AAVAS - AAVAS Financiers Limited Share Price

Management Outlook:
Aavas Financiers aims to sustain 20"“25% YoY AuM growth long-term, targeting Rs.500 billion in AuM within 4"“5 years. Key focus areas include tech-driven scalability, cost optimization (targeting opex/assets ratio below 3%), and leveraging upgraded tech platforms to enhance efficiency. The company plans to accelerate branch expansion, adding 20+ branches in Q4 FY25, primarily in Karnataka and Uttar Pradesh, with further expansion in calendar 2025.

Major Points:

1. Growth & Disbursements: Q3 FY25 disbursements grew 17% YoY (Rs.16 billion), with AuM reaching Rs.192 billion (+20% YoY). Disbursement yields improved by 25+ bps due to risk-adjusted pricing.
2. Margins & Profitability: NIM expanded to 7.75% (+10 bps YoY), with spreads at 5.72% (+4 bps QoQ). Net profit rose 21% YoY (9M FY25: Rs.4.20 billion).
3. Asset Quality: Prudent risk management maintained GNPA at 1.14% and 1+DPD at 3.85%. Credit costs improved to 15 bps (9M FY25).
4. Funding & Liquidity: Diversified borrowings (Rs.172 billion outstanding), including Rs.6.3 billion NCDs from IFC for green homes. Liquidity buffer: Rs.18.95 billion cash + Rs.22.8 billion unavailed sanctions.
5. Cost Efficiency: Opex/assets ratio reduced 42 bps YoY to 3.21%, driven by productivity gains. Employee productivity improved despite 6% headcount growth.
6. Regulatory Tailwinds: Expected benefits from PMAY 2.0 and Union Budget allocations to boost affordable housing demand.
7. Tech & Expansion: Stabilized tech platforms reduced login-to-sanction TAT by 30%, enabling faster scaling. Focus on sub-Rs.15 lakh ticket sizes (60% of AuM) for higher yields.

Future Goals: Pan-India presence, sustained RoE (14.21% in Q3), and leveraging rate cuts (51% borrowings linked to floating rates) to improve margins.

Question 1 (Renish Bhuva):
"Hi, Sir. Congratulations on the good set of numbers. Sir, I have 2 questions. One on the asset quality, though 1+DPD have fallen but at the same time and there is a marginal increase, in the GS3. So just, wanted to understand, this basically implies there is higher default flows in the delinquent buckets. So how is the underlying health of the portfolio looking like and does this pose a risk to our near-term asset quality and credit cost guidance because of higher default flows in this quarter from the delinquent pool?"

Answer 1:
The marginal increase in GS3 was attributed to seasonality and festivities, but management emphasized stable asset quality with 1+ DPD at 3.85%, within guided ranges. No immediate risks to credit cost guidance were highlighted, and seasonal normalization is expected in Q4.

Question 2 (Renish Bhuva):
"Second is on the AuM by ticket size. What % of our AuM is more than Rs. 15 lakh ticket size? I know in in terms of number of active loans it is 15% but in terms of AuM it would be higher, right? So, would you like to share that number? And also, the yield difference between more than 15 lakhs and less than 15 lakhs."

Answer 2:
Approximately 60% of AuM (value basis) is below Rs.15 lakhs, with yields ~200 bps higher than larger tickets. Volume-wise, 85% of loans are below Rs.15 lakhs.

Question 3 (Shweta Daptardar):
"So are we changing our guidance on growth front or is it that 20% is now a new normal and also give to related question. If we aim for 20% even for this current fiscal. So that would mean almost adding up Rs. 700 crores of book in one quarter..."

Answer 3:
Growth guidance remains 20"“25% long-term, with confidence in achieving ~20% for FY25. Disbursement traction in Q3 and January supports this target.

Question 4 (Shweta Daptardar):
"The competition is gaining strength and intensifying. So how do you see this? The BT-out cases going forward. Whether the current set of measures will sort of continue to help us curb below 6%."

Answer 4:
BT-out rates improved to 5.4%, aided by predictive AI models. Management expects this to remain best-in-class, with no significant upward pressure.

Question 5 (Yash Gujarathi):
"So, we've seen marginal increase in provisioning on GS3 however, on GS2, it has increased sharply. So, any change in policies there? Or how do we see it moving? And sir, just to add on that, even our ECL provisioning is around 65 bps for total AuM. So, would we see it increasing as well?"

Answer 5:
ECL provisioning adjustments followed a shift to a dynamic Deloitte model incorporating macroeconomic factors and flow rates. Management expects provisioning levels (~65 bps) to stabilize.

Question 6 (Raghav Garg):
"So, has your DSA sourcing gone up? Or if you can give us a number, say, compared to last quarter or last year. The reason I ask is that after several quarters, the number of loan files disbursed per branch, that has registered a positive growth rate."

Answer 6:
Direct sourcing remains dominant (80"“85%). Improved productivity stemmed from digital channels (e.g., WhatsApp, CSC partnerships) and RO efficiency, not DSA reliance.

Question 7 (Abhijit Tibrewal):
"So, would we also see this 65 bps of provisioning on the overall portfolio also going up eventually?"

Answer 7:
ECL provisioning is stable post-model transition, with no anticipated increases. Aging portfolio and macroeconomic adjustments are already factored in.

Question 8 (Abhijit Tibrewal):
"And sir, second is on the margins. So, we understand this BPLR hike taken in October for 25 bps. So, is that now completely accounted for? Or would we also see some impact in the fourth quarter?"

Answer 8:
The 25 bps BPLR hike was fully reflected in Q3 yields. Disbursement yields are improving quarterly due to risk-adjusted pricing, narrowing the gap between new and old loans.

Question 9 (Rajiv Mehta):
"So, has your DSA sourcing gone up? Or if you can give us a number, say, compared to last quarter or last year. The reason I ask is that after several quarters, the number of loan files disbursed per branch, that has registered a positive growth rate."

Answer 9:
Collection efficiency benefits from AI-driven predictive models and voice bots. 1+ DPD at 3.85% is manageable, with no alarming trends.

Question 10 (Shreepal Doshi):
"So, when in newer geography, what sort of RM level, KRAs we said in terms of business sourcing versus matured branches. And the level of disbursement that we have done this quarter, do you aspire to maintain it going ahead..."

Answer 10:
New branches focus on delinquency control initially, not aggressive targets. Mature branches (3+ years) match established states in productivity. Karnataka shows strong growth and asset quality.

Question 11 (Shubranshu Mishra):
"So, what is the yield on book for home loans, LAP and MSME? And what are the onboarding yields for these products?"

Answer 11:
Home loans yield 11.5"“12%, while MSME/LAP yields are ~250 bps higher. New disbursement yields trail AuM yields by 30"“35 bps.

Question 12 (Chandra):
"Could you just share maybe the percentage of disbursements that you had this quarter below 10% yield and maybe what it was for the previous quarter... And directionally, I think you were trying to reduce it."

Answer 12:
Management aims to increase sub-Rs.10L ticket disbursements to 45% (currently 30"“35%). Spreads may rise with rate cuts due to 50% floating-rate borrowings.

Question 13 (Bunty Chawla):
"So, what is the reason behind increasing the cost of borrowings? What we have observed that, there has been a minimal or no MCLR hike from the banks as such during this quarter..."

Answer 13:
Borrowing costs rose 9 bps due to MCLR resets from prior hikes. Stabilization is expected, with future rate cuts benefiting 51% of EBLR-linked borrowings.