Professional Documents
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AUM 4,062 8,429 16,799 26,935 40,730 59,416 77,961 89,728 110,626 38% 19% Mkt. Cap 10,898 Cr.
AUM Growth (%) 140% 107% 99% 60% 51% 46% 31% 15% 23% Price 1,395
Disbursements 2,799 5,369 10,504 13,916 20,512 26,724 29,303 23,012 36,314 20% 11% No. of Sh 78.1
Disbur Growth (%) NA 92% 96% 32% 47% 30% 10% -21% 58% FY20 EPS 31.5
- Self-Employed (%) 57% 61% 64% 64% 64% 65% 65% FY20 BVPS 269
- Salaried (%) 43% 39% 36% 36% 36% 35% 35% P/BV 5.2
P/E Ratio 44.3
NII 241 509 940 1,623 1,995 3,384 4,307 4,902 5,991 47% 18%
PPOP 104 313 535 953 1,369 2,667 3,173 3,536 4,944 52% 25%
PAT 63 191 328 571 931 1,760 2,491 2,480 3,558 64% 20%
EPS 2 6 9 10 14 23 31 32 46 53% 20%
BVPS 19 31 53 98 160 235 269 301 346 30% 14%
P/E Ratio 44 44 31
P/BV 5.2 4.6 4.0
Interest Yield 19% 17% 17% 17% 15% 15% 14% 14% 14%
Interest Cost 12% 10% 9% 9% 9% 8% 8% 8% 7%
NIM (%) 8% 8% 8% 9% 8% 9% 8% 6% 6%
Opex-to-AUM 5% 3% 3% 3% 5% 4% 3% 3% 3%
Gross NPA Ratio 0.22% 0.52% 0.55% 0.79% 0.46% 0.47% 0.46%
Net NPA Ratio 0.19% 0.43% 0.42% 0.60% 0.39% 0.37% 0.34%
Dupoint
Interest Income 18.9% 16.6% 15.1% 14.0% 11.6% 11.9% 11.5% 11.3% 11.4%
Interest Expenses 10.5% 8.4% 7.7% 6.5% 5.7% 5.1% 5.2% 5.4% 5.4%
NII 8.4% 8.2% 7.5% 7.4% 5.9% 6.8% 6.3% 5.8% 6.0%
Operating Expense 4.8% 3.2% 3.2% 3.1% 4.9% 3.8% 3.3% 3.2% 3.0%
PPOP 3.6% 5.0% 4.2% 4.4% 4.0% 5.3% 4.6% 4.2% 4.9%
Provision 0.3% 0.4% 0.3% 0.4% 0.1% 0.2% 0.22% 0.32% 0.2%
Tax 1.1% 1.6% 1.4% 1.4% 1.2% 1.6% 0.8% 0.9% 1.2%
PAT (ROAum) 2.2% 3.1% 2.6% 2.6% 2.8% 3.5% 3.6% 3.0% 3.6%
Leverage 6.8 8.0 8.3 5.7 4.1 3.4 3.5 3.8 4.0
ROE 15.0% 24.3% 21.5% 14.8% 11.2% 12.0% 12.7% 11.2% 14.1%
Customer Profiles
Asset Quality
Ccost of Funding
Profitability
Underwriting
Collections
FY20Q4 Concall
Loan Book
Profitability
Asset Quality
Provisioning
Collection Efficiency -
Demand Outlook:
Other Metrics
94000 units
mostly in EWS/LIG <50k
35% new to credit
75% home;
highest 15% LAP; 10%
credit-to-sales top-up
team ratio in the industry
at ~1:3
largest legal team; local hireing
Mkt Size: 20bn ir.r (1.5lcr)
Aavas has ~2.5% market share in Aff Housing space
Rating upgrade to AA- from BBB+ in 3 yrs
TAT has reduced from 21days in FY14 to 13days in FY19
Avg Installmement payout is ~12000 per customer that will be his average 2 days cashflows thus they are pretty comfortab
No under construction only self construction or Ready to move it: we only fund properties which are 85%-90% complete o
No exposure to builder for High rise appartmnet; We don;t fund for the land purchase
For Small cities: Single flats in appartmnet buildings we check 7-8 yrs history of builder/developers and feedback from his e
Aavas also has a robust collection infrastructure—a 4 layered structured with a 250 plus member strong collection team—
Low credit cost: 1) 100% retail oriented 2) in-house sourcing & strong underwriting 3) low 50% LTV vs industry avg of 55-60
With Rating upgrade to AA-, aavas can raise ECB, borrow from Pension/insurance companies (borrowed 100cr from SBI life
NBF Refiance is at 7.5%; Assignment funding is at 9.5%
IFC & CDC lends because Aavas's focus is on lending to first time home owners that is in line with IFC's objectives
Home Loan ticket price in increasing and NPA is decling but the reverse for Mortgage loans (stated post demon so now it is
In-house collection team is 4-tires structure? Does it reducted 1dpd; will provide operating leverage as opex is fixed; branc
Fixed rate loans has increased from ~23% in FY14 to ~50% in FY20: as 80% of branches are in towns with <10l popilation
& Positioning
Areas with lot positiing of top-5 NBFC and less than 5% HF penetration; ensuring lending to best customer with good credi
Does't follows hub-&-spoke model and all branches are self-sufficient; Thus new branch doesn’t do any susbtantial bz in fir
Competition with AU SFB: not to proach each other emp; no BT in/out transaction; AU has indicated to grow its HF book a
In home states of Rajasthan, Gujarat and Maharashtra, it has a tehsil-level penetration of up to 80%
> 80% branches in <1mn population
245 branches in 10 states
Techonology
Many a time, there are various proxies that have to be used to assess the customer’s creditworthiness. This is where com
moats are built. And this is what creates an entry barrier for a new entrant or a purely tech-enabled lender. For evaluati
customers with no formal income proof, Aavas has created over 100 occupational profile templates. This templatisation
occupation profiles is nothing fancy, but a mere digitisation of all the rich underwriting experience that Aavas has gathe
course of doing business in the last eight years.
*: Total employees at 3500, sales (2500), Risk/Fraud (70), Underwriters (400), Architechs (200), Civil Engineers (100), Tec
based team (80)
As every thing is done inhouse: turnaround time from 21 days in FY14 to 13 days currently,
App 'Aavas Nirman': Dedicated app to punch in leads details for Relationship officer; reduce dependency in RO by geo-tagg
customers; improved productivity, customer engagements and targeted telecalling
Samvaad meeting with housing ecosystem partners;
Aavas Mitra app connecting painters, carpenters, etc, which is better than having DSAs, for refferal (~15% of business can
through this platform in the near future); Partner can grow its business and also get timely payment + some incentive for r
Focus on Costumer Retention via Analytics: Aavas Plus (top-up), Aavas ReFresh (additional loans)
100% inhiuse (75% for Indutry & only 25% for gruh)thus saving fee expenses and better assset quality (refferal based);
Referral-driven sourcing of new business offers a deep understanding of local characteristics, enabling it to leverage the so
of its borrowers to ensure that credit discipline is maintained
The key reason for Aavas’ early success can be attributed to (1) direct sourcing model which lays emphasis on word-of-m
advertising and referrals for sourcing, (2) deeper penetration which not only gives strong understanding but also helps s
faster, (3) well-aligned incentive structure for its sales as well as credit team, and (4) focus on technology to improve effi
check asset quality challenges.
Technical valuation of the property: All Aavas employees, who perform technical assessments of properties, feed in all the
observations into a dedicated app.
Scrub Analysis: Aavas does a detailed analysis of not only its existing customers, but also of those it rejects. While on one h
helps maintain the current portfolio’s asset quality, on the other it helps it gauge the rejection rate and tighten or loosen c
covenants accordingly.
Appropriately price the risk: This helps Aavas appropriately price the risk appetite for a particular segment. Just to elucidat
on property category a yield differential of ~ 325bps for Development Authority vs. Gram Panchayat property; b) credit his
to-credit customers charged ~50bps higher than credit-tested customers; and c) employment category: Self-employed cus
charged 125bps higher than salaried customers.
The sub-10 lakh segment in which normal people will say why you need two KYC cheques, two bureau records, two legal r
technical reports, SARFAESI, two company employees will go and visit the customer and property. So we do underwriting o
customers also the same way if other companies are doing for a 1 Crores plus case, though we were aware that this will le
increase by 100 basis point.
Today we are sourcing 10,000 cases a month and we are disbursing somewhere around 2800 to 3300 cases.
Bounce Rate predication is done by analystics thus reducting the 1dpd number
Maintatin customer retention by managing Balance Transper Out: by max. interest drop or additional top-ups; Balance tra
0.8% per month was earlier, now at 0.3% per month.
Micr-managemnet of field work through app and geo-tagging
2018 our BT out rate which was 0.8% per month, which got reduced last year to 0.5% per month. And in the current circum
has further come down to 0.3% per month. So, with the help of analytics, the effort which we are putting over a period of
months with a clear cut emphasis of the organization, with a dedicated team for retention and the current market circums
all peers are slow on disbursement; all these have helped on this aspect.
Risks
Is higher growth sustainable: now base is lower and as most loans are new loans, repayments are low
Avg. Loan tenue is 8-9 yrs. So loans are not matured enough. Higher NPA expected ) (still one cycle complete of ~7yrs)
Most customers new to credit, Self-employed (income of <6lpa)
Conecntration Risk (Raj & Maha)
Share of mortgage loans and LAP is increasing rapidly (LAP was started 2yrs ago and mgt don't want to inc it further
Targets
Disbursement CAGR of 25% in 3-4 yrs (due to low AUM base, growth in AuM will be 40%)
Opex to come down to 1.75%
ROA will is 2.5 times in LT
Leverage of 5 times till AA rated (as AU subsidiary it was 10 times); no new capital raise required for 3-4 yrs)
ROE Target of 15%
Current ROA and ROE are subdued
Try to maintain spread of ~5%
1DPD below 5% and NPA below 1%
has guided to adding about 40 odd branches annually for the next couple of years
Positives
Average 50% LTV and 0 builder loans; most are completed residential property
100% inhouse sourcing model - Opex is higher by 1% bue setoff by higher fees (30bps extra), higher transperancy & lower
sanction officers are CAs & better underwriting
Techonlogy orientation (will bring down opex by 30 bps)
Most branchs in city with population<10L (less housing penetration), no plans to expand beyond 8 cities
10% of all 1DPD converts to NPA (9% loans were 1DPD during demon) - better credit profilling
low credit cost due to, granual retail books; strong underwritings; 50% LTV vs 60% for industry; Underpenetrated North eo
Afforable Housing?
In my view, the average construction cost is Rs 2000 psf, in AH its about 1700 psf and for higher end projects it varies from
Aavas limits the psf cost to 1000 rupees
Total Cost
Constructon
- RCC cost
- other cost
Labour
margins
For FY20, AUM grew by 31% to Rs 77.9bn; Disbursements grew by 10% to Rs 29.2bn; (Disb. in Housing Loan grew by 6% wh
housing book inc. 19%)
Self-Employed : Salaried remains at 65%:35%; Overall ticket size remains at 8.4lks; Aavas has 105,000 customers.
Non-Housing loans forms 27% of total Loans (up from 24% in FY19); Tick size has declined from 7.3lks to 6.7lks (may be du
in Top-up loans)
· Interest Income grew by a robust 28% yoy but NII grew by 24%;
· This was because incremental loans are disbursed via Borrowing rather than Internal Accruals/Capital); Borrowing inc.
31% growth in AUM
· Operating Income grew by just 5% due to 67% dip in securitization for FY20Q4 (this incomes are booked upfront as pe
have material impact on Profitability);
· Securitization volume were lower as it is used as a liquidity source (has already received Sanction from NHB & ADB)
· Operating Expenses grew in line with the Interest Income (up 27%); Opex-to-AUM declined yoy from 3.9% to 3.4%
· Provisions increased by 84% to 63mn (due to 44mn additional Covid reserves which is ~0.5% of total AUM); Conseque
declined by 10% yoy
· As per Ind-AS, PAT increased by 10% due to lower tax rates; IGAAP profit growth 56% for FY20Q4
· For FY20, RoE remains subdued at 12.4% (vs. 12.0% in FY20) due to higher CAR (~60%)
· GNPA improved sharply on qoq basis from 0.57% in FY20Q3 to 0.46% in FY20Q4 (lowest in last 5yrs)
· This was due to improvement in Non-housing Book (interestingly GNPA for Non-housing/LAP book is lower than Housi
· 1+DPD reduced further from 3.4% in FY19 to 2.4% in FY20 (one of the best in Industry)
· Risk categorization, FOIR (fixed obligation to income ratio) and LTV are factors taken to extra 25% provision for COVID
45mn for Q4FY20.
· Aavas employs quality data analytics to bucket customers into risk categorised buckets to assess stress. Hospitality (3-
tourism, transport have been affected the most while kirana stores, cash and carry, pharmacists are the least affected.
· Total credit losses since inception has been only 7-8bps of loan book (~10cr)
· In the newer states of operation, salaried customers are higher and to that extent, business performance is slightly be
asset quality perspective
· Collection efficiency was ~95% in Mar’19 (vs 99% under normal circumstances)
· 24% customers have availed moratorium as on Apr’20 (18% of salaried employees & 25% of self-employed have taken
moratoriums)
· Expect this number will improve further as per experience till now - Another 8-12% customers will be able to pay
· Prepayments (3-4% of total customers) are also happening since fixed deposit rates are low.
· NPAs for Non-Housing Book has improved as Aavas has recovered money from 3-4 large account
· Aavas was operating 60% branches in Lockdown-2 and currently 82% branches are operational
· Currently disbursing ~2cr per day vs 10cr under normal circumstances
· Loan demand is coming through as due to natural demand, family extensions, nuclerisation as well as builders reducin
10-20%
· Non-home loans growth has been robust as the disbursement was not disrupted due to closure of Field Visits & Valua
· Exposure to the most impacted sector i.e. Hospitality is just 3-5% of total loan book
Customers are pripritizing home loan EMI re-payment over Credit Card and personal loan re-payment
Checking Liquid profile customers (kirana shops ad trade ref, purchase sales, visits of 30-60min, footfalls)
Finaincing to Builders (mostly kachaa income; projects completed)
Refernce model works: Cutomer
Self-employed in Aavas: low reasle values; Village will self build; Psycology; RE is a bubble
Housing may go upto 50LTV
MV of Open Land + estimate expenses (FOIR as per Income Level)
Own Contribution and equity (50%+ in Land)
Sushil Agrawal (dynamic personality, youngest NCM, ICICI manager @ 32, great at solution findings)
Down to earth
CCO Ashotosh Sir (Equitas ICICI) (50L+ plus CCO will handel)
ICICI top management levels
GHANSYAM RAWAT; RAM NARESH - bajaj fin
While most mortgage finance companies would have selected to blend revenues from diverse income segments, Aavas is
focused housing finance company. Our business has been structured around rural and semi-urban geographies. We recrui
from within the customer’s geography who aware of ground realities. We have helped customers enter the country’s finan
mainstream, build assets and long-term wealth.
% of cusomters from Rural areas has increased from 45% in FY19 to 49% in FY20, leading to ATP declinging from 8.6L to 8.4
The Company is graduating from home loan financing to life-cycle financial engagements with customers, increasing the n
loan proportion of the Company’s revenues.
The Company is present in only 134 districts of the 295 districts of the states of its presence.
The Company moderated the turnaround time taken to process home loan requests to one of the lowest within India’s ho
finance sector through the interplay of increased process urgency and automation. Leading to TAT reducing from 14days in
12days in FY20
Processed recordapplications (approximately 1.48 lakh) and a high screening standard that translated into 42,000 cases be
sanctioned – a high 72% rejection filter
At a time when the cost of funds available to India’s housing finance sector increased on account of the risk premium bein
lenders, Aavas succeeded in moderating its blended cost of funds (after factoring inflows of the last financial year) by 30 b
the ninth successive year of such a decline. We believe that this decline in the cost of funds represents a robust platform a
to grow the business: if we select to pass this cost decline to housing finance loan seekers, it could help us accelerate new
creation; if we select to retain this decline in spread and continue growing our book the way it has been growing, then it co
our spread and profitability.
Aavas invested approximately H9.5 crore in 2019-20 in technologies and business expansion
Aavas also arrived at an effective balance: the Company would extend deep into rural geographies marked by the largest c
customers but where housing finance penetration was less than 2%; it would then wire extensively with the head office th
information technology and secure itself with a sequence of systems that made business processes simple, secure and qui
Initially, branches were different from hubs; cases sourced from branches would be transferred to the hub for disburseme
in processing delays. Aavas responded with a digitised disbursement model where every branch is a virtual hub, reducing d
tenure. Payments would once be made through the cheque or online whereas they are completely online today.
We announced a 9:30 a.m. - 6:30 p.m. work schedule; to discourage employees from staying over or taking work home, w
our IT system off at 7 p.m. each evening. Three positives emerged: workplace productivity increased, employees began spe
time with their families / friends and employees strengthened the business through lower attrition.
The Company invested in a bounce prediction model, which provides data of cases that can potentially default in three mo
resulting in pre-emptive action and 6% decline in bounce incidence
• The Company created a customer-centric business environment.
• During 2019-20, the Company doubled its customer service team, CRM automation and opened a dedicated customer se
to enhance its overall service experience.
Aavas caters to majrotiy of first-time borrowers (approximately 60-70%) living in kutcha houses and aspiring to live in pucc
As of March 31, 2020, 63.40% of the Gross Loan Assets were from customers who belonged to the economically weaker se
low income group, earning less than H50,000 per month.
Aavas processed record applications (~148,000) and a high screening standard that translated into 42,000 cases being sanc
high 72% rejection filter.
Enhanced proximity for customers with deep penetration: Aavas had a science behind its branch-expansion strategy. It scr
Census patterns and CIBIL data to map prospective markets – low delinquency and low penetration – down to each tehsil a
states of its presence. It extended deep into rural geographies marked by the largest cluster of customers, but where hous
penetration was less than 2%. Aavas now addresses 1,073 tehsils across 10 states and has active loans in 10,928 villages/to
even penetrated small towns with a population of less than 10,000.
Turnaround time (TAT) stood at 12 days in FY20. Customer query resolution turnaround time was within 24 hours for 90%
and 48 hours for others. Aavas aspires to shrink its turnaround time to low single-digit. It also wants to increase cross-sellin
improve the proportion of non-home-loan customers in the overall mix. Though Aavas is primarily a housing finance comp
leverage its presence and distribution to cross-sell non-home-loan products to customers. Non-home-loans (including LAP
loans, extension/improvement loans) currently constitute ~25% of the loan-book
Business activity is gradually picking up, we disbursed Rs. 2,130 Mn during the quarter out of which Rs. 590/1,540 Mn was
May/June
Moratorium has reduced from 24.0% as of April 2020 to 17.8% as of June 2020; Exposure under moratorium for 3 months
June is 7.7% (40% cases customer has paid money in Aug) - 25% are salaried, 75% is self-employed.
the overall additional provision for potential impact of COVID-19 stands at 9.1crn as of Jun'20
We continue to borrow judiciously and raised Rs 7,160 Mn during the quarter. As on 30th June 2020, we maintained a suffi
liquidity of Rs. 2,300cr (1,500cr of cash)
Incremental Q1 FY21 borrowings ^ 7,160 Mn for 43 months at 6.02%
e in paying it back
eady to move in properties.
isting financier
hich enables it to maintain best-in-class asset quality, a commendable feat given the operating segment.
% with mostly completed homes 4) Under-penetrated geog
2000 psf
1200 psf
500 psf
700 psf
400 psf
400 psf
Moratorium FY20Q4 FY21Q1
Gross NPA Ratio 0.52% 0.55% 0.79% 0.46% 0.47% 0.46% 0.70% 0.40% ###
Net NPA Ratio 0.43% 0.42% 0.60% 0.39% 0.37% 0.34% 0.50% 0.30% ###
PCR 18% 23% 24% 16% 21% 26% 29% 25% ###
CAR 21% 27% 47% 62% 69% 56% 52% 52% ###
Corporate
Top-ups
0.3%
Fee & Ins. 6%
4%
GNPA (%)
4.81203
LAP NPA Total NPA 4%
Self-Employed
NA 3.9% 1.3% 3%
1.5% NA 0.8% 2.53661
2.38937
NA 1.3% 2%
NA 0.8% 1.3%
6.7% 6.6% 4.3%
1% 0.73674
0.6% 0.3% 0.5% 0.4536
0%
Corporate
Top-ups GNPA (FY20) - LHS P/B (F
0.3%
Fee & Ins. 6%
4%
AP
%
70%
4.3%
60%
Home Loan
74% 50%
40%
30%
1.3% 1.3% 1.3%
20%
0.8%
10%
0%
LICH CanFin PNBH Gruh Repco
5x
4x
1 3x
2x
0.73674 0.557 1x
0.4536
0x
5 .0 %
4.3% 4 .5 %
4 .0 %
3 .5 %
3 .0 %
2 .5 %
2 .0 %
1.3% 1 .5 %
0.5%
1 .0 %
0 .5 %
0 .0 %
Retail NPA
Consolidated FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Year 0.2 1 2
Total Net worth 5,663 10,985 18,370 20,979 23,483 27,041 31,658
P/B 5.2 4.6 4.0 3.4
P/E 43.6 43.8 30.5 23.5
Branch
FCFE 0 0 0
PV 0 0 0
37,744 45,684 55,932 69,020 80,599 95,085 113,021 135,003 161,670 193,692
2.9 2.4 1.9 1.6 1.3 1.1 1.0 0.8 0.7 0.6
17.8 13.7 10.6 8.3 6.6 5.2 4.2 3.5 2.9 2.4
18% 19% 20% 21% 22% 24% 25% 25% 26% 26%
4.9 5.2 5.4 5.5 5.8 6.1 6.3 6.4 6.4 6.3
185,377 236,911 300,166 377,009 469,376 579,210 708,374 858,550 1,031,118 1,227,030
29% 28% 27% 26% 25% 23% 22% 21% 20% 19%
25%
7.8% 7.7% 7.7% 7.6% 7.5% 7.4% 7.4% 7.3% 7.2% 7.1%
2.7% 2.5% 2.4% 2.2% 2.1% 2.0% 1.9% 1.7% 1.6% 1.5%
5.1% 5.2% 5.3% 5.4% 5.4% 5.5% 5.5% 5.5% 5.6% 5.6%
0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%
4.9% 5.0% 5.1% 5.2% 5.2% 5.3% 5.3% 5.3% 5.4% 5.4%
25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
3.7% 3.8% 3.8% 3.9% 3.9% 3.9% 4.0% 4.0% 4.0% 4.1%
6,087 7,940 10,248 13,088 16,542 20,694 25,623 31,403 38,096 45,746
32% 30% 29% 28% 26% 25% 24% 23% 21% 20%
6,087 7,940 10,248 13,088 11,580 14,486 17,936 21,982 26,667 32,022
100% 100% 100% 100% 70% 70% 70% 70% 70% 70%
Disc Rate
37,744 45,684 55,932 69,020 80,599 95,085 113,021 135,003 161,670 193,692
6,087 7,940 10,248 13,088 16,542 20,694 25,623 31,403 38,096 45,746
16% 17% 18% 19% 21% 22% 23% 23% 24% 24%
13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0%
4,907 5,939 7,271 8,973 10,478 12,361 14,693 17,550 21,017 25,180
1,180 2,001 2,976 4,115 6,064 8,333 10,930 13,853 17,078 20,566
802 1,204 1,585 1,939 2,529 3,075 3,570 4,004 4,368 4,655
FY34E FY35E FY36E FY37E FY38E FY39E FY40E Terminal
13 14 15 16 17 18 19 19