Aavas Financiers Q1 Results Review - Spreads Guidance Maintained; Strong AUM Growth: IDBI Capital

IDBI Capital Report

Aavas Financiers Ltd.'s assets under management growth remained strong at 22% YoY (up 3% QoQ) led by lower disbursement growth. Disbursements grew slower by 13% YoY (down 36% QoQ) during Q1 FY25 due to seasonality. Management retained guidance at 22-25% AUM growth going forward.

Asset quality deteriorated with gross non-performing asset at 1.01% versus 0.92% QoQ due to seasonality; further reported 1+ dpd at 3.65% versus 3.12%.

Spreads declined by 6bps QoQ to 5.0% due to rise in cost of borrowings. Net interest income grew by 8% YoY led by decline in NIMs; pre-provision operating profit grew by 16% YoY led by higher other income.

Profit after tax grew by 15% YoY led by higher provisions (up 51% YoY). We revised estimates upwards for FY26E adjusted book value by 1% backed by lower cost ot assets.

We maintain ‘Buy’ with a new target price of Rs 2,110 (Rs 1,880) valuing it at 3.3 times P/ABV FY26E (earlier three times) as strong AUM growth with best asset quality seems sustainable.

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