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    Aadhar Housing Finance Limited

    AADHARHFC
    Financial Services·25 Jul 2025
    Management Summary

    Aadhar Housing Finance reported a strong Q1 FY26, marked by robust AUM and disbursement growth, alongside improved profitability and operational efficiency. The company's asset quality remained healthy, with management attributing slight GNPA increases to seasonality. Strategic focus on urban and emerging markets, coupled with technology adoption and a diversified funding mix, positions the company for sustained growth and leadership in affordable housing finance.

    Highlights

    5

    • AUM grew 22% YoY to Rs. 26,524 crores, reaching an all-time high.

    • Disbursements increased 32% YoY to Rs. 1,979 crores, demonstrating strong lending operations.

    • PAT grew 19% YoY to Rs. 237 crores, indicating robust profitability.

    • Cost to Income Ratio improved to 36.1% in Q1 FY26 from 36.7% in Q1 FY25, reflecting enhanced operational efficiency.

    • CARE rating upgraded to AA+ with a positive outlook from ICRA, reinforcing confidence in the company's financial strength.

    Concerns

    2

    • GNPA slightly increased to 1.34% in Q1 FY26 from 1.31% in Q1 FY25, though management attributes this to seasonality.

    • 1+ DPD stood at 7.1% at quarter-end, which management expects to reduce to 3.5%-4% over the next nine months.

    Key financials

    Single quarter

    08 metrics
    1. 01AUM₹26,524 Cr+22%YoY
    2. 02Disbursement₹1,979 Cr+32%YoY
    3. 03PAT₹237 Cr+19%YoY
    4. 04GNPA1.3%+2.3%YoY
    5. 05Cost to Income Ratio36.1%-1.6%YoY

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Liquidity

    Cash ₹2,181 crores · Undrawn ₹1,500 crores

    Guidance & targets

    6
    CategoryTargetPriority
    Volume
    AUM Growth
    20%-22%
    		High
    Volume
    Disbursement Growth
    18%-20%
    		High
    Profitability
    Credit Cost
    25-27 bps
    		High
    Profitability
    ROA
    4.2%-4.3%
    		High
    Profitability
    ROE
    17%-18%
    		Medium
    Capacity
    Branch Additions
    50-60 branches
    		High

    What to watch in Q2 FY26

    5

    Credit Cost Trajectory

    Next quarter / Full year FY26
    Current40 bps odd (Q1 FY26)
    Target25-27 bps (for full year FY26)

    Why it matters

    Credit cost is a key profitability driver; management expects a significant reduction from Q1 levels, which needs to be verified.

    overall credit cost for the whole year will be tending in the range of about 25-27 bps. In terms of current quarter, obviously, because of seasonality, it looks high at 40 bps odd, but we believe that we should be able to hold it between a range of about 25-27 bps as we exit the year.

    Risks & concerns

    4
    RiskSeverity

    Potential stress in MSME/LAP segment

    Analyst raised concerns about MSME stress, but management clarified their portfolio is micro loan against property, not MSME, and shows no stress, with steady bounce rates and GNPAs. — Analyst downplayed

    low

    Seasonality impacting asset quality

    The slight increase in GNPA and Stage-3 movement in Q1 FY26 is attributed to seasonality, a normal process for initiating legal actions on delinquent accounts. — Both acknowledged

    low

    Competition in the affordable housing segment

    Management stated they do not see fierce competition, as the number of players is stable, and there is ample market opportunity, allowing them to maintain their niche. — Analyst downplayed

    low

    Slowdown in southern states

    Contrary to some industry comments, management denied any slowdown in southern states, reporting positive Q1 numbers from these regions. — Analyst acknowledged

    low

    Q&A highlights

    8

    “If I look at our numbers on Quarter 1 YOY basis, we were GNPA of 1.31% moving to 1.34%. So, I would not say that there is any movement. It is more flattish and it is actually seasonality effect. ... The BT-out has come in at 5.3% for this quarter. ... Quarter 1 FY25 last year was around 5.9%. So, 5.3% versus 5.9% same time last year.”

    Management clarifies that the slight increase in GNPA is seasonal and BT-out rates remain stable, addressing concerns about potential asset quality stress.

    asked by Varun from Kotak Securities

    2 min read5 chapters

    Detailed Narrative

    01

    Q1 FY26 Performance Overview

    Aadhar Housing Finance commenced FY26 with strong performance, achieving an all-time high AUM of Rs. 26,524 crores, marking a 22% year-on-year growth. Disbursements also saw a significant increase of 32% YoY, reaching Rs. 1,979 crores. The company's Profit After Tax (PAT) grew by 19% YoY to Rs. 237 crores, reflecting robust financial health and operational momentum.

    02

    Asset Quality and Portfolio Health

    The company maintained healthy asset quality, with Gross NPA stable at 1.34% in Q1 FY26, a slight increase from 1.31% in Q1 FY25, which management attributed to seasonality. The 1+ DPD stood at 7.1% at quarter-end, with management expressing confidence in reducing it to the historical range of 3.5%-4% over the next nine months. The portfolio remains well-secured with an average loan-to-value ratio of 59%, and the micro loan against property segment (25% of portfolio) showed no signs of stress.

    03

    Strategic Expansion and Branch Network

    Aadhar Housing Finance is executing its 'urban and emerging' strategy, with emerging locations expected to drive higher growth. The company expanded its pan-India reach to 591 branches across 22 states and 547 districts, adding 11 new branches in Q1 FY26, including entry into Assam. This expansion aligns with the target of adding 50-60 branches annually for the next three years, with 15 in urban and 35 in emerging areas.

    04

    Funding and Profitability

    The cost of funds exited Q1 FY26 at 8%, with the company benefiting from a 50 bps repo rate cut by RBI. The exit portfolio yield was 13.8%, resulting in an exit spread of 5.8% and NIMS of 8.8%. The cost to income ratio improved to 36.1% in Q1 FY26 from 36.7% in Q1 FY25. Management targets an ROA of 4.2%-4.3% by the end of FY26 and an aspirational long-term ROE of 17%-18%.

    05

    Technology and Regulatory Environment

    The company continues to leverage technology, including its TCS-enabled core system and AI/machine learning, to enhance operations and decision-making. A significant achievement was the upgrade of its CARE rating outlook to AA+ and a positive outlook from ICRA, reflecting strong fundamentals. Management also highlighted its leadership in PMAY subsidy disbursements and various awards for product innovation and CSR initiatives.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.