Aadhar Housing Finance aims for 22-24% loan growth over three years
Rishi Anand, MD & CEO of Aadhar Housing Finance expects net interest margins (NIMs) to be stable in the range of 8.75-8.8%.
Rishi Anand, MD & CEO of Aadhar Housing Finance, expects loan growth of 22-24% over the next three years, driven by consistent disbursement growth of 18-20%.
In an interview with CNBC-TV18, Anand said he also expects the company to maintain stable net interest margins (NIMs) in the range of 8.75-8.8%.
The current market capitalisation of the company is ₹18,824.25 crore.
This is the verbatim transcript of the interview.
Q: How is the quarter panning out for you? I am talking about October-December 2024 (Q3FY25) relative to July-September 2024 (Q2FY25) - is it as steady? A lot of talk out there in the market about a bit of a slowdown in the margin, etc. Have you seen any of it in terms of credit offtake?
A: Let me give you a little flavour of what is happening in the industry and at Aadhar. Versus April-June 2024 (Q1FY25) and July-September 2024 (Q2FY25), we grew our assets under management (AUM) at about 21%, disbursement at about 18-19%, and profit after tax (PAT) at about 16-17%. While I can be quoting many numbers from October to December 2024 (Q3FY25), I would say we are on a better footing from July to September 2024 (Q2FY25). That is the indication I can give. I think your opening statement answered all the questions, saying that this is one of the safest and the most stable industries to be in.
Housing finance, especially after the Pradhan Mantri Awas Yojana (PMAY) 2.0, which formally got launched on November 14, has started seeing a lot of traction, seen a lot of movement in the demand.
Q: So give us some colour. The July-September 2024 (Q2FY25) was strong for you. So some sense, full-year growth, not just 2024-25 (FY25) but given this momentum in the housing market, maybe even 2025-26 (FY26) – what is a steady state number that looks very achievable to you?
A: The way we look at the next three years, we are looking at a comfortable 18-20% disbursement growth, which will result in about 22-24% growth on AUM. Net interest margins (NIMs) will be very stable at about 8.75-8.8% while we recorded 9% in the quarter that is under question, but 8.75% is a stable state that we are looking at.
Also Read | Aadhar Housing Finance maintains AUM growth guidance at 24% this fiscal
Yes, the industry and Aadhar Housing Finance are in for good times. And I will keep coming back to PMAY 2.0 which targets the economically weaker section (EWS), lower income group (LIG) segment majorly - 80% of the target happens to be EWS and LIG, and that's the play area for companies like us.
Q: Could you tell us what is the current incremental cost of funds versus your average cost of funds - you could give us a couple of numbers on that, and also, a lot of your liability is floating. So whenever the rate cuts come about, you all will be in a good position to explain that to us as well
A: Our year-to-date (YTD) cost of funds is at about 8.4% so very comfortably placed. There is a 20 basis points (bps) hike that has happened over the last seven months, and from here on, we see the cost of funds going stable or down depending on what happens tomorrow.
80% of my borrowing is floating, and 80% of my asset is floating. So it is like to like for us. Whatever comes in is moved back to the consumer, depending on what is the quantum coming in. If it's like 5-7 bps, obviously it doesn't make sense to do that whole exercise, the high OPEX exercise and if it is substantial, upward of 25 bps, it will definitely be passed to the consumer.
Q: The expectation out there is no policy cut, but maybe a cash reserve ratio (CRR) cut. If there is a CRR cut of 15-25 bps, what will that mean for your cost of funds?
A: So the way it works for people like us is we have our borrowing spread across quarterly, half-yearly or annually. The moment the cuts happen on the banks, the banks change their MCLRs, which will have a lag of a quarter, and the moment that happens, the moment it is passed on to us, it is eventually passed on to the consumer. So if I were to do a door-to-door window, it might be anywhere between three to six months.
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In an interview with CNBC-TV18, Anand said he also expects the company to maintain stable net interest margins (NIMs) in the range of 8.75-8.8%.
The current market capitalisation of the company is ₹18,824.25 crore.
This is the verbatim transcript of the interview.
Q: How is the quarter panning out for you? I am talking about October-December 2024 (Q3FY25) relative to July-September 2024 (Q2FY25) - is it as steady? A lot of talk out there in the market about a bit of a slowdown in the margin, etc. Have you seen any of it in terms of credit offtake?
A: Let me give you a little flavour of what is happening in the industry and at Aadhar. Versus April-June 2024 (Q1FY25) and July-September 2024 (Q2FY25), we grew our assets under management (AUM) at about 21%, disbursement at about 18-19%, and profit after tax (PAT) at about 16-17%. While I can be quoting many numbers from October to December 2024 (Q3FY25), I would say we are on a better footing from July to September 2024 (Q2FY25). That is the indication I can give. I think your opening statement answered all the questions, saying that this is one of the safest and the most stable industries to be in.
Housing finance, especially after the Pradhan Mantri Awas Yojana (PMAY) 2.0, which formally got launched on November 14, has started seeing a lot of traction, seen a lot of movement in the demand.
Q: So give us some colour. The July-September 2024 (Q2FY25) was strong for you. So some sense, full-year growth, not just 2024-25 (FY25) but given this momentum in the housing market, maybe even 2025-26 (FY26) – what is a steady state number that looks very achievable to you?
A: The way we look at the next three years, we are looking at a comfortable 18-20% disbursement growth, which will result in about 22-24% growth on AUM. Net interest margins (NIMs) will be very stable at about 8.75-8.8% while we recorded 9% in the quarter that is under question, but 8.75% is a stable state that we are looking at.
Also Read | Aadhar Housing Finance maintains AUM growth guidance at 24% this fiscal
Yes, the industry and Aadhar Housing Finance are in for good times. And I will keep coming back to PMAY 2.0 which targets the economically weaker section (EWS), lower income group (LIG) segment majorly - 80% of the target happens to be EWS and LIG, and that's the play area for companies like us.
Q: Could you tell us what is the current incremental cost of funds versus your average cost of funds - you could give us a couple of numbers on that, and also, a lot of your liability is floating. So whenever the rate cuts come about, you all will be in a good position to explain that to us as well
A: Our year-to-date (YTD) cost of funds is at about 8.4% so very comfortably placed. There is a 20 basis points (bps) hike that has happened over the last seven months, and from here on, we see the cost of funds going stable or down depending on what happens tomorrow.
80% of my borrowing is floating, and 80% of my asset is floating. So it is like to like for us. Whatever comes in is moved back to the consumer, depending on what is the quantum coming in. If it's like 5-7 bps, obviously it doesn't make sense to do that whole exercise, the high OPEX exercise and if it is substantial, upward of 25 bps, it will definitely be passed to the consumer.
Q: The expectation out there is no policy cut, but maybe a cash reserve ratio (CRR) cut. If there is a CRR cut of 15-25 bps, what will that mean for your cost of funds?
A: So the way it works for people like us is we have our borrowing spread across quarterly, half-yearly or annually. The moment the cuts happen on the banks, the banks change their MCLRs, which will have a lag of a quarter, and the moment that happens, the moment it is passed on to us, it is eventually passed on to the consumer. So if I were to do a door-to-door window, it might be anywhere between three to six months.
For more details, watch the accompanying video
Catch all the latest updates from the stock market here
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