Aadhar Housing Finance Limited — Q1 FY26 earnings call

Call held 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

  • 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

  • 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

  1. AUM ₹26,524 Cr +22%YoY
  2. Disbursement ₹1,979 Cr +32%YoY
  3. PAT ₹237 Cr +19%YoY
  4. GNPA 1.3% +2.3%YoY
  5. Cost to Income Ratio 36.1% -1.6%YoY
  6. NIMS 8.8%
  7. 1+ DPD 7.1%
  8. Capital Adequacy Ratio 44.1%

What they filed

Q1 FY27: revenue up 17.1%, net profit up 19.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue764 798 833 848 897 +17%943 +18%985 +18%993 +17%
Net profit228 239 245 237 266 +17%281 +18%311 +27%282 +19%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Liquidity Cash ₹2,181 Cr · Undrawn ₹1,500 Cr
    Liquidity as we ended Quarter 1 FY26 was Rs. 2,181 crores. Undrawn sanctions as at 30th June 2025 is around Rs. 1,500 crores.

Guidance & targets

Volume

  • AUM Growth Volume · FY26 · High confidence 20%-22%
    On growth guidance, we continue to maintain our growth guidance of generally at around 20%-22% of AUM

    — Rishi Anand

  • Disbursement Growth Volume · FY26 · High confidence 18%-20%
    18%-20% on disbursement.

    — Rishi Anand

Profitability

  • Credit Cost Profitability · FY26 · High confidence 25-27 bps
    overall credit cost for the whole year will be tending in the range of about 25-27 bps.

    — Rajesh Viswanathan

  • ROA Profitability · Exit FY26 · High confidence 4.2%-4.3%
    I think we will be targeting an ROA in the range of about 4.2% to 4.3% as we exit current financial year.

    — Rajesh Viswanathan

  • ROE Profitability · Long-term · Medium confidence 17%-18%
    anywhere between a 4.2% ROA and anywhere between a 17% and 18% ROE is a good sort of a math for the business that we run.

    — Rajesh Viswanathan

Capacity

  • Branch Additions Capacity · Year-on-year for 3 years · High confidence 50-60 branches
    we will keep adding about 50 to 60 branches year-on-year basis. And we are on track, we have already in Quarter 1 launched 11 new branches

    — Rishi Anand

What to watch in Q2 FY26

Credit Cost Trajectory

Next quarter / Full year FY26
Current 40 bps odd (Q1 FY26)
Target 25-27 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

  • Potential stress in MSME/LAP segment

    low

    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

  • Seasonality impacting asset quality

    low

    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

  • Competition in the affordable housing segment

    low

    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

  • Slowdown in southern states

    low

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

    Analyst refuted

Q&A highlights

8 direct
Asset quality stress and repayment rates (BT-outs) Direct
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

MSME stress and credit cost outlook Direct
Our portfolio is actually not the MSME portfolio. We do micro loan against property which is about 25% of my portfolio. Are we seeing any stress? No, we are not seeing any stress. ... overall credit cost for the whole year will be tending in the range of about 25-27 bps.

Management clarifies that their micro LAP portfolio is distinct from general MSME and is not experiencing stress, while also providing a full-year credit cost guidance.

Asked by Manan Tijoriwala from ICICI Prudential

Spreads trajectory Direct
the exit spread was 5.7% March 25, 5.8% Quarter 1 FY26. So, it should be there about in the same range of 5.7% as we look ahead here.

Provides clarity on the expected stability of spreads, which is a key driver of the company's profitability.

Asked by Manan Tijoriwala from ICICI Prudential

AUM growth drivers and urban vs emerging strategy Direct
in this particular year, emerging will give me slightly higher growth than my urban locations. Urban locations are steady state, we are not adding more branches, etc. It the focus is more towards emerging. A combination of both will give us the desired 18%-20% % average growth that we are talking about.

Explains the strategic focus on emerging markets as a key growth driver and how it contributes to the overall AUM growth targets.

Asked by Abhishek Jain from Alfaccurate Advisors Private Limited

Stage-3 movement and 30+ DPD sustainability Direct
The flow from Stage-2 to Stage-3 is a normal phenomenon which has happened during the quarter. ... this is a pure seasonality where Stage-2 flows to Stage-3. ... No, we definitely expect it to come down, Sanket, because if you look at on a FY basis also, we have always been in the range of about 3.5% to 4%. So, we are today about 4.65% with the effort that goes around the next nine months, it is bound to come down.

Management addresses concerns about asset quality deterioration by explaining it as seasonal and expresses confidence in reducing the 30+ DPD to historical levels.

Asked by Sanket Cheddha from DAM Capital

ROA and ROE targets Direct
I think we will be targeting an ROA in the range of about 4.2% to 4.3% as we exit current financial year. ... anywhere between a 4.2% ROA and anywhere between a 17% and 18% ROE is a good sort of a math for the business that we run.

Provides clear profitability targets for the current fiscal year (ROA) and long-term aspirations (ROE), which are key metrics for investors.

Asked by Darshan Deora from Indvest Group

Slowdown and credit behavior in southern states Direct
I don't know why this statement has come in the industry that there is a slowdown. There seems to be no slowdown. In fact, our Quarter 1 numbers have moved positively across the southern states. So, I don't see any slowdown happening there.

Management directly refutes claims of a slowdown in southern states, providing a positive outlook for a key operating region and differentiating their performance from peers.

Asked by Dixit Shah from AS Capital

Rate differential for urban vs emerging yields Direct
urban typically gives about 12%-12.5% incremental yield. Your emerging will range between 14.5% up to 16%.

Quantifies the yield advantage of the company's strategic focus on emerging markets, which is crucial for potential NIM expansion and profitability.

Asked by Dixit Shah from AS Capital

2 min read 5 chapters

Detailed narrative

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.

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.

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.

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%.

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.

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