Aadhar Housing Finance Limited — Q3 FY25 earnings call

Call held 6 Feb 2025

Management summary

Aadhar Housing Finance delivered a strong Q3 FY25 performance characterized by 21% AUM growth and stable asset quality. Management highlighted successful digital transformation with 100% paperless onboarding and a strategic focus on Tier 4 cities. Despite a slight seasonal uptick in Stage 2 assets, the company maintained healthy spreads of 5.8% and is on track to meet its full-year efficiency and growth targets.

Highlights

  • Assets Under Management (AUM) reached ₹23,976 crores, representing a 21% YoY growth

  • Quarterly disbursements stood at ₹2,094 crores, a significant growth of 20% YoY

  • Profit After Tax (PAT) for 9M FY25 grew by 22% YoY to ₹667 crores; Q3 PAT was ₹239 crores

  • Gross NPA (GNPA) improved to 1.36%, a drop of 4 bps YoY, with collection efficiency at 98-99%

  • Cost-to-Income ratio improved by 60 bps YoY to 34.8% for the quarter

  • Average ticket size remains stable at ₹10 lakhs with an average LTV of 59%

  • Capital Adequacy Ratio remains robust at 46.1% (Tier 1 at 45.5%)

  • Balance Transfer Out (BT Out) ratio improved to 6.3% from 6.7% previously

Key financials

  1. AUM ₹23,976 Cr +21%YoY
  2. Disbursements ₹2,094 Cr +20%YoY
  3. PAT (Quarter) ₹239 Cr +17.1%YoY
  4. GNPA 1.4% -2.8%YoY
  5. Cost-to-Income 34.8% -1.7%YoY
  6. Portfolio Yield (Exit) 13.9%

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

SegmentPortfolio ShareYield (YTD)
Home Loans74%12.4%
Other Mortgage Loans / LAP26%16.5%

Guidance & targets

Revenue

  • AUM Growth Revenue · FY25-FY27 · High confidence 22% to 24%
    we would continue to grow our AUM at about 22%, 24%. So that's the growth number we are looking at.

    — Rishi Anand, MD and CEO

Margin

  • Exit Spreads Margin · FY25 Year-end · High confidence 5.7% to 5.75%
    we expect to end the year in the range of around 5.7% to 5.75% levels.

    — Rajesh Viswanathan, CFO

Profitability

  • Cost to Income Reduction Profitability · FY25 · High confidence 100 bps
    we aim to drop our cost to income for the current financial year by at least 100 bps, and we are well in course for that.

    — Rajesh Viswanathan, CFO

Other

  • Credit Cost Other · FY25 · Medium confidence 25 bps to 27 bps
    We believe that overall credit cost, as in terms of bps would be in the range of about 25 bps to 27 bps is what we expect the credit cost to come in at.

    — Rajesh Viswanathan, CFO

  • NPA Target Other · March 2025 · Medium confidence 1.1%
    we should be in the range of 1.1% kind of NPA numbers as of March.

    — Rishi Anand, MD and CEO

  • Balance Transfer Out (BT Out) Other · Medium Term · Medium confidence 5.5% to 5.7%

    Previously 6.3% → 5.5% to 5.7%

    to get down this number from a 6.3% to 5.5%-5.7%, which is the comfort level.

    — Rishi Anand, MD and CEO

Risks & concerns

  • Balance Transfer Out (BT Out) Pressure

    medium

    Management identifies BT Out as the only significant internal challenge, currently at 6.3% vs. a target of 5.5-5.7%.

    Both acknowledged

  • Yield Compression

    medium

    Incremental business is being booked at 40-45 bps lower than the existing book yield, which will compress spreads over time.

    Analyst acknowledged

  • Stage 2 Asset Slippage

    low

    A slight 10-12 bps slippage in Stage 2 assets occurred in December due to seasonal festival impacts (Diwali/Dasara).

    Management acknowledged

Q&A highlights

3 direct
Increase in Credit Cost Direct
basically, the one reason for the increase in the credit cost is the buckets of 30 to 60 and 60 to 90, which is basically are Stage 2... we expect that this is more or less going to be evened out as we exit quarter 4.

Explains that the Q3 credit cost spike is seasonal/festival-related and expected to reverse in Q4.

Asked by Abhishek Jain

Fee Income Weakness Direct
This quarter, we had specifically taken some one-offs on processing fee and admin fee, which we ran some contests... about INR7 crores to INR8 crores of fee income has come in lesser.

Clarifies that the flat fee income was a deliberate strategic choice to acquire business via contests, not a structural decline.

Asked by Nischint Chawathe

Yield Compression on Incremental Business Direct
your book is sitting at yields in the range of about 13.9% to 14%, whereas incremental business would be done at a ratio of 40, 45 bps lower than that.

Highlights the competitive pressure on pricing for new loans, which will lead to a gradual downward trend in overall portfolio yields.

Asked by Nischint Chawathe

2 min read 5 chapters

Detailed narrative

Robust AUM and Disbursement Momentum

Aadhar Housing Finance achieved a new AUM milestone of ₹23,976 crores, growing 21% YoY. Disbursements remained strong at ₹2,094 crores for the quarter, up 20% YoY. Management remains confident in maintaining a 22-24% AUM growth trajectory over the next 2-3 years, supported by a deeper impact strategy targeting Tier 4 cities and beyond.

Asset Quality and Credit Cost Dynamics

GNPA improved to 1.36% from 1.4% YoY. While credit costs saw a slight uptick in Q3 due to seasonal slippages in Stage 2 assets (10-12 bps slippage in December), management expects this to normalize in Q4. The company targets an NPA level of approximately 1.1% by March 2025 and a full-year credit cost between 25-27 bps.

Spread Management and Yield Outlook

The company exited the quarter with a portfolio yield of 13.9% and spreads of 5.8%. However, incremental business is being priced 40-45 bps lower than the existing book, leading to a guided exit spread of 5.7% to 5.75% by year-end. Management noted that 77% of assets and 79% of borrowings are floating, providing some natural hedge against interest rate cycles.

Digital Transformation and Operational Efficiency

Aadhar has transitioned to a digital lending model with 100% paperless onboarding via mobility solutions. This digital push, combined with data analytics for risk categorization and collection triggers, has contributed to a 60 bps YoY improvement in the cost-to-income ratio (34.8%). Management aims for a total 100 bps reduction in cost-to-income for the full fiscal year.

Strategic Expansion and Market Outlook

The company added 12 branches in Q3, bringing the 9-month total to 34, with a target of reaching ~55 new branches by year-end. Management expressed bullishness on the affordable housing segment, citing positive budget announcements like PMAY 2.0 and the SWAMIH Fund 2.0. They reported that 6,700 customers have already shown interest in the new PMAY subsidy scheme.

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