Aavas Financiers :: Banking on the unbanked

Stock Opportunities Not-so-Hidden Gems
105

Maybe because lots of competition is coming not only from affordable housing NBFCs but also from SFBs, MFIs.

Price struggle in the LT is due to valuation correction. As you would know, at high valuations lots of things are baked into the price, and they need to go right for valuations to sustain.

106

Probably because the pace of growth is not the same as that of peers

Aavas

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Aptus

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Aadhar

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107

This is pretty huge position of my PF. I am happy with the results but overall down on net basis on this stock.

My Observations / Learnings

  • I brought it too expansive - But now I would say the PB is justified by the quality
  • With the promoter changes done there is nothing hanging on the head
  • I would say the slower growth rate is due to stricter underwriting standard. Look at the asset quality
  • ROE and ROA is not at the levels which would be eye watering but at this levels and at this price there is very little downside left.

Disclosure: Already hold significant exposure and would increase my exposure in 1250 -1300 range by 25%

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108

Are we expecting asset quality deterioration because of higher food & energy prices? Given it will impact lower segments of society. At the same time the loans are secured

109

prices seem to be around 1100-1150, did you add more in your portfolio? If yes, what are your current thoughts regarding this?

110

Sorry for the delayed response. Yes, I’ve increased my position in this stock—AAVAS now makes up about 7.1% of my total direct equity exposure.

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My core thesis hasn’t changed. I initially bought at higher levels, but at the current price, I believe the price-to-book is more justified relative to the value on offer. I’ve continued to add, with a meaningful allocation around 1150. Despite averaging down from my original entries in the 2300–2400 range and a ~20% recent price recovery (current level ~1400), my XIRR is still around 5%.

From a structural standpoint, I like the segment AAVAS serves—self-employed borrowers in the sub-₹25 lakh housing category—and its geographic focus on states like Rajasthan and Gujarat. The loan book is largely housing-focused, with relatively strong underwriting quality. While I’m not satisfied with current ROA and ROE, I expect improvement over the longer term.

My growth expectations are:

  • Best case: 22–23% AUM growth, ~25% EPS growth

  • Base case: ~18% AUM growth, ~20% EPS growth

  • Worst case: ~15% EPS growth over the long term, supported by strong asset quality

More broadly, I’m seeing a rebound across financials—microfinance institutions, housing finance companies, and private banks—which supports my decision to increase exposure.

Key risks and metrics I’m tracking:

  • Loan book growth slowed to 13.2% YoY (vs. 15–18% in prior quarters)

  • Opex growth (20.6% YoY) outpacing net operating income growth (17.8%)

  • Cost-to-income ratio increased to 46.2% in Q4 (from 42.9% in Q3)

  • FY27 loan book growth guidance of 17–18% implies a sharp acceleration from FY26

  • FY27 disbursement growth target of 25%+ (vs. current ~16% YoY) may be execution-heavy

I have a significant position in this stock, so my views are naturally biased.

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