AADHARHFC — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

CHAIRMAN · MR. RISHI ANAND - MANAGING DIRECTOR & CHIEF

MR. RISHI ANAND - MANAGING DIRECTOR & CHIEF

EXECUTIVE OFFICER · MR. RAJESH VISWANATHAN - CHIEF FINANCIAL

MR. RAJESH VISWANATHAN - CHIEF FINANCIAL

OFFICER · MR. SANJAY MOOLCHANDANI - HEAD (FINANCIAL

MR. SANJAY MOOLCHANDANI - HEAD (FINANCIAL

Moderator · Conference Operator

MR. AJIT KUMAR - JM FINANCIAL Aadhar Housing Finance Limited May 06, 2025

Ladies and gentlemen, good day, and welcome to Aadhar Housing Finance Limited Q4 & FY'25 Analyst Conference Call hosted by JM Financial Institutional Securities Limited.

As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing * then 0 on the touchtone phone.

Please note that this conference is being recorded.

I now hand the conference over to Mr. Ajit Kumar from JM Financial.

Thank you, and over to you, sir.

Ajit Kumar

Thanks, Rutuja.

Good evening, everyone.

On behalf of JM Financial, I welcome everyone to 4Q

Moderator · Conference Operator

Thank you very much.

We would now like to open the question-and-answer session.

The first question is from the line of Renish from ICICI.

Please go ahead.

Renish

Hi sir.

Congrats on a good set of numbers.

Just 2 things.

One on the asset yields.

So typically, in a falling rate cycle, there are 2-3 moving parts.

One of those is the BT-out rate then the PLR change and also the competitive pressure because generally the prime housing loans will get repriced lower and lower in line with the repo rate cut.

So if we look at our yields in Q4 exit, how do you see yields are settling, let's say, over the next 2 to 3 quarters, considering all these 2-3 moving parts?

Rajesh Viswanathan

I think, Renish, if you look at our overall book yields, it has been quite consistent on a quarterly basis for the last 3 quarters.

And as we had said, the full year yields are around 30 bps lower Aadhar Housing Finance Limited May 06, 2025 than the book yield.

So in quarter 4 also, we have been quite good at managing to get incremental yields of around 13.5% to 13.55%, which is quite similar to what we had in Quarter 3.

Yes, BT, as you correctly said, some of the prime housing finance companies obviously do a lot of aggressive BT-in Quarter 4.

And the BT-out rate as we exited the year, we had a 6.5% BT-out, which was a drop from 6.9% in Quarter 4 of last financial year.

So to that extent, some of the steps that we had taken on BT-out is something that has helped us to stem the BT-out to by about 50 bps on a quarter-on-quarter basis.

Renish

But I mean, let's say, in a scenario where there could be higher BT-out rates going ahead and in order to sustain 20% plus growth obviously we have to get into the price war.

So in that scenario, I mean how comfortable or confident we are that we will be able to sustain this yield of 13.5.

Rishi Anand

So Renish, I can come in here.

Rishi here.

So Renish, as Rajesh said, we have taken multiple steps already with our central retention team in place, multiple other measures with respect to data analytics pooling in into the retention team.

So all those measures have been taken and we can see initial results at 6.9% to closer to 7% falling to about 6.5%.

Vision is to take it to a annualized number of 6%.

What we have also interestingly done is and you are right, in the way you are looking at it, what we have done is to protect ourselves, we have now divided the country into something and that is effective this financial year.

But I don’t mind speaking about it right now into urban and emerging locations.

So the top 15 cities which will contribute about 100 branches of ours is now urban which contributes to my topline and in emerging we have 3 categories of branches which is typically about 400 odd branches, so emerging A, B and C.

And the strategy is for urban and emerging A,B, C for all 4 kinds of different location is completely different.

When I say strategy I mean the ticket size, I mean the yield, I mean the BT-out strategy, the branch strategies, all the strategies for every branch category is different.

Illustratively let us say emerging C location which will be typically a Tier 4, Tier 5 location.

I have a maximum ticket size cap, I have a BT-out cap, I have incremental yields which will be much higher than what an urban and emerging will be given to me.

So as we move ahead, I think this strategy of ours which is going to play a big role in defining how Aadhar is going to maintain its current levels of spreads or even BT-out for that matter.

Renish

Got it.

Rishi sir, just a request, would you be able to share the yield difference, let us say between urban and emerging, A, B, C, I mean, there will be 40-50 basis points of rate difference between each location or how is it?

Rishi Anand

While this is, as I told you it is 1st April, but I will indicatively give you the differential in yields overall.

You can just bear with me for a second.

Rajesh Viswanathan

Renish, we will come back to you.

We will just pull it and we will come back to you in the call and we can take up the next questions, if you don’t mind?

Renish

Okay, sir.

So sir, second question, again from the asset quality.

So obviously this quarter we have seen a very sharp recovery.

But when we look at the Stage-2 assets, that has been steadily Aadhar Housing Finance Limited May 06, 2025 increasing with it stacking at 4% as on March '25 versus 3.8% December quarter and 3.6% last quarter last year.

So is there any specific reason or this is just a quarterly movement here and there?

Rajesh Viswanathan

I think, honestly Renish, we should not read too much into Stage-2.

Honestly, as a company we have been a company which shows a lower NPA and higher Stage-2 always.

There is also one more thing which I would want to share because, included in Stage-2 is some of our assets which were one-time restructuring we had done at the time of COVID.

So on this basis, what you call it, conservative basis, we provide a provision of 10% and we also show them at Stage-2 though they are Stage-1 assets.

So the impact of that is anywhere between 0.6% and 0.7%.

So of the total Stage-2 that you are seeing, 4% about 0.6% to 0.7% will pertain to assets which are actually Stage-1, but we show it under Stage-2 because we carry a Stage-2 provision as per RBI mandate of 10%.

It is about 4 year since restructuring has happened on account of OTR.

So probably somewhere in FY'26 we may take a view or a call of moving this back into Stage-1.

Renish

Got it.

But all these accounts are regularly paying accounts?

Rajesh Viswanathan

Yes, this 0.6% to 0.7% which I have mentioned are actually Stage-1 in terms of actual DPD, but I classify it under Stage-2 for the purpose of reporting.

Rishi Anand

So Renish, if I can now, I have the data on the yield that you have required.

If I can indicatively tell you, your urban location yield will be in the range of 12%.

Your emerging A,B,C as I told you will be in the range of 14% to 16%.

And that is how the combine 13.5%-13.6% yield is.

Rajesh Viswanathan

And as Rishi said, the reason of us going on emerging A, B and C is primarily to ensure that our next year yields also fall into the same range as we exited in the current financial year.

So we would like to maintain yields at similar levels, may be minus 5 to 6 basis points, but otherwise we would like to maintain at similar levels.

Renish

Got it.

This is actually very helpful, and this is what sort of we wanted to get a sense of yields.

Thank you very much and best of luck.

Rishi Anand

Thank you, Renish.

Moderator · Conference Operator

Thank you.

The next question is from the line of Yash from Citigroup.

Please go ahead.

Yash

Hi sir, Thanks for taking the question.

Sir, on the borrowing side of the almost 79%-80% of the floating rate borrowings, can we get the split on like what's the benchmark they are linked to?

And what could be the quantum of improvement, which we can see in sort of 1Q of FY'26?

Rajesh Viswanathan

So if you look at it on the total bank borrowings or even on the total borrowings, if you see, about 18% of them will be linked to short-term rates like repo or T bills.

So for example, let's take the bank borrowing, out of the total bank borrowing, approximately 18% is linked to either Aadhar Housing Finance Limited May 06, 2025 repos or T bills, where obviously, the pass on will be almost immediate.

We are, for example, out of the total borrowings, 1-year MCLR is 20% and 6-month MCLR would be 30% and 3 months will be a further 30%.

So in that sense, it is widely distributed and only about 18% is where we get immediate benefit.

The bigger benefit will obviously start coming in when the MCLR starts moving.

And what we have seen is that 2 rate cuts have happened, and we have not seen much movement in the MCLR.

So honestly, I do not see MCLR moving the needle so much at the end of 1Q.

Maybe in this in Quarter 2 that we will see some movement in MCLR, which will happen as a pass back to us.

Maybe MCLR headline of the banks may change.

But by the time it gets passed on to us, depending on whether we come into a 3-, 6- or 12-month MCLR resets, probably we see it happening somewhere in Quarter 2.

As far as the interest rate drops are concerned, I think a lot of public experts have spoken on that.

And as and when the drop happens, approximately 18% benefit comes immediately to us.

In terms of fixed and floating, as I said, approximately 74%, 75% of my assets are also floating. and we calculate RPLR on a continual basis.

And as and when the RPLR needs to get passed on, as per the mandate of the ALCO and the Board, we will pass it on to the customers.

So we don't see much of a benefit on any movement in interest rate because our borrowing floating and our asset floating are more or less on a matched basis.

Yash

Okay.

So basically from 2Q onwards, you would see some meaningful drop in borrowings, but it might get offset with yields?

Rajesh Viswanathan

And yes, to be very honest, you may have a lag effect before we get a benefit and we may pass it on.

But beyond that, I don't think neither we are building anything internally also on that.

Yash

Got it.

And sir, second, on the asset quality more from the MFI exposure.

I believe in the last call also, we have indicated around 9,000-10,000 customers with MFI overlap.

And now with the Tamil Nadu thing coming in, so any risk to the customers there?

I believe we have around 56 or 57 branches in there.

So anything incremental from the states we could see given the MFI exposure?

Rishi Anand

Yes, you're right.

Our numbers were about 9,000-odd customers, 9,096 customers who had MFI exposure.

That number has dropped to about 7,077 customers now.

So loans have been foreclosed.

As regards to Tamil Nadu, I think it is too early to read what is going to happen.

Yes, we have branches.

As we speak today, things are perfectly okay.

Our recovery efforts wherever applicable are completely online.

The complete support from the government machinery like the DMs or the police wherever assistance required has been coming in even as close as today morning.

So we don't see any issue happening as we move ahead.

Yash

Got it.

That is it sir from my side.

Thank you so much.

Rishi Anand

Thank you, Yash.

Aadhar Housing Finance Limited May 06, 2025

Moderator · Conference Operator

Thank you.

The next question is from the line of Sonal from Asian Market Securities.

Please go ahead.

Sonal

Thanks for the opportunity, sir and congrats on the quarter.

Just I had one question on the yields.

So when we look at it as a percentage of average assets, it has come down to 12.8%.

So there is some drop.

But the reported numbers, they stand pretty much similar at 13.9%.

So what kind of explains this difference?

Rajesh Viswanathan

I think to be very honest, I would want to see the number that you're quoting 12.8%, I wouldn't be able to.

So if we can take that offline and you can probably share it with us, and we'll be more than happy to help you on that.

Sonal

Sure.

Thank you.

Moderator · Conference Operator

Thank you.

The next question is from the line of Abhishek Kumar Jain from AlfAccurate.

Please go ahead.

Abhishek Kumar Jain

Thanks for opportunity and congrats for strong set of numbers.

Sir, in disbursement and AUM side what is your growth target for FY'26?

Rishi Anand

So Abhishek, in terms of growth targets or guidance we will maintain our AUM guidance of 20%-21%, disbursement growth of about 18%-19% and a PAT of about 20%-21%.

And on the NPA front we believe that we should be around 1.10% to 1.15%.

Rajesh Viswanathan

That's right.

Abhishek Kumar Jain

And from where you are targeting this much of growth, basically on the emerging market or in your existing?

Rishi Anand

So our primary growth is going to come from emerging markets.

As I explained during the previous caller, emerging is going to contribute higher composition of our growth.

Abhishek Kumar Jain

And what is the current urban versus rural mix of your loan?

Rishi Anand

We don't do rural, Abhishek, just to clarify.

We do only urban.

Urban and emerging split, I can tell you is about 55% current is from the urban locations and the balance is from the emerging locations.

And we would look at maintaining 55% should eventually in a couple of years should go to about from emerging and 45% from urban, so it will reverse as we move ahead.

Abhishek Kumar Jain

And how is the demand situation, urban versus rural at this point of time in affordable housing?

Rishi Anand

So demand, whether it is urban or whether it is emerging, not rural again, it is more or less similar.

It is all about how do we reach there, where is competition playing a larger role?

For Aadhar Housing Finance Limited May 06, 2025 example, in urban locations, competitors will play a larger role.

And the moment you move to emerging A, B, C kind of locations that I just explained, the competitive intensity goes down.

Hence, the probability of higher conversion ratios applies in emerging locations.

Abhishek Kumar Jain

Okay, sir.

Thank you.

That is all from my side.

Rishi Anand

Most welcome.

Moderator · Conference Operator

Thank you.

The next question is from the line of Siraj Khan from Ascendant Capital.

Please go ahead.

Siraj Khan

Thanks for the opportunity and good set of numbers.

So sir, first question is with regards to the credit cost.

Credit cost for Q4 was elevated.

I mean, compared YoY. last year Q4, we had a recovery, negative number.

This year, we have a positive number.

So I wanted to know, are there any write-offs, elevated write-offs, technical write-offs of that sort?

Rajesh Viswanathan

No. This is not on account of write-off as it was asked by one of the analysts, this is primarily because of the movement of Stage-2, because Stage-2, if you look at it on a year-on-year basis would have moved by about 30 bps-40 bps. And second is basically your standard asset provision would have increased because the AUM increases significantly in Quarter 4.

Last year, the Stage-2 improvement was fairly significant in Quarter 4 versus Quarter 3.

That is why there was a reversal of provision in Quarter 4.

This year, that much benefit didn't flow through in terms of Stage-2 improvement.

And that is why we are seeing a small credit cost of about INR 5 crores, INR 6 crores going into the P&L

Siraj Khan

Okay.

So in Q4, we will not have any write-offs basically?

Rajesh Viswanathan

There will be standard write-offs, which, for example, if you sell an asset, for example, if there's a haircut of 10% on an asset sale, that 10% write-offs will happen.

We have not taken any additional provisional write-off or prudential write-off, which we take.

Normally, we take prudential write-off once a year.

We have not done anything of that sort in Quarter 4.

Siraj Khan

Okay.

So I want that number.

So what was the Q4 write-off and FY'25 write-off?

Rajesh Viswanathan

This would be approximately INR 8 crores to INR 9 crores in Quarter 4.

Siraj Khan

Full year?

Rajesh Viswanathan

INR 32 crores would be the full year.

Siraj Khan

Okay.

That's for the asset quality.

One more question, another I had was on the sourcing, specifically in the Southern region.

So many of the peers that have seen that is there in the Southern market, they have seen that Tamil Nadu market has seen a little bit of a slowdown.

Aadhar Housing Finance Limited May 06, 2025 Karnataka is also facing some issues.

Even Madhya Pradesh, there were some NBFCs showing that there is some tremors of very, very low level this thing, there is some asset quality issues.

Are we seeing anything in these markets, Madhya Pradesh, or maybe Southern area?

Anywhere in across of our states, we see some asset quality issues, maybe early signs in 30 DPD, 60 DPDs, anything of that sort?

Rishi Anand

So since you mentioned Siraj, certain states, Tamil Nadu, we are not seeing any issue as I see the numbers, Karnataka, no issue.

Andhra Pradesh on a growth trajectory, Tamil Nadu on a growth trajectory.

The states, and if you recall in the last quarter also, I mentioned the states, which historically have been a poor credit behavior, continue to be poor credit behavior, which is typically east of the country.

You have Kerala.

They continue to be bad.

Madhya Pradesh, again, a growth trajectory, complete growth trajectory, no early indications from any of the states that you mentioned, neither in bouncing any negative indications nor in 1 plus nor in NPA.

Siraj Khan

Okay.

And finally, on OPEX.

So year-on-year cost to income has also come down.

So what are the drivers that we will get this further lower?

What is the target with respect to both cost to income and OPEX, OPEX to AUM?

Rajesh Viswanathan

I think when we reduce 120 bps of cost to income, I think I have said that we want to reduce about 150 bps in 2 years, to be very honest.

And we have already done about 120 bps in year 1.

I think to be very honest, next year, we will have around 30 to 50 bps sort of a drop in cost to income.

The driver over here predominantly is that majority of our expansion has already happened.

And the incremental expansions that we do over 50, 60 branches expansion that we do, about 60%, 65% of the branch expansion will happen in emerging B and C, which are smaller offices. and where the cost of OPEX of setting up these offices are predominantly lower and the remaining 30%, 35% will happen in the bigger offices.

And the second thing is, obviously, since we have invested significantly 3, 4 years back in data analytics as well as in technology, the benefit of that is seen right across the company, whether it is sourcing, whether it is credit, the number of files that they can handle, technical in terms of turnaround time.

So basically, the sheer productivity, not only of the sales guys, but also of the non-sales guys has stepped up.

So that is the reason for the incremental Rs.

100 of business, the OPEX that I had to probably put in 3 years ago is not the same.

Obviously, we are seeing benefits of productivity.

And that is a driver that we constantly work on, whether it is frontline sales productivity or productivity right across all the business support functions.

Siraj Khan

Understood.

Just a few statistics if you could provide what was the log into sanction and the sanction to disbursement ratio for the year and the files per officer.

Rishi Anand

Files per officer or volume per officer?

Siraj Khan

Yes.

Aadhar Housing Finance Limited May 06, 2025

Rishi Anand

The third number I will try and pick up.

But login to sanction was 60% and sanction to disbursement was 62%.

Siraj Khan

Okay.

And the corresponding last year number if that is readily available?

Rishi Anand

The previous year, it was the log-in to sanction was 61.8% in FY'24.

In FY'25, it is 60, sanction to disbursement was 62.5 and in '25, it is 62.

So more or less similar in terms of numbers.

Siraj Khan

And the volume per employee, the officer, file number, if possible?

Rishi Anand

For the sales, right?

Siraj Khan

Yes.

Rishi Anand

For the sales, it is 1.15 per sales officer.

This is for the frontline sales.

Siraj Khan

Yes, understood.

ROs you are speaking about, right?

Rishi Anand

Yes, that's right.

You got it right.

Siraj Khan

Thank you.

Moderator · Conference Operator

Thank you.

The next question is from the line of Nidhesh Jain from Investec.

Please go ahead.

Nidhesh

Thanks for the opportunity.

On credit rating, how is the conversation with the credit rating agencies on possibility of credit rating upgrade?

That is my first question.

And then I have some data keeping questions.

Rishi Anand

Okay.

So credit rating, as also informed, Nidhesh, earlier, we are already engaged with both the credit rating agencies.

And I don't foresee that this rating upgrade should be prolonged for too long, while obviously, it is a decision that will be taken at their management level or the rating committee level.

But we have had good rounds of meetings even as last as last 15 days.

So that's the update.

Nidhesh

Sure.

Because in terms of size and other financial metrics, we are doing quite well.

And we have also reached gross INR 25,000 crores of size.

Rishi Anand

That's what both the rating agencies also tell us.

So I will leave it up to their judgment.

Nidhesh

Second, if you can share incremental yields and incremental ticket size, loan size for Q4, incremental yields and incremental loan size?

Aadhar Housing Finance Limited May 06, 2025

Rishi Anand

Incremental yields has come in around 13.45% and the incremental ticket size on a blended basis is INR 13 lakhs.

HL is about INR 15 lakhs and INR 9 lakhs is nonhome loan.

Nidhesh

And in terms of sourcing mix for the full year or for the quarter, if you can share the sourcing mix between in-house, DSA and connectors?

Rishi Anand

The split I will pull out, but broadly, if I can tell you, in-house, which was 54% last year, has grown to 59%.

So almost 60% is now in-house.

And the balance is external split between DSAs and connectors.

Rajesh Viswanathan

So of the 41%, your corporate DSA would be in the range of about 25%, the balance would be what we call connectors or retail DSA.

A point that we wanted to mention over here is our Aadhaar Mitra program, which if you remember, we have been always talking about it for the last 3, 4 years.

We have seen good traction in our Aadhaar Mitra offtake and the disbursement contribution by Aadhaar Mitra now is almost touching 30% for FY'25.

To put it into perspective, in FY'22, it was about 22%.

And FY'24, it was again about 22%.

So there has been a significant movement both in the number of Aadhaar Mitras that we have and the contribution that Aadhaar Mitras are making to the overall disbursement mix.

As you would know, Aadhaar Mitra is only a referral model where the case is actually closed by my internal sales team.

And hence, these are all counted as internal businesses.

Nidhesh

Okay.

So 59% internal includes Aadhaar Mitra?

Rishi Anand

Yes, Aadhaar Mitra is a referral program of providing leads to my internal channel.

It is just a lead provider.

Nidhesh

Sure.

And sir, last question is that if you look at 1.15 per sales officer, what are the steps we are taking to improve this?

Because this productivity for an industry level also the productivity is broadly here only.

But then, let's say, we want to build a INR 50,000 crore book, etc. this could become a bit of a constraint for reaching that particular scale because then we will require thousands of employees.

So how are we thinking about improving this productivity?

Rishi Anand

See, the direct correlation of this 1.1 file per sales officer is linked to the attrition rate of the company and we've realized that and we understand the data, we understand the psyche of our front-end employees.

We have launched multiple programs right from handholding to internal schemes of the growth trajectory, etc., just to ensure and we've seen early results, early positive results, at least in the last 3 quarters that we've been doing this, our attrition rates have dropped.

The moment the attrition rates drop and if I were to look at numbers in the current quarter or the last month, for example, they have gone up, I'll not say substantially, but you can see a trajectory moving northwards.

So it is directly correlated to attrition.

We have started adjusting attrition, which will eventually lead to a higher file per RO.

Nidhesh

Sure, sir.

Thank you, sir.

That is it from my side.

Aadhar Housing Finance Limited May 06, 2025

Rishi Anand

Thank yo

Moderator · Conference Operator

Thank you.

The next question is from the line of Abhishek M from HSBC.

Please go ahead.

Abhishek M

Thanks for taking my question.

Can you give a sense of the balance transfer that you are seeing?

So how much is getting BT-out right now?

And has that increased or remained the same over the last, say, 1 year?

Rishi Anand

So Abhishek, our balance transfer out annualized for March is 6.49%, which has dropped from a previous year.

Previous year, it was 6.93%.

So from 6.93% it has dropped to 6.49%.

Abhishek M

This is on the number of files.

So if you are holding 100 files, 6.9 are getting BT-out or 6.4 or is it from value?

Rishi Anand

This is AUM, value.

Abhishek M

Right.

So see, as per my understanding, a lot of larger HFCs are trying to build an affordable housing book, and they are trying to approach customers who have been with you and your peers for 2, 3 years, good track record, and they are able to offer lower rates given their own lower cost of funds and OPEX and all that.

So is that not increasing in instance and that is why your BT-out trade is coming down?

Or is it some calculation thing that is contributing to this?

I just wanted to understand how you're able to retain these many customers, when the competition from large peers is increasing?

Rishi Anand

Yes.

So there are multiple things, Abhishek, that plays around when BT-out is spoken about.

One is internally, we have taken multiple measures, right, from having a centralized retention team to data analytics contributing towards highlighting the consumer as red, green, and amber, etc. So there are multiple things from a data analytics perspective that has gone to the retention team.

It's a centralized retention team operating out of Mumbai.

So any customer across the 600 branches that process a branch for a BT-out is immediately redirected.

We understand the reason of his BT-out, if it is yield, good customer, green tagged customer, we look at our own spreads and accordingly, maybe look at the customer, if he needs top up, based on our policy, we look at top up.

That is one.

Second is while you mentioned large housing finance companies, etc. everybody has a certain risk appetite, as we understand.

There are certain large companies who are not very comfortable with a certain credit score.

There are companies which are not comfortable with self-employed, no income proof underwriting.

There are certain large housing finance companies not comfortable with the kind of properties my consumer buys.

It is a mix of a lot of things, a generic statement that one large company can come and take away BT.

No, it doesn't work like this.

It is a combination of all these 3 things.

Third, when we talk about larger companies looking at our consumers, this is primarily going to happen only or is happening, I would say, primarily in the emerging A and urban locations and that's why our shift in strategy emerging B, C.

So that is going to balance out completely.

And that is actually already, you can Aadhar Housing Finance Limited May 06, 2025 see the numbers panning out.

For example, versus the last year, as I quoted, almost 7% of our BT-out has fallen to about 6.5% today.

Abhishek M

Yes.

Thanks for that.

That was very comprehensive.

So another quick question on your sourcing mix.

So you explained that almost 59%, 60% internal and the rest is through your channel partners.

Even in an internal, you have this Aadhaar Mitras.

Can you sort of pinpoint which is the fastest-growing channel?

Is it Aadhaar Mitras and that's because you've added a lot of Aadhaar Mitras and that is helping the growth of 54% going to 59 entirely driven by that?

Or there a reliance more on your internal teams as well.

Rishi Anand

Yes. my fastest growing 2 channels, Abhishek, are Aadhaar Mitra and my direct sourcing.

Both of them combined are the fastest-growing channels for me today.

Abhishek M

Understood.

Thank you so much for those two answers.

Thank you and all the best.

Rishi Anand

Thank you, Abhishek.

Moderator · Conference Operator

Thank you.

The next question is from the line of Parth from Nomura.

Please go ahead.

Parth

Congratulations on a good quarter, sir.

So just 2 basic questions.

You mentioned that the share of emerging markets is going to improve going ahead to 55% from the current levels of 45%.

And we also see good traction in the non-home loan segment.

So do you see any incrementally improving impact on the yields with the growth in these 2 segments and geographies?

And apart from that, since you will be growing in the emerging market segment, can we expect some improvement in the share of self-employed customers and EWS/LIG customers and this will be detrimental to the credit cost?

Rajesh Viswanathan

Yes.

I think as we explained, overall, the strategy of moving into or splitting the business into urban and emerging 1, 2, 3 is to maintain the healthy yields that we currently have.

So I think the idea is to maintain the yields that we currently have.

To be very honest, we don't expect the yields to grow significantly from where we are currently.

Maintenance of the yields itself is a fair achievement.

Whatever benefit we get from emerging B and C is where the yields will be slightly more stronger.

If the business of that starts growing significantly in year 1 and year 2, that is where you may see some traction.

But for that, we also have urban locations where competition will be high.

So it's a sort of a setup that we have.

That's why I'm saying holding yields is a fair assumption.

The second question that you had was on consumer profile.

See, consumer profile, what is going to happen is as we move ahead in this strategy, our self- construction business will go up.

Our self-led business will go up because the more you focus on emerging B and C locations that these are smaller district centers where more of self employed customers are available, which gives us an upside on managing.

So, what are we trying to protect by doing broadly if I can give you a couple of points.

One is we are trying to protect our ticket size, emerging locations, urban locations where the ticket size moves northward, cost of construction is high, cost of labor is high, so on and so forth.

And the emerging locations, the Aadhar Housing Finance Limited May 06, 2025 cost of construction is comparatively lower.

So I will be able to manage my ticket size.

And as Rajesh explained, urban locations, you will have slight contraction on yields on spreads, whereas in emerging locations, that's where you will be able to manage.

So a complete balance on ticket size and complete balance on spreads is what urban and emerging is going to give you.

Parth

Sure, sir.

That is helpful.

Sir, just another question was on the fact that since you will be looking in the emerging segment, do you see a rise in the EWS and LIG income group and will it have any impact on the credit cost side?

Rajesh Viswanathan

First, let me clarify to everybody on the call, including Parth you, that we are already in these locations.

We are not going to these locations.

What I have done is I have split my 600 branches that I'm available today into 2 categories.

So I am not that I'm going to venture out into new locations.

From a pure strategic and control perspective, ticket size perspective, yield perspective, I have just distributed not only the branches, but even my teams.

I'm trying to put the best and the strongest team on the emerging side because urban locations are more or less on auto mode right now.

So that's what I'm doing.

So will my credit cost enhance because of this?

No, it will not because this is a business that I've already been doing.

Parth

That is helpful.

And just one last question.

So your top states like Rajasthan, UP, Maharashtra and even Gujarat is now at 11%.

So do you plan to change your threshold of maintaining per state AUM just 14% to EBITDA for higher threshold once you start seeing improved growth in the state?

Rajesh Viswanathan

No. We as management, we have strategically decided whether it is distribution whether it is incremental disbursement or whether it is AUM we will not breach the 14% mark, maybe 50 bps here and there 14-14.5 but that's the range we will be around.

Parth

Thank you.

This is very helpful.

Congratulations.

Rajesh Viswanathan

Yes, thanks.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, this will be the last question for today, which is from the line of Shreya Shivani from CLSA.

Please go ahead.

Shreya Shivani

Thank you for the opportunity.

Apologies, I joined in late, so I'm not sure if this has been discussed already.

I wanted to understand how much liquidity are you holding on balance sheet right now in terms of 3 months, 6 months, what is it right now?

What was it in FY'24?

Where would we want to keep it?

And if any benefit can come through from reducing this on our spreads, on our margins, etc.?

So some commentary on that, please.

Thank you.

Rajesh Viswanathan

So our overall liquidity that we had at the year-end stood at about INR 2,200 crores, which is approximately 10% of the loan book.

And if you look at it at March end last year, it would have been on a similar line.

So typically, what happens is in intervening quarters, this typically is in Aadhar Housing Finance Limited May 06, 2025 the range of about 8% to 9% and the end of the year, it becomes 10% because there are significant drawdowns which happen at the end of the quarter, which gets utilized in the start of the next quarter.

Typically, what we would like to keep it is, we would like to keep this in the levels of about 8%.

And to be very honest, we would like to measure that more as a percentage of borrowing mix.

So we would like to keep somewhere about 8% to 9% of the borrowing mix.

Obviously, this gets decided by the ALCO in terms of the liquidity in the market.

If the liquidity becomes tight, we would like to keep it at a higher percentage.

Otherwise, 8% to 9% is balance sheet liquidity.

On top of that, we will always have undrawn lines.

For example, on balance sheet liquidity was INR 2,200 crores, we also had undrawn lines of about INR 900 crores.

Shreya Shivani

Got it.

So broadly, then you are pretty much in range and this will not really dramatically shift from where we are right now, right?

Rishi Anand

This may give you a release of about 1%, 2% to be very honest.

Not significant.

Shreya Shivani

Got it.

This is very useful.

Thank you so much and all the best.

Moderator · Conference Operator

Ladies and gentlemen, as this was the last question for today.

I would now like to hand the conference over to the management for closing comments.

Rishi Anand

Thanks a lot.

I thank all the participants for joining in.

And I would like to apologize also for uploading the presentation a bit late.

We had some problems at the site for upload.

So we will ensure that next time at least we give you a slightly more bigger lead time for reading the presentation.

I hope all the questions have got answered.

If there are any unanswered questions, you can always reach out to the Investor Relations email ID, and we'll be happy to answer questions.

Thanks a lot, and have a good day.

Rajesh Viswanathan

Thank you so much.

Moderator · Conference Operator

Thank you.

On behalf of JM Financial Institutional Securities Limited, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.

Questions and answers

16:58:12 +05'30' · Research Analyst

“Aadhar Housing Finance Limited Q4 & FY'25 Analyst Conference Call” May 06, 2025