Why we like Aavas Financiers ?
(Thread)
(Thread)
2/n
Started as a housing finance arm of AU Small Finance Bank. Incorporated in
2011 as AU Housing Finance Pvt Ltd. HQ in Jaipur, Rajasthan.
In 2017 changed the name to Aavas Financiers Limited. IPO came in Oct’ 18.
Backed by PE funds Kedaara & Partners group as promoters.
Started as a housing finance arm of AU Small Finance Bank. Incorporated in
2011 as AU Housing Finance Pvt Ltd. HQ in Jaipur, Rajasthan.
In 2017 changed the name to Aavas Financiers Limited. IPO came in Oct’ 18.
Backed by PE funds Kedaara & Partners group as promoters.
3/n
Low free float & tightly held company.
Total retail network of 211 branches with major focus in Rajasthan, Maharashtra, Gujarat & MP.
Low free float & tightly held company.
Total retail network of 211 branches with major focus in Rajasthan, Maharashtra, Gujarat & MP.
4/n
5Y AUM growth CAGR - 63%
5Y Total disbursement CAGR - 49%
5Y Total revenue CAGR - 61%
5Y PAT CAGR - 67%
GNPA 0.58%. NNPA 0.47%.
ROA 3.64%. ROE 11.64%.
Capital Adequacy Ratio 64.3%
Opex to Total Assets - 3.8%
Book value per share - Rs 260/- (as on Dec19)
5Y AUM growth CAGR - 63%
5Y Total disbursement CAGR - 49%
5Y Total revenue CAGR - 61%
5Y PAT CAGR - 67%
GNPA 0.58%. NNPA 0.47%.
ROA 3.64%. ROE 11.64%.
Capital Adequacy Ratio 64.3%
Opex to Total Assets - 3.8%
Book value per share - Rs 260/- (as on Dec19)
5/n
CRISIL Long term rating A+ Stable
Cost of Funds - 8.74%. NIM 8.1%
Avg Loan ticket size - 8.59L
Home Loans vis-a-vis Other Mortgage loans - 75% : 25%
Salaried vis-a-vis Non-salaried - 64.9% : 35.1%
Retail vis-a-vis Corporate - 99.6% : 0.4%
CRISIL Long term rating A+ Stable
Cost of Funds - 8.74%. NIM 8.1%
Avg Loan ticket size - 8.59L
Home Loans vis-a-vis Other Mortgage loans - 75% : 25%
Salaried vis-a-vis Non-salaried - 64.9% : 35.1%
Retail vis-a-vis Corporate - 99.6% : 0.4%
6/n
Yields - 13.85%.
Cost of Funds - 8.79%.
Spread - 5.06%.
Hedging Strategy: Nearly 38% of liability was borrowed at a fixed rate. 39% of disbursements were lent at a fixed rate. A natural hedge.
Yields - 13.85%.
Cost of Funds - 8.79%.
Spread - 5.06%.
Hedging Strategy: Nearly 38% of liability was borrowed at a fixed rate. 39% of disbursements were lent at a fixed rate. A natural hedge.
7/n
Strong ALM management.
Strong ALM management.
8/n
Management Quality / Corporate Governance
Professional Management. Risk Averse nature.
Low leveraged balance sheet with high net worth.
Positive ALM across tenures. No reliance on commercial papers.
Management Quality / Corporate Governance
Professional Management. Risk Averse nature.
Low leveraged balance sheet with high net worth.
Positive ALM across tenures. No reliance on commercial papers.
9/n
Shareholding:
Kedaara Capital - 34.2%.
Partners Group - 23.9%.
AU Small Finance bank - 6.4%.
Management, Employees & Board members - 7.2%.
Aavas - Credit led strategy over Sales driven strategy.
Fully in-house Lead generation, Underwriting, sourcing & execution model.
Shareholding:
Kedaara Capital - 34.2%.
Partners Group - 23.9%.
AU Small Finance bank - 6.4%.
Management, Employees & Board members - 7.2%.
Aavas - Credit led strategy over Sales driven strategy.
Fully in-house Lead generation, Underwriting, sourcing & execution model.
10/n
Capable to rise funds at 8.74% even in current market condition. Raised masala bonds of Rs. 200 Cr from CDC group UK.
Technology driven growth with the launch of Aavas Mitra, Samvad, Aavas Nirman.
Scope to increase in credit rating & so reduction in cost of funds.
Capable to rise funds at 8.74% even in current market condition. Raised masala bonds of Rs. 200 Cr from CDC group UK.
Technology driven growth with the launch of Aavas Mitra, Samvad, Aavas Nirman.
Scope to increase in credit rating & so reduction in cost of funds.
11/n
Enough room for increase in Leverage from current 4 times to 6-7 times & is improvement in ROEs.
Guidance - Growth by maintaining asset quality at GNPA sub 1% & 1 DPD less than 5% and with consistent ROA of 2.5%+.
Enough room for increase in Leverage from current 4 times to 6-7 times & is improvement in ROEs.
Guidance - Growth by maintaining asset quality at GNPA sub 1% & 1 DPD less than 5% and with consistent ROA of 2.5%+.
12/n
How does it fit into our 5GCPM Framework:
Expanding into new geographies from current 211 branches in 9 states
Strong growth in Sales (61%) & PAT (67%) over the last 5 years
Best in class NIMs of 8.1%
Opex to Avg Assets improved from 4.86% to 3.8%
Focused on Quality Growth
How does it fit into our 5GCPM Framework:
Expanding into new geographies from current 211 branches in 9 states
Strong growth in Sales (61%) & PAT (67%) over the last 5 years
Best in class NIMs of 8.1%
Opex to Avg Assets improved from 4.86% to 3.8%
Focused on Quality Growth
13/n
Risk averse management With strong balance sheet.
Consistently Tax paying.
Only one subsidiary - Aavas Finserv Limited.
No major related party transaction.
Risk averse management With strong balance sheet.
Consistently Tax paying.
Only one subsidiary - Aavas Finserv Limited.
No major related party transaction.
14/n
Practicability:
They are strategically placed in states of biggest mortgage markets in India.
Have to manage geographic risk - Rajasthan accounts for 44% of AUM.
65% to Self employed - Highly vulnerable to economic cycles.
Prolonged liquidity crunch may damper the growth
Practicability:
They are strategically placed in states of biggest mortgage markets in India.
Have to manage geographic risk - Rajasthan accounts for 44% of AUM.
65% to Self employed - Highly vulnerable to economic cycles.
Prolonged liquidity crunch may damper the growth
15/n
Peer Comparision:
Peer Comparision:
16/n
Disclosure:
Aavas is part of our 5GCPM Framework since Dec 2018.
Recommended & Holding from Rs. 830/- per share levels. The stock is up 140% in the last one year.
Disclosure:
Aavas is part of our 5GCPM Framework since Dec 2018.
Recommended & Holding from Rs. 830/- per share levels. The stock is up 140% in the last one year.
17/n
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