute our investment strategy for India. The crisis of the microfinance sector has caused some delays, but this new investment in Arman is proof of our continued support for the industry. Moreover, this investment in Gujarat is very complementary to our existing holdings of in four MFIs spread across the country. We are confident that our proposed investment will provide a very positive signal,” says Geert Peetermans (Chief Investment Officer of Incofin Investment Management), “especially as we aim to support Arman not only by this capital infusion but also by technical assistance”.
Speaking on the proposed investment in Arman Financial, Aditya Bhandari (Regional Director, Incofin South Asia) stated that the partnership was to enhance the financial services being offered to the underserved segment in the fast-growing state of Gujarat. “Arman is a solid company with an attractive business mix of secured and unsecured products. On one hand it offers a very high rural-cum-social angle and on the other hand it delivers well-accepted commercial returns. Arman has a long standing positive track record and is now ready to leverage its regional strengths for a strong business footing. Like our other investee companies, Arman is also focusing on controlled growth rather than irrational exponential growth. We are delighted to join hands”.
Eric Savage, Co-Founder & President of Unitus Capital, commented “Unitus Capital is honored to be part of this transaction, which is a rare instance of private placement of equity in an MFI which is listed and actively traded. Arman is a high-quality institution with many years of lending experience in Western India, a highly underpenetrated region for microfinance. The immense latent business potential, strong leadership, eminent Board, diversified product suite, deposit-taking NBFC license and strong processes collectively contribute towards Arman being an upcoming industry leader. Add to this the fact that it is one of the few MFIs in India listed on the BSE and having the support of a global microfinance stalwart like Incofin, Arman is poised to shine in the coming years.” Unitus Capital is the financial advisor, structurer and arranger to Arman.