Aavas Financiers - Rate Cut To Support Improvement In Spreads: IDBI Capital

IDBI Capital Report

We met with the management of Aavas Financiers Ltd. and discussed about the business momentum and rate cut impact on margins. Technology up-gradation is almost completed as company went live on loan management channel i.e Oracle Flex cube system; thus focus will be on disbursement growth along with deeper penetration in geographical areas.

This should sustain the guidance of above 20% AUM growth and disbursement growth for FY25. Cost of funds could peak in Q2 FY25 and could see margin accretion of 10-15 basis points in case of a 25-bps repo rate cut by the RBI as EBLR linked (20% repo and 10% T-bill) liabilities will re-price immediately.

Asset quality has remained pristine with 1+ days past due at 3.12% the lowest since inception as of FY24.

We revise estimates upwards slightly and maintain ‘Buy’ with a new target price of Rs 2,190 (earlier Rs 2,110) valuing it at 3.4 times price/adjusted book value FY26E (earlier 3.3 times) as strong AUM growth with best asset quality seems sustainable.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.