Arohan Financial Services Limited has taken a major step towards entering the public markets after filing draft red herring prospectus (DRHP) documents with Securities and Exchange Board of India for its proposed initial public offering (IPO).
According to reports, the proposed IPO will consist of both a fresh issue of equity shares and an offer-for-sale (OFS) component by existing shareholders.
Fresh Issue Planned to Support Lending Growth
The company plans to raise around ₹600 crore through the fresh issue portion of the IPO. Arohan Financial stated that the proceeds are expected to be utilised primarily for strengthening its capital base and supporting future business expansion.
As a microfinance-focused non-banking financial company (NBFC), Arohan Financial mainly serves low-income and underserved customer segments across various regions in India. The additional capital is expected to support growth in its lending operations and improve overall capital adequacy.
The IPO also includes an offer-for-sale of up to 40.4 million shares by existing investors.
Existing Investors to Partially Dilute Stakes
Among the shareholders participating in the OFS, Teachers Insurance and Annuity Association is expected to sell part of its holding in the company. The Michael & Susan Dell Foundation will also dilute a portion of its stake through the public issue.
Stake sales through the OFS route allow existing investors to partially monetise their holdings while enabling broader public participation in the company.
RBI Restrictions Earlier Withdrawn
The IPO filing comes after the Reserve Bank of India had earlier withdrawn certain lending-related restrictions imposed on Arohan Financial and some other NBFCs.
The restrictions were previously linked to concerns surrounding lending practices and pricing structures within parts of the microfinance sector. Following regulatory easing, the company is now moving ahead with its capital market plans.
Profitability Under Pressure Despite Business Growth
For the financial year ended March 2025, Arohan Financial reported pressure on profitability due to rising operational expenses. However, the company continued to record growth in net interest income during the same period.
The microfinance sector has witnessed increasing demand for retail and small-ticket credit, although rising funding costs, operational challenges, and evolving regulatory norms continue to influence profitability across the industry.
Investment Banks Managing the Issue
The company has appointed DAM Capital Advisors Limited, Motilal Oswal Investment Advisors Limited, and SBI Capital Markets Limited as the book-running lead managers for the proposed IPO.
Summary
Arohan Financial Services has filed draft IPO papers with SEBI for a proposed public issue comprising a ₹600 crore fresh issue and an offer-for-sale of up to 40.4 million shares by existing investors. The company plans to use the fresh capital to strengthen its balance sheet and expand lending operations. The IPO comes amid growing activity in the NBFC and microfinance sector as companies increasingly tap capital markets for future growth funding.
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