Aavas Financiers Limited — Q4 FY26 earnings call

Call held 5 May 2026

Management summary

AAVAS Financiers reported a strong Q4 FY26, with net profit growing 18% and NII up 17% Y-o-Y. The company demonstrated significant margin expansion, with NIMs reaching 8.45% in Q4, and continued improvement in asset quality, reflected in lower DPD and GNPA. While AUM grew 15% Y-o-Y, management acknowledged higher opex due to strategic investments and flat loan disbursement volumes for the full year, which are areas of focus for improved execution and productivity.

Highlights

  • Net profit for Q4 grew 18% to ₹1.82 billion, driven by robust 17% Y-o-Y growth in NII.

  • NIMs expanded by 44 bps sequentially to 8.45% in Q4, and 29 bps overall in FY26.

  • Asset quality remains pristine with 1+ DPD improving by 63 bps sequentially to 3.17% and GNPA improving by 14 bps Q-o-Q to 1.05%.

  • ROA improved by 13 bps to 3.5% and ROE improved by 38 bps Q-o-Q to 14.67% in Q4.

  • AUM at the end of FY26 stood at ₹234.5 billion, registering a Y-o-Y growth of 15%.

Concerns

  • Opex was higher than the previous year due to investments in branch expansion and ESOP/PSOP schemes.

  • Total number of loans disbursed on a full-year basis was flat, with home loan volumes declining Y-o-Y.

Key financials

4 periods

Headline

  • AUM
    ₹2.35L Cr
    YoY +15%
  • 1+ DPD (Mar-26)
    3.2%
    QoQ -0.63%
  • Credit Costs
    —
  • Net Worth
    ₹5,050 Cr
    YoY +16%
  • CAR
    44.6%
  • Total ECL Provisioning
    ₹130 Cr

Q4

  • Net Profit
    ₹182 Cr
    YoY +18%
  • NII
    —
    YoY +17%
  • NIM
    8.4%
    QoQ +0.44%
  • GNPA
    1.1%
    QoQ -0.14%
  • ROA
    3.5%
    QoQ +0.13%
  • ROE
    14.7%
    QoQ +0.38%

FY26

  • Disbursements
    ₹6,780 Cr
    YoY +11%
  • NIM
    —
  • Spread
    5.2%
    YoY +0.31%
  • Cost of Borrowing
    —
  • Total Loans Disbursed
    —
    YoY 0%

FY26 Volume

  • Home Loans Disbursed
    —
    YoY -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
  • Liquidity Undrawn ₹1,900 Cr Ample liquidity, including cash and cash equivalents and unavailed cash credit limits of ₹19 billion, documented unavailed sanctions of ₹9.75 billion.
    Our relationship with the financial institutions remains robust, supporting our strategic funding goals. As of 31st March 2026, we maintained ample liquidity, including cash and cash equivalents and unavailed cash credit limits of Rs. 19 billion, documented unavailed sanctions of Rs. 9.75 billion.

Guidance & targets

Credit Growth

  • AUM Growth Credit Growth · long-term · High confidence 20%+
    Our aspiration clearly is to consistently deliver 20%-plus AUM growth, largely to outperform industry.

    — Manu Singh

Profitability

  • ROE Profitability · long-term · Medium confidence high teens
    So, as I mentioned on your second question, which is long-term growth strategy or if the question still pertains to the fact of long-term indications, I think high teens is where our eyes are very clearly set on ROE.

    — Manu Singh

Margins

  • Spreads Margins · ongoing · High confidence 5%+
    We're very confident to maintain the spreads 5%+

    — Manu Singh

Operational Efficiency

  • Opex to AUM Ratio Operational Efficiency · 2-3 years · Medium confidence below 3%
    I think on a 2-to-3-year platform, yes. We are shooting for something below 3%.

    — Manu Singh

  • Opex to AUM Ratio Operational Efficiency · when balance sheet doubles · Medium confidence 2.75%
    And we maintain that once we reach a double size of the balance sheet, it will be somewhere 2.75% opex to AUM ratio.

    — Ghanshyam Rawat

Asset Quality

  • Credit Costs Asset Quality · sustainable basis · High confidence below 25 bps
    We continue to maintain our guidance on keeping credit costs under check and below 25 bps on a sustainable basis.

    — Manu Singh

What to watch in Q1 FY27

AUM Growth

next quarter / long-term
Current 15% Y-o-Y (FY26)
Target 20%+ Y-o-Y

Why it matters

To assess if the company is achieving its stated long-term growth aspiration and outperforming the industry.

Our aspiration clearly is to consistently deliver 20%-plus AUM growth, largely to outperform industry.

Risks & concerns

  • Impact of Middle East war and inflation on customer profiles

    medium

    Analyst raised concern about potential impact on customers from geopolitical events and inflation; management is monitoring but has not seen impact yet.

    Analyst acknowledged

  • Flat/declining loan disbursement volumes

    medium

    Total loan disbursements were flat and home loan volumes declined Y-o-Y, identified as an area of immediate attention for management.

    Analyst acknowledged

  • Higher operating expenses

    low

    Opex was higher than last year due to investments in branch expansion and ESOP/PSOP schemes, but management expects it to normalize with growth.

    Analyst acknowledged

Q&A highlights

7 direct
Long-term AUM growth strategy and targets Direct
Our aspiration clearly is to consistently deliver 20%-plus AUM growth, largely to outperform industry. On your question of short- and medium-term growth, I think me and the team are very clearly focused on sharp execution of our already laid down strategies for growth.

Management provided a clear long-term AUM growth target and emphasized execution.

Asked by Renish Bhuva

ROE targets and trajectory Direct
I think high teens is where our eyes are very clearly set on ROE.

Management set an aspirational target for ROE, indicating future profitability expectations.

Asked by Renish Bhuva

Impact of PLR cuts on spreads and future spread trajectory Direct
We're very confident to maintain the spreads 5%+

Management confirmed confidence in maintaining spreads above 5% despite interest rate movements.

Asked by Renish Bhuva

Growth strategy, geographical expansion, and productivity initiatives Direct
Yes, we are continuously focused on adding branches in states like UP, Gujarat, Tamil Nadu, where we find the perfect balance of potential as well as risk, which we are ready to underwrite. So that's a balance to look at. So, we will continue doing that.

Management outlined specific states for branch expansion and strategies to improve productivity and execution.

Asked by Kunal Shah

Yield optimization and risk-adjusted pricing strategy Direct
So, as we speak, there is no better way to start a good deed than today. So, it has already started in the financial year. As I mentioned, it's a progressive journey that we have the expertise of underwriting risk very well.

Management clarified that yield optimization is an ongoing process and does not imply taking on higher risk.

Asked by Kunal Shah

Reasons for past growth being below 20% compared to peers Partial
Every human being, including me, becomes wiser in hindsight. So, I would start answering by saying at every point in time, my predecessors and the management team have done their best in those times. Times are different. Variables are different.

Analyst questioned past growth performance, and management acknowledged it while emphasizing current focus on sustainable growth and right pricing.

Asked by Abhijit Tibrewal

Opex to AUM ratio trend and future targets Direct
This year, we had higher opex than last year. It has two factors: We have invested in the branch expansion, which has led to higher manpower because we firmly believe that we must invest in the branch expansion, which will give us a better growth momentum than what we have done in the past.

Management explained the reasons for higher opex and provided a future target for the opex to AUM ratio.

Asked by Gaurav Khandelwal

Flat/declining loan volumes despite branch and employee expansion Direct
It is very clear to us that this is an area of immediate attention for all of us. On which, as we laid down our FY27 plans, we've taken our numbers in April have been, for us, quite effective.

Management acknowledged the issue of flat loan volumes and stated it is an area of immediate attention and focus for FY27.

Asked by Raghav Garg

2 min read 6 chapters

Detailed narrative

Q4 FY26 Financial Performance Highlights

AAVAS Financiers reported a strong Q4 FY26, with net profit growing 18% year-on-year to ₹1.82 billion. Net Interest Income (NII) also saw a robust 17% Y-o-Y growth. The company's Asset Under Management (AUM) reached ₹234.5 billion by the end of FY26, marking a 15% Y-o-Y increase, while total disbursements for the year grew 11% to ₹67.8 billion.

Margin Expansion and Profitability

The company demonstrated significant margin expansion, with Net Interest Margins (NIMs) expanding by 44 basis points sequentially to 8.45% in Q4 FY26, and an overall expansion of 29 bps for the full fiscal year. This contributed to an improvement in Return on Assets (ROA) by 13 bps to 3.5% and Return on Equity (ROE) by 38 bps quarter-on-quarter to 14.67% in Q4. The spread for FY26 improved by 31 bps Y-o-Y to 5.20%.

Pristine Asset Quality and Risk Management

AAVAS maintained pristine asset quality, with 1+ DPD (Days Past Due) improving by 63 bps sequentially to 3.17% as of March 2026. Gross Non-Performing Assets (GNPA) also improved by 14 bps quarter-on-quarter to 1.05%. Credit costs improved by 13 bps, and the company reiterated its guidance to keep credit costs below 25 bps on a sustainable basis. Total ECL provisioning stood at ₹1.3 billion as of March 31, 2026.

Strategic Growth and Branch Expansion

The company added 31 branches in Q4, bringing its total network to 435 branches across 15 states, with expansion concentrated in focused growth markets like Tamil Nadu, Uttar Pradesh, and Gujarat. Management aims for 20%+ AUM growth long-term, focusing on sharp execution, enhancing operating efficiency, and leveraging its distribution network and local market knowledge. The net worth crossed ₹50 billion, and the Capital to Risk-Weighted Assets Ratio (CAR) stood at a healthy 44.6%.

Funding and Liquidity Profile

AAVAS successfully secured commitments of approximately ₹975 crores (USD 108 million) from a multinational financial institution and issued ₹500 million of AAA-rated PTCs for the first time. The company's outstanding borrowing stood at ₹204 billion, with ₹67.05 billion raised in FY26 at a competitive rate of 7.61%. Ample liquidity is maintained, including ₹19 billion in unavailed cash credit limits and ₹9.75 billion in documented unavailed sanctions.

Operational Efficiency and Future Outlook

While operating expenses were higher year-on-year due to investments in branch expansion and ESOP/PSOP schemes, management expects the Opex to AUM ratio to improve, targeting below 3% in the 2-3 year platform and 2.75% once the balance sheet doubles. The company acknowledged flat total loan disbursements and declining home loan volumes in FY26 as an area of immediate attention, with a focus on improving productivity per person and per branch.

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