Aptus Value Housing Finance India Limited (APTUS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm Danish, moderator for this conference call. Welcome to the earnings conference call of Aptus Value Housing Finance India Limited to discuss its results for the quarter ended June 30, 2026. This conference call may contain forward-looking statements based on the company's beliefs, assumptions and expectations as of today. These statements are subject to risks and uncertainties, and actual results may differ materially. [Operator Instructions] Please note that this conference is being recorded. We have with us today, Mr. M. Anandan, Executive Chairman; Mr. P. Balaji; Managing Director; Mr. C. T. Manoharan, Executive Director and Chief Business Officer; Mr. Sanjay Mittal, Chief Financial Officer. I would now like to hand the conference over to Mr. Anandan for his opening remarks. Thank you, and over to you, sir.

Yes. Thank you. Good morning, ladies and gentlemen. I am Anandan, Executive Chairman of the Company. I warmly welcome you all to this earnings call. As you know, the Indian economy continues to exhibit strong underlying momentum and created a supportive environment for credit growth, including for affordable housing finance. Aptus delivered a good start for the year with assets under management growing by 21% Y-o-Y. Disbursements reached a good level during the quarter, and the growth was broad-based across geographies and distribution channels with continued demand from our targeted customer segment. Profitability remained healthy during the quarter. Net total income increased, supported by business growth, improving operating leverage. Return on assets remained healthy, while return on equity stood a little over 20% ROE. Spreads remain largely stable. Our margins remained resilient during the quarter despite rationalization of pricing of certain lending segments and prudent liability management, including reduction in cost of funds. Asset quality remained broadly in line despite continued business growth. First half broadly contained at 60 basis points during the quarter, reflecting resilience of our underwriting framework and disciplined portfolio monitoring. Looking ahead, we remain optimistic about the opportunities for the affordable housing and finance sector. We are seeing good business momentum across our markets and are confident of delivering 22% to 24% AUM growth as guidance, as -- while maintaining our focus on operating efficiency. With that, I would now like to hand over the call to Mr. Balaji, our Managing Director to take you through the business forecast and key operating and financial parameters.

Thank you, sir. Good morning to all. To begin with, I am happy to convey that we have started FY '27 on a positive note. The strategic initiatives that we outlined during our last earnings call are progressing well and have contributed to the continued improvement in our business momentum. We remain focused on balancing growth with profitability while maintaining our credit discipline. Overall, the quarter reinforces our belief that the affordable housing segment we operate in remains structurally robust and continues to offer a significant growth opportunity. As outlined during our last earnings call, we continue to make steady progress on the strategic initiatives aimed at accelerating our growth momentum. First, branch expansion. We continue to expand our distribution network. And during the quarter, we opened 33 branches, taking our total branch network to 372. Next is strengthening customer acquisition. We continue to diversify our sourcing channel through the expansion of our connector network and increased focus on digital marketing initiatives. The connector channel contributed 8% of our disbursement during the quarter, and we continue to see encouraging traction from this sourcing channel. The next one is the increasing average ticket size. Our continued focus on increasing the average ticket size supported partly by inflation and calibrated customer selection strategy is helping us onboard higher quality customers while maintaining healthy business momentum. The next one is the customer quality and pricing. Our calibrated reduction in lending rates on select loan ticket sizes together with our strategy of increasing the average ticket size continues to support customer acquisition while helping us onboard higher quality customers. Going forward, we remain focused on the disciplined execution of these initiatives. During the quarter, the last year, whatever was guided has been achieved. In terms of growth, Q1 disbursements grew 36% year-on-year, providing confidence in achieving the FY '27 AUM growth guidance of 22% to 24%. Just to give [indiscernible], '26 disbursement also was good and it has improved by 25% as compared to July '25 disbursements. Branch expansion, we have added 33 branches during the quarter against the full year target of 60 to 70 branches. Spread yield moderation remained in line with expectations and was fully offset by a lower cost of borrowing resulting in stable spread. Operating expenses to AUM remained at 2.7% within the guided range of 2.6% to 2.8%. Credit cost stood at around 0.6%, in line with the guided range of 0.5% plus or minus 10 basis points for FY '27. Profitability. ROE remained above 20%, consistent with our profitability guidance. Based on the progress made during Q1 FY '27, we remain confident of delivering our FY '27 guidance across growth, spreads, operating cost, credit cost and profitability. Our growth is anchored on the following strategic pillars. One is diversified mix, geographic expansion, productivity, digital excellence. One more thing which is slightly important is product expansion. We are also evaluating opportunities to broaden our lending portfolio beyond home loans and SME loans through the introduction of new lending product. Together, these pillars continue to strengthen our franchise and position us well to deliver sustainable growth while maintaining our profitability and asset quality. Now moving on to performance. AUM grew by 21% year-on-year to INR 13,648 crores. Disbursements grew 36% year-on-year to INR 1,053 crores. Branch network stood at 372 branches. Now coming to asset quality. The collection efficiency stood at 98.52%, primarily impacted to an extent by seasonality and some moderation in collections within the NBFC portfolio. Consequently, our 30+ DPD stood at 6.87% as against 6.21% in Q4 FY '26. Encouragingly, collection performance has improved in July with the 30+ DPD declining by nearly 20 basis points. We expect this positive trajectory to continue as our collection initiatives gain further traction. The GNPA stood at 1.7% as against 1.52% in Q4 FY '26, while net NPA stood at 1.29% as against 1.15%. The credit cost for the quarter remained within our guided range of around 0.6%. The credit cost for housing finance company came in at 0.2%, while the NBFC reported around 1.4%. Aptus is one company with 2 businesses and 2 benchmarks. Our housing finance business should be compared with [indiscernible] peers and our NBFC business should be compared with the HFC peers. Each has a distinct operating model and risk profile. Therefore, consolidated asset quality should always be assessed in the context of the portfolio mix. Now coming to the profitability. During the quarter, net income margin grew by 19% year-on-year to INR 441 crores. We maintained our spread sequentially to 9%, driven by decline in cost of funds to 8%. Our OpEx as a percentage of AUM remained at 2.7%. Profit grew 19% year-on-year to INR 261 crores, translating to an ROA of 7.8% and ROE of 20.4%, which is among the highest in the industry. Coming to the funding. During Q1, we raised approximately INR 876 crores on a consolidated basis, primarily through a mix of term loans, securitization and direct assignment. Our liability profile continues to remain well diversified with 50% from banks, entities at 14%, securitization at 18% and the balance through NHB funding. We continue to maintain a strong liquidity position with total liquidity of INR 1,933 crores as of June '26, including INR 1,257 crores of unavailed bank sanctions, providing us ample headroom to support growth. Now with these remarks, I open the floor for the question-and-answer session.

[Operator Instructions] Our first question comes from the line of Nischint Chawathe from Kotak Bank.

Just a little bit of a guidance on the way this year is playing out. One is that the disbursement growth is pretty impressive at around 36%. There was -- there have been challenges throughout the last 4, 5 quarters. So one is, a, what are the drivers? And what is the thought process comfort in terms of how this plays out over maybe the next 2, 3 quarters, if you have some color on July, et cetera? And I think even on the asset quality front, if you could give some color. I know you mentioned that 30 DPD was down around 20 basis points. But a, what exactly are the drivers? And how do we expect the year to really end? I think those are my 2 questions.

First is on the growth, like what we have explained earlier, first, the growth will come from expansion of new branches in new states and expansion of new branches in the existing states, plus the increase in average ticket size by at least INR 1 lakh as compared to the last year. That is also -- will provide momentum for the growth. Next thing is the connected channel, which we have developed. That has actually gained traction. But as I told you, during the first quarter, 8% of the disbursements was through connected channel, and this will be augmented in the second, third and fourth quarter as well. And the other one is we are also -- we have also calibrated -- we have also optimized the lending rates on certain housing loan ticket sizes. That is also likely to provide momentum for the growth. And that's what has actually happened in the sense if you look at our July '25 disbursements, it is -- July '26 disbursement, it is 25% more than the disbursement as of July '25. So all these things are likely to result in good growth and that's what we are pursuing. That is on the growth. Next thing is on the -- obviously, with this kind of disbursement growth, the AUM growth also will catch up. And that's what is giving us confidence that we'll be able to achieve the guided range of 22% to 24% AUM growth. Now coming to the asset quality. As I told you, the credit cost in the HFC was at 0.24%. This is in line with any other housing finance company and the quality of the book is behaving very well there. And if you look at the NBFC, there was a small hitch in terms of collections during the fag end of June 2026. And that is what has resulted in the collection efficiency dropping down to 98.5% and 30+DPD going up to 6.87%. But we have already taken corrective steps in terms of the NBFC collections. And we're very happy to tell that in July 2026, the Stage 2 has almost reduced by 15 to 20 basis points. So this will continue. And going forward, this range -- the credit cost range of 0.5 plus or minus 10 basis points will be maintained, and this will be there for the next 3 quarters.

And any specific factors that you want to call out because of weakness in collections or what happened really in the first quarter in the NBFC?

Repeat your question, sorry, Nischint.

Yes. So any specific factors that you may want to call out, which were the reasons for weaker collections in the NBFC in the first quarter?

So actually, first of all, let's be very clear. There is no problem with the quality of the customers whom -- where we have funded in the NBFC. It's basically the -- some commitments which was there at the end of June. So at the end -- so June '26, that was a thing. And I think if you look at the credit cost of 1.4%, that compares with the NBFC of any other -- with other NBFCs in the same line of business. So actually, there is no problem with the quality of the customers. Only thing is some commitment which was there at the end of the June, but we were not able to meet it. And that is where there is a slight deterioration in the portfolio quality, but that is getting corrected in the month of July '26, and we will come back from this quarter.

Again, just to add, the data company-wise, the parent company in HL business, pursuing HL business, the quality of portfolio, overdues, NPA data, credit cost compares favorably with all other comparable housing companies. Equally, our NBFC data also is comparing well with other NBFCs of similar size or comparable NBFCs. But on a combined basis, on a consolidated basis of HL and NBFC got -- the combined data got increased by 20 basis points primarily on account of -- while it compares well with other NBFC business, but still on a combined basis, our data wise, it is higher. That's what we are going to work strongly to reduce it further.

Probably this is kind of more of a month end or a seasonal trend is what you are suggesting. I think that's how I would look at it rather than saying that...

Absolutely, yes.

Next question comes from the line of Umang Shah with Kotak Mutual Fund.

Sir, my question is also related to the asset quality point. Now we do understand that Q1 is a seasonally weak quarter, but our headline ratios in terms of 30-plus, 90-plus are also higher on a Y-o-Y basis. So is there anything lumpy out here, which has led to this? And the second question is that if you could -- while the blended collection efficiency has dropped to 98.5%, I mean, if you could just split it out as to how much collection efficiency has dropped in the NBFC business?

Yes. See if you look at the collection efficiency in the housing finance company, it is around 99.5% and this one is around 97.5%. That's the difference. So adding up to this on a consolidated basis, it is around 98.52%. But regarding the increase in the NPA actually, we are not seeing that kind of lumpiness in this quarter or year-on-year basis. In fact, this is what we have also guided in the sense 1.49% was the NPA as of June 2025, that has become 1.7%. But this will definitely be brought down with the kind of effort that is being done. And this is broadly on account of the NBFC NPA getting increased.

Sure. So this is not specific to any particular region or any particular cohort of customers or anything like that?

No, no.

Okay. Understood. And sir, just one suggestion. I mean, I do appreciate that, I mean, on the call, you are trying to emphasize a lot more about the HFC and the NBFC business where you would want us to sort of compare both the businesses separately. But just a suggestion, I mean, if we could also start giving data points for both the businesses separately, I mean, it would help us as investors and analysts to kind of compare it in a more meaningful way.

We have already -- Umang, we have already decided. We have already discussed, from September 2026 onwards, you will get data for both the companies in the investor presentation.

Our next question comes from the line of Amit Khaitan with Yes Securities.

Can you hear me?

Yes, yes, Amit.

No, this is Rajiv here. Sorry. So just to clear this point on asset quality, you said that towards the end of June, some of the NBFC customers couldn't pay and couldn't honor their commitment. But in July, they have not only cleared the June dues and they've also honored their July commitment as well. So now they are back to -- they have kind of rolled back their bucket, right? So on an ongoing basis, your collection efficiency, which was, say, 97.5% in NBFC, now should be coming back to normal of what, 98.5%, 99%, I mean, in June, July.

Yes. Definitely, definitely.

Got it. So incrementally, you will not see flow forward from the NBFC portfolio in July and August?

Yes.

Okay. And on this -- from a growth point of view, and again, you said that July disbursements were higher 25% Y-o-Y in your initial remarks. But I think from last July, you also stopped doing this below INR 7 lakh loans also. I mean, you stopped doing below INR 7 lakh ticket sizes from last July. So on an adjusted basis, I mean, see, on a like-for-like basis, then how should we look at your disbursement run rate going ahead? I mean, 35% in 1Q was also because of a lower base last year. But July is 25%, but you still have a lower base. But when the base normalizes, how should we look at your disbursement growth?

This quarter, minimum 25% to 30% increase over the last quarter, year-on-year basis will be happening this quarter.

Impact of less than INR 7 lakh is coming.

Yes, impact of less than INR 7 lakh is also coming down.

And the disbursement is also now happening on NBFC. I mean, on the NBFC side, you have not kind of calibrated on disbursement, right? Because everything has come back to normal.

See, that's what we told. Actually, there is no problem with the quality of the customers. It is just one small hitch that has happened during the fag end of June. So there is no way that we are reducing the business in the NBFC.

And sir, one thing on the funding side, 2 things. I mean, NHB proportion in the funding is at its lowest in many, many quarters. And I don't see any NBFC sanction in the pipeline also. So what is the reason? And second is the unavailed sanctions from banks as we see in the liquidity slide, what will be the cost of these sanctions when you draw?

Yes. First of all, let me talk about this NHB. See, what is happening, we have also applied to NHB for a INR 500 crore refinance facility. But the indication from NHB is that the cost of funds that they are going to give will be around 8.2% to 8.3%. Whereas in the housing finance company, we are able to raise money from the bank or from the -- in terms of securitization or NPD at 7.8% to 7.9%. So it makes more prudent to borrow from these sources rather than going to NHB. So -- but if NHB is able to offer competitive rate of interest, then we will go to NHB. Otherwise, it will be from the other sources. So that is on the NHB borrowing. Next thing is this INR 1,257 crores of sanctions, which is there, in the case of HFC, the sanction rate is around 7.9% to 8.1%. In the case of NBFC, it is around 8.1% to 8.25%.

Our next question comes from the line of Amit Khetan from Laburnum Capital.

So a couple of questions. First is on the -- you've talked about getting into new lending segments. Now there are merits to being a company focused on a single segment and the addressable market for affordable housing LAP is pretty large. So what is the rationale for getting into these new segments and which products are under consideration?

See, this new product segment is in a formative stage. We are in the process of discussing on which products we want to get into. We'll be able to give more color in the next quarter con call because this is the thought process which is there in the company. So we'll discuss it internally and then give you more color maybe in the second quarter.

Got it. But can you explain what is the rationale for getting into new segments because our growth opportunity in the single segment is pretty huge, right? So why now?

Just to add we are looking for our next stage of growth, let's say, from 15,000 to 25,000 or from 25,000 to upwards of 50,000 over a period of time, we felt there is a strong need apart from strengthening our distribution, online associates, et cetera. There is a need to diversify the product range also. So this will -- we see opportunity, particularly in the NBFC business because in the HL, we will continue to be largely in HL and after meeting the basic requirement of HL, the gap available in non-HL in HL company is limited. But the NBFC-wise today, we are offering to the SME and to some extent to LAP. Now there is a large scope for -- to look at the add-on products, particularly even to our existing customers, we have today over 200,000 customers availing the unsecured or security-based or nonsecurity-based products, financial products from other vendors. And we have a very good experience with this 200,000 customers, and we see an opportunity for us to introduce appropriate products in our NBFC to expand. So that to support our growth apart from the distribution, we are looking at very closely the products also. The income stream we want to augment.

Understood. But does that mean that we'll go slow in geographic expansion and much deeper into our existing geographies with more products?

No. As I mentioned, the distribution will cover -- the geographical expansion will continue. And our direct sourcing through our branches, through our field staff will continue, online will continue. Business associates will continue. But that's in terms of largely, as you know, it is around distribution in some form or the other, physical, online, offline with the own [indiscernible] but then apart from that, the other way in terms of helping the company to scale up further is really the product expansion. And that's where we are looking at an opportunity could be there in our NBFC company to look at the -- to augment the products in the NBFC business, particularly to leverage our existing customer base, which is also growing at about almost about 20% per year, the customer base itself is growing. So that we should be able to leverage our new products as well.

Understood. My second question is on asset quality. If you could give some color in terms of ticket sizes, how the asset quality varies, say, between -- you have some book on sub INR 7 lakhs and maybe INR 7 lakhs to INR 10 lakhs and INR 10 lakhs plus. Is there a difference in the credit behavior? And how are the NPAs between the different ticket sizes.

We are not seeing that kind of a differential behavior in terms of ticket sizes, except for the bounce rates. I mean, as we already communicated when we -- less than INR 7 lakhs, the bounce rates were 2% to 3% more as compared to the greater than INR 7 lakhs. So other than that, we are not seeing the kind of difference in the asset quality when you look at the ticket sizes.

Got it. Lastly, our OpEx hasn't gone up a lot, while we've added 33 branches this quarter. Is that because these branches were added towards the end of the quarter?

Yes. To a certain extent, yes. Of the 33 branches, 10 branches -- 10 to 12 branches were opened before May 31, and the balance was opened in the month of June. That the rent and all those costs will get reflected in the second quarter.

But we have a track record. Even last year, we have added about 39 branches, and that has not really resulted in our OpEx going up in any significant way. In fact, current year, we are planning around what, 60 to 70 branches. We have already added 33 in the first quarter, plan to add 35 in the second quarter as well and the balance will get added subsequently. And some of the branches get started in the newer states like Maharashtra and [indiscernible]. But despite this, given our consciousness in terms of operating cost. In fact, not only the investment in the branch network, we're also making -- enhancing our investments in the IT. But despite that, we are very conscious of our cost of operations, both as a percentage of AUM as well as a percentage of the income. So that way, we have a very clear advantage in the competition today that we will continue to maintain despite these investments in the infra in branches and IT.

Got it. Lastly, if I can just ask you, can you give some color on how the attrition in the industry is evolving? Has it improved? Or does it continue to remain the same?

If you look at the attrition, at the senior level, absolutely, there is nothing. In the case of middle management also, it is only maybe 5%, 6%. And in the case of a branch manager, it is around 10% to 15%. But at the field level, it is around 40% to 45%. Earlier it was around 50% to 60%, it has come down to 45%, but still this is high -- we are -- we have introduced retention incentive, insurance schemes for these employees and all those kind of things to retain people. But still if people come and open branches in the states where we are operating, the first thing we'll do is [indiscernible] our field offices. But that's a challenge which we need to reckon with. But that is why we are also launching the alternate channels so that there is less dependence on people.

Our next question comes from the line of Renish Patel from ICICI Securities.

Sir, just one question on the strategy side. So last year, same time, sort of exited the below INR 7 lakh product. And now when we are thinking for product expansion strategy, naturally, we have to calibrate growth in some of the existing products to meet NHB criteria. So how one should think about the AUM mix shaping up in near term? And is there any impact on NIM ROA at all sort of when you start expanding new product lines?

If you look at the product mix, currently in the housing finance company, 67% is housing loan and the balance is the nonhousing loans, either in the form of quasi home loans or [indiscernible] or insurance company -- insurance loan. So this is likely to continue because we'll not -- I mean, we still have to maintain this principal business criteria. At this level of product mix, we are comfortably meeting the principal business criteria. So the mix will remain the same. So if any other business will be done, it will be done in the NBFC. So this is not likely to -- once again, this is not likely to impact the ROE. No, no.

No, no. But...

Unless the borrowings increase the [indiscernible] differences.

Got it. Got it. Sir, my point is in the 33% mix which we have currently, when we start adding new products, right, to maintain this mix, naturally, the new product lines will grow at a faster pace because of low base. And hence, some of the existing product lines in NBFC should see lower growth, right, at blended basis. Otherwise, we'll miss NHB criteria. So strategically, let us say, which products do you think will go slow in near term or maybe will offset by new product lines?

I think we need to be clear here. See, the mix which I was talking was on the housing finance company. So that mix will continue. So any new products that will be done will be done in the NBFC -- NBFC company, okay? So while the consolidated mix might change, but on the housing finance company, this will be the mix. So there will not be any impact on the principal business criteria or on the ROA or on the ROE.

Okay. Okay. So nutshell, even if we go for this product expansion, broadly, there will be no impact on the profitability?

Yes. Yes. In fact, it can do more.

Got it, sir. And just last clarification on again, this 30+liquidity movement, right? So given we sort of exited that ticket size a year back, and I'm sure incremental growth would have been towards better customer pool. So logically, at least the early bucket should have Y-o-Y improvement, right? Sequentially, I can understand there is seasonality. But if we are exiting the -- let us say, the challenging segment last year and 12 months MOB, I'm sure should perform better than a vintage book. So in that sense, why 30+ is not coming down on Y-o-Y basis?

Correct, Renish, what you're asking is very logical. But the good news is this is not because of the deterioration in the asset quality of the customers or the [indiscernible]. It is just that it was a temporary hit during the fag end of June '26, where some commitments was not delivered. And that has happened in July. That's what I'm saying. Whatever commitment didn't happen as on 30th June, that has got honored in the month of July.

Got it. So it's just [indiscernible] maybe.

With the result, there is improvement in July. So improvement will continue in the month of August and September as well.

Our next question comes from the line of Raghav Garg from AMBIT Capital.

I have a few questions. One, your tax rate has been lower for the last 2 quarters, around 20% versus -- I think if you look at the previous trend, that is around 23%. So why is that? And then going ahead, what should be the normalized run rate on the effective tax rate?

I didn't get your question correctly.

Voice is not clear, Raghav.