Aadhar Housing Finance LtdQ1 FY24Finance

Aadhar Housing Finance Ltd

Q1 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 2

→Aadhar Housing Finance expects to grow its incremental disbursement and AUM by around 20%-23% annually, consistent with the last 2-3 years' performance.
→Profit after tax growth has been around 30%, and similar growth is anticipated going forward.
→There is significant demand, with an estimated INR35 trillion housing loan requirement in the EWS/LIG segment, the company’s prime focus.
→The company plans to expand deeper into states and smaller towns, opening approximately 70-75 new branches annually, including 50 focused on a "deeper impact strategy."
→The ticket size for home loans and non-home loans is expected to remain stable with incremental yields around 12.4%-12.5% for home loans and 16.7%-17% for non-home loans.
→The approach emphasizes stable, consistent growth rather than lump sum spikes, aiming for healthy asset quality and sustainable profitability.

Margin guidance

Category 3

→Aadhar Housing Finance expects AUM growth of approximately 20-23% year-on-year, supported by strong demand, especially in the EWS/LIG segment.
→Profit After Tax (PAT) grew by 33% consolidated and 38% excluding exceptional items in the latest financial year.
→Management aims for stable, consistent delivery rather than lump sum growth.
→Return on Equity (ROE) may slightly decline to around 17.2%-17.3% from current 18.4% post-primary raise, with expectations to revert to current levels in a couple of years.
→Return on Assets (ROA) is expected to stay around 4%+.
→Cost-to-income ratio improved and management targets further reduction by 50-60 basis points.
→Spreads forecast to be around 5.8%-5.9% in the near term with slight compression over the next two years.
→With increased branch expansion and tech investments, operating performance and profit growth are expected to sustain.

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Fundraise plans

→Recently completed an IPO raising INR 1,000 crores of primary equity in FY24 to support future capital needs and general corporate purposes.
→Total borrowings as of March 31, 2024, were INR 13,960 crores, slightly lower than last year.
→Borrowings are well diversified with 38+ lender relationships; 55% from banks, 25% NHB, and 20% NCDs.
→In FY24, borrowed INR 5,560 crores at an average cost of 8.04%, including INR 1,405 crores from NHB.
→In Q4 FY24, borrowed INR 1,970 crores at 8.36%, including INR 300 crores from NHB.
→Cost of funds expected to see minimal increase with a 25 bps hike in RPLR effective June 16, 2024, to manage borrowing cost increases.
→No current exposure to short-term CP borrowing; focus on increasing borrowing sources and longer-tenor loans.
→Will continue with assignment strategy (8-9% of opening book) and slow expansion in co-lending.

Order book

The transcript does not explicitly mention the current or expected order book or pending orders for Aadhar Housing Finance Limited. However, related operational and growth information includes: - AUM crossed INR 21,120 crores, recording 23% YoY growth. - Disbursements grew 20% YoY. - Incremental ticket size: INR 12.9 lakhs for home loans and INR 8.2 lakhs for loans against property. - Branch expansion plan of 70-75 new branches in FY25, focusing on smaller towns and deeper impact strategy. - Expected AUM growth around 20-22% in the current year based on management guidance. - Focus remains on the EWS/LIG customer segment with significant housing demand (~INR 35 trillion potential). - No specific mention of order book or pending orders as such since it is a housing finance company, the focus is on loan book growth and disbursements. Hence, the "orderbook" concept is more aligned to disbursement volumes and AUM growth in this context.

Capex plans

Yes

→The company is focused on expanding its branch network with plans to add approximately 70 to 75 branches year-on-year.
→Of these, around 50 branches will be smaller sales offices (100-150 sq. ft.) under the "deeper impact strategy" targeting smaller towns and districts.
→About 20-25 branches will be larger branch offices in existing cities.
→There is ongoing investment in technology and data science to improve underwriting, collections, and customer reach.
→The company continues to invest in innovative ideas to enhance efficiency and growth while sustaining profitability and asset quality.
→No specific mention of large capex or strategic acquisitions; focus appears to be on organic growth and technology enhancements.
→The recent IPO infusion of INR1,000 crores equity is intended to meet future capital requirements and general corporate purposes.

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