Aptus Value Housing Finance India Limited — Q2 FY25 earnings call

Call held 6 Nov 2024

Management summary

Aptus delivered a strong Q2 FY25 performance characterized by 27% AUM growth and industry-leading profitability metrics (7.77% RoA). Management successfully navigated internal attrition challenges in Tamil Nadu and reiterated a confident 30% AUM growth guidance for the full year. The company remains insulated from recent RBI concerns regarding unsecured lending, as its portfolio is entirely secured with conservative LTVs (35-40%) and reasonable interest rates.

Highlights

  • AUM grew by 27% YoY to ₹9,679 crores, driven by strong demand in Tier 2-4 cities.

  • H1 FY25 Profit After Tax (PAT) reached ₹354 crores, representing a 22% YoY growth.

  • Disbursements for Q2 FY25 stood at ₹935 crores, up 26% YoY and 39% QoQ.

  • Asset quality remained stable with GNPA at 1.25% and Net NPA at 0.94%.

  • Return on Assets (RoA) stood at a robust 7.77% with Return on Equity (RoE) at 18.3%.

  • Net Interest Margin (NIM) was reported at 13.02%, while spreads were maintained at approximately 8.7%.

  • Branch network expanded to 291 branches, with 24 new branches opened in Q2 alone.

Key financials

2 periods

Headline

  • AUM
    ₹9,679 Cr
    YoY +27%
  • NIM
    13%
  • GNPA
    1.3%
  • RoA
    7.8%
  • Disbursements
    ₹935 Cr
    YoY +26% QoQ +39%

H1 FY25

  • PAT
    ₹354 Cr
    YoY +22%

What they filed

Q1 FY27: revenue up 15.4%, net profit up 19.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue421 450 484 520 544 +29%554 +23%574 +19%600 +15%
EBITDA353 383 409 439 453 +28%455 +19%— —
Net profit182 190 207 219 227 +25%236 +24%261 +26%261 +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 MixYield
Housing Loan61%15.3%
Quasi-Home Loan15%17.5%
Small Business Loans20%21%

Guidance & targets

Volume

  • AUM Growth Volume · FY25 · High confidence 30%
    We have given a guidance of 30% AUM growth at a lower base.

    — P. Balaji, Managing Director

  • Annual Disbursements Volume · FY25 · Medium confidence ₹4,000 crores
    But we’ll definitely try to touch Rs. 4,000 crores this year. So that is the guidance which we want to give.

    — P. Balaji, Managing Director

Capacity

  • Branch Expansion Capacity · FY25 · High confidence 40
    Plan for the year will be to add a total of 40 branches.

    — P. Balaji, Managing Director

Margin

  • Loan Spreads Margin · FY25 · Medium confidence 8.7%
    So, with the result, the spread is likely to be maintained at 8.7%.

    — P. Balaji, Managing Director

Other

  • Tamil Nadu Disbursement Growth Other · Q4 FY25 · Medium confidence 25%
    we'll move into 20% by third quarter, and to 25% in the fourth quarter, and our loan book will grow 30%.

    — M. Anandan, Executive Chairman

Risks & concerns

  • Employee Attrition

    medium

    Sales officer level attrition is 25-30%, which impacted Tamil Nadu's disbursement growth (8-9% vs company average).

    Both acknowledged

  • Asset Quality in 30+ DPD

    medium

    30+ DPD remains at 6.24%, though management expects improvement in H2 FY25.

    Analyst acknowledged

  • Regulatory Scrutiny on Interest Rates

    low

    Management argues their 21% yield on SME loans is reasonable and well-communicated, unlike the 'usurious' rates flagged by RBI in other segments.

    Analyst downplayed

Areas of evasion (1)

  • Slightly vague on the exact timeline for liquidity normalization, citing market dynamics.

Q&A highlights

3 direct
Regulatory Pressure and RBI Stance Direct
RBI seems to be more uncomfortable on... unsecured loans given... ATS of around Rs.2 to 3 lakhs... high interest rates, say more than 24%... As regards Aptus is concerned... Our ATS is around Rs. 8 lakhs to Rs. 9 lakhs with an LTV of around 35% to 40%.

Clarifies that Aptus is not in the crosshairs of recent RBI regulatory actions targeting high-interest unsecured lending.

Asked by Renish, ICICI

Tamil Nadu Performance and Attrition Direct
In Tamil Nadu, we had certain internal issues which we have corrected now and going forward you can expect better performance... attrition at the sales officer level, it is between 25% to 30%.

Identifies internal attrition as the primary cause for slower growth in their core market and outlines the recovery path.

Asked by Nidhesh Jain, Investec

LAP Growth vs Housing Loans Direct
it's basically because we have to do more housing loans because of which we need to take care of the compliance factor... total composition of the book... is around 61% on the housing loan.

Explains the deliberate slowdown in LAP (Loan Against Property) to maintain the 60:40 regulatory ratio required for Housing Finance Companies.

Asked by Nischint, Kotak Institutional Equities

2 min read 5 chapters

Detailed narrative

Robust Growth Trajectory and Tier 2-4 Focus

Aptus reported a 27% YoY increase in AUM to ₹9,679 crores, maintaining its focus on the underserved self-employed segment in Tier 2, 3, and 4 cities. Disbursements saw a significant sequential jump of 39% to ₹935 crores in Q2 FY25. Management is confident in reaching a ₹4,000 crore disbursement target for the full year, implying a required run rate of approximately ₹2,400 crores in H2 FY25.

Asset Quality Resilience and Provisioning Strategy

Asset quality remains a core strength with GNPA at 1.25% and Net NPA at 0.94%. The company maintains a conservative provisioning stance with a total provision of ₹100 crores, including a ₹45 crore management overlay, resulting in an effective NPA coverage of 82%. Collection efficiency remains high at 99.28%, and management expects the 30+ DPD (currently 6.24%) to trend downwards in the coming quarters.

Operational Recovery in Tamil Nadu

The company addressed a slowdown in its primary market, Tamil Nadu, where disbursement growth lagged at 8-9% due to internal team restructuring and attrition. Management has corrected these internal issues and expects Tamil Nadu's disbursement growth to accelerate to 20% in Q3 and 25% in Q4 FY25. This recovery is critical for achieving the overall 30% AUM growth guidance.

Digital Sourcing and Ecosystem Integration

Digital adoption is becoming a significant lead generator, with 20% of Q2 business sourced through the customer referral app, construction ecosystem app, and social media. The construction ecosystem channel, involving paint and cement shop owners, is particularly productive with higher conversion ratios and average ticket sizes of ₹9-9.5 lakhs. This multi-channel approach complements the physical network of 291 branches.

Liability Management and NIM Sustainability

Aptus maintains a diversified borrowing profile with 59% from banks and 19% from NHB. To manage interest rate cycles, the company has shifted 20% of its total borrowings to REPO-linked external benchmarks. Despite a 2.5% increase in the Repo rate over the cycle, Aptus only increased customer rates by 0.5-0.75%, absorbing the rest while maintaining a healthy NIM of 13.02% and spreads of 8.7%.

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