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    Aadhar Hsg. Fin.

    AADHARHFCGood
    Financial Services·6 Nov 2024
    Management Summary

    Aadhar Housing Finance delivered a steady Q2 FY25, characterized by robust AUM growth and improving asset quality. The company is successfully executing its 'deeper impact' strategy, expanding into Tier 4 cities while maintaining a 100% retail, secured portfolio. Despite rising borrowing costs and competitive pressures on yields, management remains confident in achieving its full-year targets for growth and operational efficiency.

    Highlights

    8

    • AUM reached ₹22,817 crores, representing a significant 21% YoY growth.

    • Disbursements for the quarter stood at ₹2,036 crores, up 18% YoY.

    • Asset quality improved with GNPA dropping 6 bps YoY to 1.29%; NNPA at 0.9%.

    • PAT for Q2 FY25 grew 15% YoY to ₹228 crores; H1 PAT grew 24% YoY to ₹428 crores.

    • Spread remained healthy at 5.9%, with management targeting 5.8%-5.85% for the full year.

    • Cost-to-income ratio improved to 36.2% from 37.5% in FY24, on track for a 80-100 bps annual reduction.

    • Branch network expanded to 545 branches across 21 states, with 22 new branches added in H1 FY25.

    • Average ticket size maintained at ₹10 lakhs with a conservative average LTV of 59%.

    Key financials

    Single quarter

    06 metrics
    1. 01AUM₹22,817 Cr+21%YoY
    2. 02PAT₹228 Cr+15%YoY
    3. 03GNPA1.3%-4.4%YoY
    4. 04Spread5.9%
    5. 05Cost-to-Income Ratio36.2%

    Segment breakdown

    Retail Home Loans
    74% Portfolio Share
    Other Retail Loans (Non-Home)
    26% Portfolio Share
    List

    Guidance & targets

    6
    CategoryTargetPriority
    Volume
    Disbursement Growth
    18% to 20%
    		High
    Revenue
    AUM Growth
    22% to 24%
    		High
    Profitability
    Profit Growth
    23% to 27%
    		Medium
    Margin
    Exit Spreads
    5.8% to 5.85%
    		High
    Margin
    Cost-to-Income Reduction
    80 bps to 100 bps
    		High
    Other
    Branch Expansion
    70 to 75
    		High

    Risks & concerns

    3
    RiskSeverity

    Rising Cost of Borrowing

    Cost of funds rose to 8.1% and is expected to reach 8.2-8.25% by year-end due to bank MCLR hikes. — Both acknowledged

    medium

    Competitive Pressure on Yields

    Aggressive competition in metros and Tier 1/2 locations is impacting the ability to fully pass on rate hikes. — Management acknowledged

    medium

    Balance Transfer Out (BT Out)

    While BT out is at 5.8%, management notes this is a substantial improvement from 6.5% YoY. — Analyst downplayed

    low

    Q&A highlights

    3

    “The incremental rate of lending... would not move directly proportional to that. We are lending in quarter one and quarter two at rates which are almost 10 bps to 15 bps higher than what we achieved in quarter four of last year.”

    Explains why a 25 bps rate hike in June didn't immediately translate to higher reported yields due to competitive pressures and product mix.

    asked by Rinesh, ICICI

    1 min read5 chapters

    Detailed Narrative

    01

    AUM and Disbursement Momentum

    Aadhar Housing Finance crossed a significant milestone, reaching an AUM of ₹22,817 crores, a 21% YoY increase. Disbursements for the quarter grew 18% YoY to ₹2,036 crores. Management is guiding for full-year AUM growth of 22% to 24% and disbursement growth of 18% to 20%, indicating a strong second half of the year.

    02

    Asset Quality and Provisioning

    The company maintained superior asset quality with a GNPA of 1.29%, down from 1.35% a year ago. Collection efficiency remains robust at 99%. Management indicated that Stage 3 provisioning will be maintained in the range of 35% to 37%, ensuring a healthy buffer against potential credit losses.

    03

    Yield and Spread Dynamics

    Despite a 25 bps rate hike in June, reported yields remained relatively flat due to competitive pressures and the lag in floating rate resets. Spreads for the quarter were 5.9%, and management expects to exit the year between 5.8% and 5.85%. The cost of funds is expected to peak around 8.2% to 8.25% by the end of FY25.

    04

    Operational Efficiency and Expansion

    The company is on track to reduce its cost-to-income ratio by 80-100 bps this fiscal year, reaching 36.2% in Q2. Distribution expansion continues with 22 new branches added in H1, targeting a total of 70-75 for the full year. This expansion is central to their 'deeper impact' strategy in Tier 4 cities.

    05

    Borrowing Mix and Liquidity

    Aadhar has a diversified borrowing profile with 40 relationships, comprising 50% from banks, 25% from NHB, and 25% from NCDs. Liquidity remains strong at ₹2,273 crores (12% of loan book), though management intends to optimize this to a buffer of 8% to 10% going forward⏳.

    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.