Aavas Financiers: Weak June quarter result with moderating AUM growth

AAVAS reported a weak set of results with moderating AUM growth (+16.2% YoY) and higher opex ratios, along with an uptick in early delinquencies. Disbursements growth remained weak (-5% YoY) post subdued 10.4% CAGR during FY24-FY25, although management alluded to the impact of change in methodology of disbursements recognition in Q1. While the tech transformation has led to lower TAT, opex ratios are yet to see meaningful improvement (C/I at 46.6%).

Reflation in core spread was a positive surprise

Reflation in core spread was a positive surprise (5.11%), largely driven by reduction in cost of funds, along with steady yields. While AAVAS remains a robust franchise with conservative underwriting approach reflecting in pristine asset quality, sustained slow pace of disbursements and moderating loan growth continue to remain key concerns and a key monitorable for any re-rating. We tweak our earnings estimates to factor in lower growth, offset by higher margins and maintain ADD with a revised RI-based TP of INR1,800 (implying 2.5x Mar-27 ABVPS).

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 Source : HDFC Securities Institutional Equities

 Full Report : https://www.hdfcsec.com/hsl.docs/HSIE%20Results%20Daily%20–%2013%20Aug%2025%20-%20HSIE-202508130652556341486.pdf?t=138202565458815