Detailed Narrative
Strategic Pivot to Direct Assignments
Aptus has historically avoided Direct Assignments (DA), but executed its first transaction of ₹75 crores this quarter. Management explained this shift is driven by the need for better 'interfirm comparison,' as peers who use DA report higher upfronted NIMs and ROEs. They plan to continue DA selectively, targeting ₹100-150 crores per quarter, which will also serve as an ALM management tool and help diversify funding sources.
Geographic Diversification Strategy
To reduce dependency on Tamil Nadu (now ~30% of AUM) and Andhra Pradesh (>40%), Aptus is expanding contiguously into Odisha and Maharashtra. They currently have 10 branches in these new states and plan to add 10 more in FY26. Management emphasized that they are targeting border districts where the culture and credit habits are similar to their existing core markets, minimizing entry risk.
Operational Efficiency and Productivity Gains
The company is targeting significant productivity improvements to drive growth. They aim to increase the Average Ticket Size (ATS) from ₹8.5 lakhs to ₹9.5 lakhs without compromising LTV ratios. Additionally, they expect loan officer productivity to rise from 3.2 to 4 loans per month. Digital sourcing via their referral and construction ecosystem apps now accounts for 21% of business, with a target to reach 25-30%.
Asset Quality and Provisioning Philosophy
Despite a slight sequential increase in absolute Stage 2 assets (₹504cr to ₹507cr), the percentage fell from 4.93% to 4.72%. Management maintained a conservative Provision Coverage Ratio (PCR) of 1.03% by strengthening provisions in the NBFC subsidiary, which saw rapid book growth to ₹3,000 crores. Credit costs remained stable at 0.3% for the quarter, though guidance for FY26 is slightly higher at 40-45 bps to maintain buffers.
Interest Rate Sensitivity and Margin Outlook
Aptus maintains a unique position with an 80% fixed-rate loan book, while 56% of its borrowings are variable. This positioning allows them to benefit from a falling interest rate cycle, as borrowing costs will reprice downward while asset yields remain largely locked. Management expects NIMs to remain stable or improve as they negotiate harder on incremental bank borrowings and benefit from repo rate cuts.