Aavas Financiers Limited — Q1 FY27 earnings call

Call held 21 Jul 2026

Management summary

Aavas Financiers Limited delivered a strong Q1 FY27, marked by robust disbursement and AUM growth, leading to a 23% Y-o-Y increase in net profits. The company demonstrated significant improvements in operating efficiencies and maintained strong asset quality. While acknowledging competitive pressures and expected spread compression, management is confident in leveraging operational levers and strategic focus on home loans to sustain profitability and growth.

Highlights

  • Robust disbursements of Rs. 16.1 billion, up 41% Y-o-Y, driven by strong pickup in volumes and resource productivity.

  • AUM grew 15.4% Y-o-Y to Rs. 239.3 billion, with monthly AUM additions improving by nearly 50% Y-o-Y.

  • Net profits grew 23% Y-o-Y to Rs. 1.71 billion, supported by 18% Y-o-Y NII growth and 22 bps NIM expansion to 7.70%.

  • Significant improvement in operating efficiencies, with cost-to-income ratio improving by 254 bps Y-o-Y to 43.7%.

  • Maintained best-in-class asset quality with 1+DPD improving by 39 bps Y-o-Y to 3.76% and Gross Stage 3 at 1.11%.

Concerns

  • Anticipated spread compression, with management expecting spreads to fall 'a tad below 5%' due to competitive environment and strategic focus on lower-yield home loans.

  • Small uptick in repayment rates in April-May for specific segments (interest rates >14%, small ticket), though management expects it to normalize by June.

Key financials

  1. Net Profits (PAT) ₹171 Cr +23%YoY
  2. NII Growth 18%
  3. NIM 7.7%
  4. Cost-to-Income Ratio 43.7% -2.5%YoY
  5. Gross Stage 3 (GNPA) 1.1% -0.11%YoY
  6. ROA 3.2% +0.25%YoY
  7. ROE 13.3% +0.78%YoY
  8. AUM ₹23,930 Cr +15.4%YoY
  9. Disbursements ₹1,610 Cr +41%YoY
  10. Credit Costs 24 bps
  11. Net Worth ₹5,220 Cr +16%YoY
  12. CAR 44.7%
  13. Total Borrowings ₹20,700 Cr
  14. Cost of Funds Improvement 38 bps
  15. Spread 5.1%

What they filed

Q1 FY27: revenue up 12.9%, net profit up 23.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue579 597 636 628 667 +15%674 +13%715 +12%709 +13%
Net profit148 146 154 139 164 +11%170 +16%182 +18%171 +23%
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
  • Debt Gross ₹20,700 Cr Maturity: Our average tenure of borrowing continued to be longer than our assets, ensuring a positive ALM across all the time buckets.
    • New borrowing Raised around Rs. 14.74 billion at a competitive rate of 7.74% for Q1. ₹1,474 Cr
    • Rate reset 38-basis point year-over-year improvement in cost of funds for Q1. 76% of borrowings enable faster re-pricing.
    Total outstanding borrowings stood at Rs. 207 billion, a well-diversified liability franchise linked with various benchmarks and at competitive prices. We were able to deliver a 38-basis point year-over-year improvement in our cost of funds for current year Q1.
  • Liquidity Cash ₹1,880 Cr · Undrawn ₹1,880 Cr Maintained ample liquidity, including cash and cash equivalent and unavailed CC limits up to Rs. 18.8 billion. Documented unavailed sanctions are Rs. 4.85 billion.
    As of 30th June 2026, we maintained ample liquidity, including cash and cash equivalent and unavailed CC limits up to Rs.18.8 billion. Documented unavailed sanctions are Rs.4.85 billion.

Guidance & targets

Growth

  • Sustainable growth Growth · medium term · High confidence 20% growth
    These improvements give us confidence that Aavas is well positioned to accelerate growth and deliver sustainable 20% growth over the medium term.

    — Manu Singh

  • Top line growth Growth · yearly commitment · High confidence 22% to 23%
    For the next nine months, we are committed to delivering our yearly commitment of 22% to 23% top line growth and that remains steadfast on disbursement and that moves to about 17%-18% on AUM.

    — Manu Singh

  • AUM growth Growth · yearly commitment · High confidence 17%-18%

    — Manu Singh

Profitability

  • Spread Profitability · remaining part of the year · Medium confidence fall a tad below 5%
    Yes, I do think it will fall a tad below 5%. I mentioned in the early part of the conversation that we are already on our way to make sure that our operating engines churn out both cost reduction and income support to maintain our ROA and ROE guidelines.

    — Manu Singh

  • ROE and ROA outlook Profitability · full year · High confidence remain stable
    Reasonably confident to make sure that the ROE and ROA that we have planned for the year remains where it is, even if slight compression does take place on the competitive environment.

    — Manu Singh

Productivity

  • Disbursements per resource Productivity · ongoing · High confidence Rs. 20 to 22 lakhs

    Previously Rs. 8-10 lakhs → Rs. 20 to 22 lakhs

    from an average of about Rs. 8-10 lakhs productivity per resource, we are looking at doubling this to at least Rs. 20 to 22 lakhs per resource deployed on the field.

    — Manu Singh

Market Share

  • HL segment market share Market Share · ongoing · High confidence regaining market share
    More so, Prashant, I am heavily focused on regaining our market share in the HL segment, which is the primary aim of the HFC.

    — Manu Singh

Portfolio Mix

  • HL to NHL portfolio mix Portfolio Mix · ongoing · High confidence roughly 65-35
    I want to be absolutely comfortable on both on-boarding business metrics between HL and NHL, to tend towards what the portfolio is, which is roughly 65-35.

    — Manu Singh

What to watch in Q2 FY27

Spread Trajectory

Next quarter
Current 5.06% (Q1 FY27)
Target Below 5%

Why it matters

Direct impact on profitability and Net Interest Margin (NIM).

Yes, I do think it will fall a tad below 5%. I mentioned in the early part of the conversation that we are already on our way to make sure that our operating engines churn out both cost reduction and income support to maintain our ROA and ROE guidelines.

Risks & concerns

  • Competitive environment and pressure on spreads

    medium

    Healthy competition across geographies is leading to pressure on spreads, with an expectation of spreads falling below 5%.

    Management acknowledged

  • Macroeconomic factors (West Asia Conflict, rainfall shortfall)

    medium

    Proactive policy changes were made in February to address potential impacts on certain segments from the ongoing West Asia Conflict and anticipated rainfall shortfalls.

    Management acknowledged

  • Uptick in repayment rates for specific segments

    low

    A small, temporary uptick in repayment rates was observed in April-May for specific segments (interest rates >14%, small ticket) but is expected to normalize.

    Management downplayed

Q&A highlights

7 direct
Competitive environment and impact on spread/profitability outlook Direct
First on the question of competitive environment, I do think that we are witnessing healthy competition across geographies. Yes, there is pressure on spreads. As I look for the complete year, I do believe that spread compression from the existing point will take spread to go sub-5%. However, I am clear on the operating levers that we have put into action are showing results in Q1 and the ROE and ROA outlook remain stable.

Management acknowledges competitive pressure and anticipates further spread compression, but expresses confidence in operational levers to maintain profitability.

Asked by Prashant Poddar

Addressing spread compression through operating leverage Direct
There are enough and more opportunities to lever on the cost-to-income side, more so on the income side. And hence, we are acutely focused on productivity per resource and revenue per resource being driven day in and day out at each of our 440 branches.

Highlights management's strategy to counter margin pressure by focusing on productivity and cost efficiencies at the branch level.

Asked by Prashant Poddar

Repayment rate trends and reasons for uptick Partial
Yes, Renish. We did see a small uptick in the early part of the fiscal opening, which is April and early May, in specific segments, especially interest rates upwards of 14%, small ticket. But as we close the quarter in the month of June, it has rallied back to its usual trend. I do not expect this to continue.

Clarifies that an observed uptick in repayment rates was temporary and specific, not a systemic shift in product mix or BT out rates.

Asked by Renish Bhuva

Disbursement run rate and outlook for the next nine months Direct
So, in the next nine months, yes, we were very conscious of making sure that the early part of the year, which is Q1, gets us onto the right footing on run rate. For two reasons, we are now heavily oriented towards P&L. And the more that you upfront your business, the more earnings you have in the entire part of the year. That has been the guiding force across the businesses. Secondly, June numbers are upwards of Rs. 600 crs. For the next nine months, we are committed to delivering our yearly commitment of 22% to 23% top line growth and that remains steadfast on disbursement and that moves to about 17%-18% on AUM.

Provides specific June disbursement figures and reiterates full-year top-line and AUM growth commitments, indicating strong momentum.

Asked by Renish Bhuva

Asset quality trends, geographical stress, and underwriting measures Direct
To answer your first question, No. We continue to see healthy trends on both lead and lag indicators. Absolutely no geographical customer segment stress coming in. Having said that, we are very cautious about the fact of keeping our collections under complete control. Towards the same, in the early part of February, proactively the teams have made certain policy changes looking at the macro environment, certain segments, which would be affected by both the ongoing West Asia Conflict as well as the ensuing expectation of shortfall of rainfall.

Reassures on current asset quality but highlights proactive measures taken in anticipation of potential macro risks.

Asked by Shreepal Doshi

Disbursements per branch for AUM growth targets Direct
from an average of about Rs. 8-10 lakhs productivity per resource, we are looking at doubling this to at least Rs. 20 to 22 lakhs per resource deployed on the field.

Quantifies the ambitious productivity targets per resource, which is a key driver for future growth and efficiency.

Asked by Raghav Garg

Strategy to regain home loan market share and its impact on yields Direct
Two things. First, the necessity of looking at this number arises from the fact that over the last year, year-and-a-half, we would have graduated towards NHL. I want to be absolutely comfortable on both on-boarding business metrics between HL and NHL, to tend towards what the portfolio is, which is roughly 65-35. So that is the strategic reason why the focus on home loans. ... As I mentioned earlier, yes, this is a conscious choice. It is a more competitive business. However, sourcing mechanisms of moving back to our main strength of doing direct business, making sure that branches are equipped with resources to go out and do that business which comes at a much lower cost of acquisition, better quality, and levers to work on the income side at every transaction, in my opinion, is reasonable enough to counterbalance the small compression that we may see on being more healthier.

Explains the strategic rationale behind the focus on home loans (portfolio mix) and how potential yield compression will be offset by lower acquisition costs and improved income levers.

Asked by Raghav Garg

Impact of PLR cut on reported yields and future spread outlook Direct
Yes, I do think it will fall a tad below 5%. I mentioned in the early part of the conversation that we are already on our way to make sure that our operating engines churn out both cost reduction and income support to maintain our ROA and ROE guidelines.

Confirms that the PLR cut is already reflected and reiterates the expectation of further spread compression, along with management's plan to mitigate its impact on ROA/ROE.

Asked by Rajiv Mehta

2 min read 6 chapters

Detailed narrative

Strong Q1 FY27 Performance Driven by Robust Growth

Aavas Financiers delivered a strong Q1 FY27, with disbursements growing 41% Y-o-Y to Rs. 16.1 billion. This robust performance contributed to a 15.4% Y-o-Y growth in AUM, reaching Rs. 239.3 billion by June end. Net profits increased by 23% Y-o-Y to Rs. 1.71 billion, supported by an 18% Y-o-Y growth in Net Interest Income (NII). The company's ROA improved by 25 bps to 3.19%, and ROE by 78 bps to 13.34%.

Enhanced Operational Efficiency and Resilient Asset Quality

The company demonstrated significant improvements in operating efficiencies, with the cost-to-income ratio improving by 254 bps Y-o-Y to 43.7%. Asset quality remained strong, with 1+DPD improving by 39 bps Y-o-Y to 3.76%. Gross Stage 3 (GNPA) improved by 11 bps Y-o-Y to 1.11%, and Net Stage 3 (NNPA) improved by 13 bps Y-o-Y to 0.71%. Credit costs were well within guided ranges at 24 bps.

NIM and Spread Dynamics Amidst Competition

Net Interest Margins (NIMs) expanded by 22 bps Y-o-Y to 7.70% during the quarter. However, management anticipates competitive pressures will lead to spread compression, expecting spreads to fall 'a tad below 5%' from the current 5.06%. The company implemented a 10-basis point reduction in its PLR in June 2026, contributing to a cumulative 25-basis point reduction since March 2026, passing benefits to customers.

Diversified Funding and Ample Liquidity

Aavas maintained a stable cost of borrowing, achieving a 38-basis point Y-o-Y improvement in cost of funds for Q1. Total outstanding borrowings stood at Rs. 207 billion, with a well-diversified liability franchise. Approximately 76% of borrowings are linked to benchmarks allowing faster re-pricing. The company maintained ample liquidity, including Rs. 18.8 billion in cash, equivalents, and unavailed credit limits, with documented unavailed sanctions of Rs. 4.85 billion.

Strategic Focus on Home Loans and Productivity Enhancement

The company is strategically focused on regaining market share in the home loan (HL) segment, aiming for a portfolio mix of roughly 65-35 (HL-NHL). This involves targeted customer acquisition and a goal to double productivity per resource from an average of Rs. 8-10 lakhs to Rs. 20-22 lakhs. The branch network expanded to 440 across 15 states, with an emphasis on achieving faster branch-level break-evens and improving profitability.

Proactive Risk Management and Policy Adjustments

While no specific geographical or customer segment stress was identified, management proactively made policy changes in February. These adjustments were in response to the macro environment, including the West Asia Conflict and anticipated rainfall shortfalls, to mitigate potential impacts. The company continues to strengthen decision-making and governance through data and technology, ensuring robust risk assessment at the branch level.

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