Aadhar Housing Finance Limited — Q2 FY26 earnings call

Call held 7 Nov 2025

Management summary

Aadhar Housing Finance delivered a steady Q2 FY26, characterized by 21% AUM growth and stable asset quality despite industry-wide concerns. Management highlighted a successful H1, achieving 42% of their annual disbursement target, and expressed high confidence in a stronger H2 (typically 60% of business). The company is focusing on geographic diversification and operational efficiency (TAT) to maintain margins rather than engaging in aggressive price wars with larger peers.

Highlights

  • Assets Under Management (AUM) reached ₹27,554 crores, representing a 21% YoY growth.

  • Net Profit (PAT) for Q2 FY26 stood at ₹266 crores, up 17% YoY from ₹228 crores.

  • Disbursements for H1 FY26 totaled ₹4,089 crores, a 16% YoY increase.

  • Gross NPA remained stable at 1.42%, with Net NPA at 1.0% and Stage-III PCR at 34.3%.

  • Exit Spread improved to 5.9% in Q2 FY26, up 10 bps sequentially from Q1.

  • Cost-to-Income ratio for H1 FY26 improved to 36.1% from 36.4% YoY.

  • Capital Adequacy remains robust with Tier-1 CAR at 44.3%.

  • Branch network expanded to 611 locations across 22 states, adding 20 new branches in Q2.

Key financials

  1. AUM ₹27,554 Cr +21%YoY
  2. PAT ₹266 Cr +17%YoY
  3. GNPA 1.4%
  4. Exit Spread 5.9% +1.7%QoQ
  5. Cost-to-Income 36.1% -0.8%YoY
  6. Tier-1 CAR 44.3%

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.

Segment breakdown

SegmentAUM ShareYield
Home Loans73%12.2%
Loan Against Property (LAP)27%15.8%

Guidance & targets

Volume

  • AUM Growth Volume · FY26 · High confidence 20-22%
    On AUM, we have always kept a guidance of 20%-22% and profit again about 18%-20%.

    — Rajesh Viswanathan, CFO

Profitability

  • Cost-to-Income Reduction Profitability · FY26 · High confidence 40-50 bps

    Previously 40 bps → 40-50 bps

    And probably year end also, we will see a 40-50 bps that we will be able to target [in cost to income].

    — Rajesh Viswanathan, CFO

Debt

  • Leverage (Debt-to-Equity) Debt · Medium Term · Medium confidence 3.0x

    From 2.5-2.6x today

    We believe that first we should hit the 3x lever and then probably take it up from there.

    — Rajesh Viswanathan, CFO

Margin

  • Exit Cost of Funds Margin · Q4 FY26 · High confidence 7.75% to 7.80%

    From 7.9% today

    When I am saying that when we are exiting the year, we will be exiting in the range of 7.75 to 7.80.

    — Rajesh Viswanathan, CFO

Risks & concerns

  • Extended Monsoons

    medium

    Heavy rains in the North/Uttarakhand belt impacted 'logins' for self-construction projects during the quarter.

    Management acknowledged

  • Balance Transfer (BT) Out / Attrition

    medium

    While improved to 5.4%, competitive pressure for high-quality customers remains a constant threat to AUM retention.

    Analyst acknowledged

  • Low Leverage impacting RoE

    low

    Current leverage of 2.5-2.6x is low; reaching 18% RoE requires increasing leverage to 3.5-4x, which management says will be a 'slow, steady process'.

    Analyst acknowledged

Q&A highlights

3 direct
Asset Quality in Stress Markets (Tirupur, Surat, Coimbatore) Direct
For example, Tirupur, from a 9.2%, it has dropped to about 7.1 sequential quarter-on-quarter. Surat has dropped from 8.8% to about 8%. Coimbatore has dropped from 9.2-9.3 to 8.2-8.3.

Management provided granular data to debunk fears of localized stress in textile/diamond hubs that have affected other lenders.

Asked by Renish, ICICI

Muted Sequential Disbursement Growth Direct
This particular quarter on a quarter-on-quarter basis will definitely give you a distorted view... in Q1 of last financial year, there was a regulatory circular... because of which, there was a substantial business which got carried forward to Quarter 2 of last year.

Explains why Q2 disbursements appeared flat (4% QoQ) due to a high base effect from regulatory timing shifts in the previous year.

Asked by Renish, ICICI

Pricing Competition and Undercutting Direct
We are not in the race of undercutting and a war of rate... End of the day, consumer is more interested in how fast can you provide me the funds rather than looking at rate.

Confirms Aadhar's strategy to protect margins by focusing on Turnaround Time (TAT) rather than competing on price with larger banks/HFCs.

Asked by Siraj Khan

1 min read 5 chapters

Detailed narrative

Resilient Asset Quality Amidst Sector Headwinds

Despite marginal deterioration seen in other mortgage players, Aadhar's GNPA remained stable at 1.42%. Management attributed this to their 'no single state >15% AUM' strategy, which mitigates localized economic shocks. Notably, Stage-II assets improved by 20 bps YoY, and 1+ DPD stayed flat at 7.17%, signaling robust collection mechanisms involving a 1,500-member team.

Margin Expansion Strategy

The company reported an exit spread of 5.9%, a 10 bps sequential improvement. This was driven by a reduction in the cost of funds to 7.9% and a high-yield portfolio (13.8% exit yield). Management expects a further 10 bps improvement in borrowing costs by year-end as they benefit from recent credit rating upgrades to AA+ and potential MCLR pass-throughs from banks.

Strategic Focus on Emerging Markets

Aadhar is pivoting toward a 50-50 model between Urban and Emerging markets. Currently, 45% of business comes from emerging markets (C-category branches). They plan to add 50-55 branches annually, with 35 targeted at these emerging locations where competition is lower and yields are typically higher.

Operational Efficiency as a Competitive Moat

Management explicitly stated they will not participate in interest rate 'wars' or undercutting. Instead, they are leveraging their TCS-enabled core system and AI/ML frameworks to improve Turnaround Time (TAT). They believe their target customer segment (low-income, ₹10.5 lakh ticket size) prioritizes speed of funding over a few basis points of interest rate.

Path to Higher RoE through Leverage

With a Tier-1 CAR of 44.3% and leverage at only 2.5-2.6x, the company is significantly under-leveraged. Management outlined a roadmap to reach 18% RoE by gradually increasing leverage to 3x and eventually 3.5-4x. They emphasized this would be a 'slow, steady process' to maintain their AA+ rating and satisfy rating agency comfort levels.

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