Ladies and gentlemen, good day and welcome to the Aadhar Housing Finance Q1 FY 2026 earnings conference call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Ramesh from ICICI Securities Limited. Thank you and over to you, sir.
Yeah, thank you, Vire. Good evening, everyone, and welcome to Aadhar Housing Finance Q1 FY2026 earnings call. On behalf of ICICI Securities Limited, I would like to thank the Aadhar Management Team for giving us the opportunity to host this call. Today, we have with us the entire top management team of Aadhar, represented by Mr. Dev Shankar Tripathi, Executive Vice Chairman, Mr. Rishi Anand, M D and CEO, Mr. Rajesh Viswanathan, Chief Financial Officer, and Mr. Sanjay Moolchandani, Head of Financial Planning. I will now hand over the call to Mr. Rishi, sir, for his opening remarks, and then we'll open the floor for Q&A. Over to you, sir.
Thank you very much, Ramesh. Very good evening, ladies and gentlemen. On behalf of Aadhar Housing Finance , I extend a very warm welcome to all of you. We are pleased to begin FY 2026 on a very strong and promising note. This quarter has been a continuation of our disciplined execution and strategic focus, and I am proud to share that our AUM has reached an all-time high of INR 26,524 crore, reflecting a remarkable year-over-year growth of 22%. This achievement is more than just a number; it is a testament to the trust of our customers, the dedication of our teams, and the strength of our business fundamentals. It also reinforces our leadership position in the affordable low-income housing finance space, a sector that continues to gain relevance in India's evolving financial ecosystem.
The affordable and low-income housing finance segment has seen renewed momentum over the past year, supported by proactive regulatory measures, improved credit demand, and growing aspiration of home ownership, especially among first-time and low-income buyers. These macro tailwinds have complemented our ground efforts, enabling us to scale responsibly and sustainably. Moving on to Aadhar's performance for this quarter, as mentioned earlier, in Q1 FY 2026, our AUM grew by 22% year-over-year at INR 26,524 crore, with disbursements standing strong during the quarter at INR 1,979 crore, reflecting a 32% year-over-year growth. Over the past year, even as we scale our lending operation, our focus on preserving asset quality remains unwavering. To ensure this does not get compromised, we have continued to fully concentrate on retail secured lending with no exposures to corporates or developers. Our asset quality remains healthy, with Gross NPA stable at 1.3% and collection efficiency consistently above 98%.
The portfolio continues to be well-secured, with an average loan-to-value ratio of only 59%. Notably, the salaried segment now represents 56% of our overall portfolio, reflecting our focus on stable income profiles. The average ticket size on AUM remains steady at INR 10 lakh only. Home loans continue to form the core of our business, accounting for 73% of our AUM, while the balance 27% happens to be micro loans against property. As a part of our commitment to inclusive and efficient growth, we have focused on expanding into high-potential underserved regions, especially in smaller districts and talukas, through our deeper impact strategy. This targeted approach has enabled us to deepen our outreach while maintaining a lean and agile operational model. It has also helped us strike the right balance between scale and sustainability, aligning well with our long-term goals of impactful expansion and optimal resource allocation.
This has helped us expand our reach to pan India through 591 branches, serving more than 300,000 live customers across 22 states and 547 districts. Our network continues to grow in alignment with the strategy, and during this third quarter, we have added 11 new branches. Our portfolio continues to be geographically well-diversified, with no single state contributing more than 14% of our AUM, a testament to our calibrated and disciplined risk management framework. This diversification also marks a significant milestone in our broader mission to expand access to housing finance in underpenetrated regions. It aligns closely with the government's Housing for All vision and National Housing Bank's mandate to drive financial inclusion across the country. This mission has led us to the birth of our strategy of urban and emerging.
We have, based on our internal classification, selected approximately 130 branches that are top 50 cities as urban, and the balance is emerging. We spoke about this strategy in the last call as well. The quarter in discussion was effectively our first quarter under this new strategy, and we seem to be going in the right direction with broadly aligning separate focus for urban and emerging with regards to ticket size, potential yield, and manpower. Moving on, we have mentioned in multiple intervals that for us as an organization, technology is central to how we operate and scale efficiently. Our TCS-enabled core system has helped digitize key processes across loan lifecycles, improving turnaround times and customer experience. Over the past four years, we have built strong data capabilities, moving from basic reporting to advanced analytics. We are now leveraging AI Machine Learning to enhance decision-making, strengthen governance, and support future-ready operations.
As FY 2026 takes shape, we are seeing steady improvement in the economic environment. The first quarter reflected a gradual pickup in the market sentiment, supported by RBI's rate cut, stable macro indicators, and support global context. The affordable housing finance sector in India continues to be the cornerstone of inclusive economic growth, deeply aligned with the country's vision of becoming a developed nation by 2047. With urbanization projected to rise at 40% by 2030, affordable housing is emerging as a critical bridge to address the growing needs of migrant populations across Tier two and Tier three cities. The sector continues to gain momentum, driven by sustained urbanization, rising demand from first-time low-income home buyers, and consistent policy support. Additionally, government initiatives like PMAY 2.0, revival of interest subsidy schemes, a credit guarantee program, and continued support for the SWAMIH Fund, among others, will give additional boost to the segment.
A key macro development this quarter was RBI's third consecutive repo rate cut, lowering it by 50 basis points to 5.5% in June 2025, which has further improved housing affordability ahead of the festive season. We remain optimistic that these combined actions will accelerate formal credit penetration and sustained growth in the affordable housing segment. I am pleased to share that the CARE Ratings has revised our rating outlook upward to AA+ from the old AA. This recognition reflects our consistent loan book growth, robust capital adequacy, and strong asset quality. Our collection performance remains stable, and we continue to benefit from the well-diversified funding mix. These strengths, along with our strong internal controls and governance framework, have reinforced CARE's confidence in our ability to sustain both our business momentum and financial resilience over the medium term. We would also like to highlight a few important recognitions and accolades received recently.
Aadhar enters the 22nd state in the third quarter with a branch in Guwahati, Assam. We received the NBFC of the Year award under PMAY Affordable Housing. We received the prestigious NHB Excellence Award for Product Innovation. We received the Gold Award from CSR Times for our Clinic on Wheels initiative. I'm also immensely proud to let the audience know that Aadhar, under its vision of empowering women colleagues, has launched its first-ever all-women branch in Indore, and we continue to look for more opportunities across the country. Lastly, I would want to conclude by saying that Aadhar Housing Finance is well-positioned to sustain its growth trajectory, backed by a strong operational foundation, expanding reach, and robust technology infrastructure. With continued policy support, a stable macro environment, and rising demand for affordable housing, we are confident in our ability to maintain leadership in the sector.
As we move forward, our focus remains on creating long-term value for stakeholders while deepening our impact on underserved communities. Now, I would like to hand over to our CFO, Rajesh Viswanathan, to take you all through the financial performance of the quarter.
Thank you, Rishi. Good evening, everyone, and thanks for joining in late on a Friday for this call. I would like to take you through some of the financial numbers. Bear with me while I repeat some of the highlights that Rishi has pointed out. In Q1 FY 2026, our AUM has grown 22% on a year-over-year basis. Our overall borrowings as at June 30, 2025, stood at INR 16,876 crore compared to INR 14,019 crore as at June 30, 2024. The current borrowing mix stands at 48% from banks, NHB shares 24%, NCD shares 23%, and ECB and others make up 4%. As highlighted by Rishi, one big achievement for the company was an upgrade of our rating to AA+ by CARE during the quarter and an upgrade to a positive outlook from a stable outlook from ICRA.
Our incremental borrowings for Q1 FY 2026 stood at INR 1,166.65 crore, which came in at around 8.1%. Currently, we have about 43 borrowing relationships. We have drawn INR 300 crore from NHB in Q1 FY 2026. The cost of funds as we exited Q1 FY 2026 stood at 8%. In terms of fixed and floating nature of the asset and liability side, 75% of both our assets and borrowings are floating in nature. Undrawn sanctions as at June 30, 2025, is around INR 1,500 crore. Liquidity as we entered Q1 FY 2026 was INR 2,181 crore. The exit portfolio yield is 13.8%. In terms of spread, the exit spread was 5.8%. Overall NIMs for Q1 FY 2026 was 8.8%.
Our cost-to-income ratio, where we had seen more than 100 basis points improvement in last financial year, happy to state that we have managed to even drop it further in the current quarter and compared on a year-over-year basis. The Q1 FY 2026 cost-to-income has come in at 36.1% compared to 36.7% in Q1 FY 2025. GNPA 1.34% compared to 1.31% in Q1 FY 2025. This is a seasonality impact over here. Capital adequacy as at the end of June 30, 2025, stood at 44.1% Tier 1 and 0.5% Tier 2. Last but not the least, on the first quarter FY 2026, the PAT came in at INR 237 crore compared to INR 200 crore in Q1 FY 2025, rendering a 19% growth on a year-over-year basis. With that, we can open up for questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hand gestures while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Varun from Kotak Securities. Please go ahead.
Hi, sir. Thanks for the opportunity and congrats on a good set of numbers. With regard to the seasonality that you had just mentioned, that the stages between 4Q and 1Q this quarter appear to be a bit higher than what it was last year in the same period. Are you seeing any heightened stress? Is this localized in any way in some particular region, state, or in a particular cohort of customers that you see the stress peaking out, or is it a broad-based thing? The second question is with regard to the repayment rate. The calculated repayment rate appears to be low at about 15%. Is this just some seasonal effect here as well, or are you seeing lower BTOs? Which is a bit surprising because the players have called out higher competition. Can you just call out the BTO rate as well? Thanks. Those are my questions.
Great. Yeah, Varun, thank you so much for your questions. Varun, part one of your question was with regards to the stress. If I look at our numbers on Q1 year-over-year basis, we were G NPA of 1.31% moving to 1.34%. I would not say that there is any movement. It is more flattish, and it is actually a seasonality effect. Are we seeing any impact on any region, state, et cetera? I would say no because our portfolio remains to be constant. The second part I will hand over to Rajesh, please.
Yeah, in terms of asset rundown, you are right. The BTO has come in at 5.3% for this quarter. Typically, in our business, we have seen that BTO actually spikes in quarter 4 when there is very high competition. 5.3% was for this quarter. Just to put it in context, Q1 FY 2025 last year was around 5.9%. 5.3% versus 5.9% same time last year.
Thanks.
Answer that question, Varun.
Yeah, thanks, sir.
Thank you. The next question is from the line of Manan Tijoriwala from ICICI Prudential. Please go ahead.
Yeah. Hi, sir. Just in light of some of your larger peers giving some commentary on MSME being stressed, just wanted to understand if there is any color that you can provide on the same, and how do you see the credit costs for this year, for the full year, and how should it trend across the quarters? That's the first question.
Hi, Manan. Manan, MSME, you know we'll have to look at what our portfolio is. Our portfolio is actually not the MSME portfolio. I was related. We do micro loans against property, which is about 25% of my portfolio. Are we seeing any stress? No, we are not seeing any stress. Our bounce rates on a year-over-year basis are steady, stayed exactly the same. I would say our G NPAs and delinquencies are the same. If I do a data pattern specifically on the loan against property that I do, the good news is that we are not seeing any stress on that portfolio.
Manan, on the credit costs, typically, if you look at it last time also, we had ended up with a credit cost of approximately INR 57 crore or INR 58 crore for the whole year, and approximately INR 19 crore, INR 20 crore had come in Q1. If you take Q1 and Q2, H1 put together, it was about INR 35 crore, INR 36 crore. In that sense, I think if you look at the slight growth that we have in the AUM, I think it will be better to extrapolate the INR 57. We believe that overall credit costs for the whole year will be trending in the range of about 25% to 27 basis points in terms of current quarter. Obviously, because of seasonality, it looks high at 40 basis points odd. We believe that we should be able to hold it within a range of about 25% to 27 basis points as we exit the year.
Basically, the operating environment is not materially different from what it was in the last year. That's what you're saying?
No, I agree with your point. It is not different at all, in fact. In fact, it's better. If you look at the numbers that we spoke about incrementally, the growth numbers, etc., it's kind of better. From a pure asset quality perspective, it remains steady, steady.
Right. Fair enough. Can you give us some color on the average ticket size that you have between home loans and segment?
Yes, if you just give me one second. Okay. Our home loan ticket size on AUM, on disbursement, sorry, is INR 15.7 lakhs. Non-home loans, as I said, micro loan is about INR lakhs . Total average at the company level incrementally is INR 12.7 lakhs. On AUM, I indicated it is INR 10 lakhs on AUM.
Okay. Fair enough, sir. Could you explain how we should think about the spreads going on a quarter on quarter in the year?
Yeah, I think we have seen some benefit that has come in the current quarter on account of a drop in the cost of funds for us. We will be assessing as banks start passing on MCLR. We believe that should happen somewhere in Q2 and Q3. Since a percentage of our book is floating, we will also be obliged to pass it on to our borrowers. The way of looking at spreads over here is currently we are at 5.8%. We were about 5.7% as we exited last year. The exit spread was 5.7%, March 5.8%, Q1 FY 2026. It should be there about in the same range of 5.7% as we look ahead here.
Could you talk about how the disbursements are picking up under the PMAY scheme?
Manan, I explained last time also. I would not say disbursements are picking up because of PMAY. Disbursement comes, and then it goes to the regulator to tag it as PMAY. It's the other way around. Having said that, we were fortunate enough to be the first ones to draw down subsidy for our consumers under the PMAY 2.0. Our customers, the first set of customers, were called by the regulator, and they were given out letters. As we stand today, close to about INR 10 crore of subsidy is already disbursed to our consumers, and the journey continues.
Right. Right. Fair enough. Any guidance on growth for this year?
Yeah, I will give you. Coincidentally, on PMAY, you know, we get to get the data of the industry. We happen to be the number one leading player on PMAY subsidy. On growth guidance, we continue to maintain our growth guidance of generally at around 20%- 22% of AUM, 18%- 20% on disbursement.
Right. Fair enough. That's all from my side, sir. Thank you.
Thank you so much, Manan.
Thank you. The next question is from the line of Abhishek Jain from Alf Accurate Advisors Private Limited. Please go ahead.
Thanks for the opportunity and congrats for a strong set of numbers. First question on the AUM growth. You have guided around 21% AUM growth in FY 2026. Which are the key states which will drive this growth? How much will it be sustainable?
Abhishek, it is not fair on my part to say a particular state will guide more growth. You'll have to go back to my statement saying that we are now driving urban and emerging, right? Emerging is, in this particular year, emerging will give me slightly higher growth than my urban locations because urban locations are steady state. We are not adding more branches, etc . The focus is more towards emerging. A combination of both will give us the desired 21% average growth that we're talking about.
How is the BTO range across the urban versus emerging branches? Where does it stay more visible, urban or emerging?
Generally, while I don't have the data cut right away, urban would have a slightly higher BTO rate.
Okay.
I will ask Sanjay to come back to you on that urban and emerging data.
Okay. My last question on that, many peer companies are indicating that they have a lot of the competition in the prime segment. I just wanted to understand how is the growth potential and the risk-reward dynamics of the prime housing segment versus the affordable segment at this point of time?
Abhishek, I don't think it will be fair on my part to comment on prime because we are not a prime player at all. We are in the bottom of the pyramid, which is affordable. Whatever you talk about competition, you talk about people operating in the affordable space, they continue to be the same set of people. We are, all of us are expanding reach and growth. Prime, I will not be able to comment too much.
Okay, sir. Thanks, sir. I'll comment.
Thank you so much, Abhishek.
Thank you. The next question is from the line of Nitesh from InvesTech. Please go ahead.
Thanks for the opportunity, sir, and congratulations for a good set of numbers. The first question is, can you share 1+ DPD data for the quarter at the end of the quarter? 1+.
Yes, Nitesh, how are you? One plus for us, end of quarter in question is 7.1%.
How is the trend in this number? Is it stable year-over-year?
I would say it is exactly the same as we've been talking about. Seasonality impact in quarter one. year-over-year, we were close to about 6.2%- 6.4% on a year-over-year basis. We are 7.2%, but currently under control.
Sure. If you can also share the sourcing mix in terms of collectors and own employee, that would also be useful for the Q1.
Yeah, sure. Nitesh, Q1, the direct mix has jumped from 57%, 58% to 61%, and the balance is reassessed.
Okay, that's quite good. Thanks, sir.
Yeah, as I told you, for emerging, our emerging strategy starts to play around. The proportion of direct mix will slightly start inching up.
Correct. What is the definition of emerging?
Yeah, you know, we have not gone by a scientific definition of emerging. As I indicated in my opening call, you know we have internally said that top 15 cities of the country, which contribute close to about 132 branches, and the top 15 cities will be top metros, are all urban for me. The rest balance India is emerging for me. If I can give you a few examples, if that helps, let us say pick up APTL. In APTL, Andhra Pradesh, Telangana, Hyderabad would be urban. Wanaparthy and Kurnool will be emerging for me. If I pick up Rajasthan as an example, then Kota would be urban. Jaipur would be urban. Bundi, Deoli, Veerawada will be emerging for me. In emerging, I have three categories, A, B, C. They're accordingly divided based on potential and, you know, what kind of spreads that I can derive from that location.
Top 130 cities are urban and the rest of them are emerging. Is that?
No, no, not 130 cities. 130 branches, 15 cities.
15 cities, one pipe. Okay.
That's right, Nitesh.
Okay. The last question is, what are the plans to add branches this year?
As we indicated in the beginning of the year also, we will keep adding about 50- 60 branches on a year-on-year basis. We are on track. We've already in quarter one launched 11 new branches, including one new state, which is Assam.
Thank you so much.
I would want to add here, Nitesh, in the branches, you know, when I say 50/50 branches, 15 branches will be in urban locations and about 35 branches will be in emerging locations.
That's it from my side. Thank you. Thanks a lot.
Thank you, Nitesh.
Thank you.
Thank you. The next question is from the line of Pankaj Cheeda from DAM Capital. Please go ahead.
Yes, just a sunset here. Congrats on good set of numbers and particularly on the 30+ DPD, which has stayed steady quarter on quarter. Just wanted to understand within that, say, stage three has moved up by 31 basis points and stage two has come down by a similar quantum. Apart from, say, usual Q1 specific inch-up, were there any specific accounts which were moved to stage two plus stage three? Just wanted to understand a bit better on that. Sorry if you have already alluded on it earlier.
No, I think there was no direct question. I think the flow from stage two to stage three is a normal phenomenon which has happened during the quarter. Whatever was an opening stage two during the quarter may have slipped into a stage three. Hopefully, during the year, we will be working on this and getting it out of NPA. That is the normal process which we run with. This is a pure seasonality where stage two flows to stage three. Typically, what happens is once it flows into stage three, it also allows us to start SARFAESI action on the customers.
Yeah, I can add on. Right. Generally, you know, that is what you see. When we say seasonality, it's a very broad-based word. What we do is some accounts are allowed to be flowed in quarter one so that you could go ahead and start doing your legal process, which is typically called SARFAESI. That can happen only when the account flows to 90+ . These will be typical sticky accounts, as we call them, who continuously are delinquent and then they try to be only 60 or 90 buckets. Such accounts generally would flow, and that's the seasonality we talk about. We do SARFAESI, which is a six-month process, and then you start seeing a downward trend on NPAs.
Yeah, perfect. Since you indicated that maybe the SME or the MSME-specific thing would not be said that in our case, we operate in a different segment, do we expect this 5% 30+ DPD as a pool to sustain and not go beyond that throughout the year, or do you expect it to come down?
No, we definitely expect it to come down, Sanjay, because if you look at, you know, on a FY basis also, we've always been in the range of about 3.5%- 4%. We are today standard about 4.65%. With the effort that goes around the next nine months, it is bound to come down.
Okay, sir. Sure. That answers my question. Thanks a lot.
Thank you, Pankaj.
Thank you. The next question is from the line of Yash from Citigroup. Please go ahead.
Hi, sir. Thanks for taking my question. Sir, one question on this differentiated strategy on urban and, you know, emerging locations since this is the first quarter. How different is the underwriting infrastructure in both? Since we believe that we could extract benefit on the growth side from emerging, would this differentiated strategy also lead to some help us extract benefit from the asset quality as well by focusing solely on emerging?
Okay, Yash, when it comes to the backend functions, which is underwriting, operations, collections, technical visit to the property, everything remains common for urban and emerging. As earlier indicated, we have a hybrid underwriting mechanism. All the salaried profiles are underwritten centrally at something called regional processing centers, whether it is for urban or emerging. That happens for both urban and emerging. It is the same process. The self-employed consumers are underwritten from the branch network, and it continues for urban as well as emerging. The underwriting standards, underwriting process, even operation process, technical process, everything remains common. As far as leveraging the emerging, yes, when you focus more on certain locations, your asset quality, one is growth is bound to come in and asset quality is bound to improve. That's what I think the agenda of the company is to realign our focus. Today, as I indicated to the first person we spoke to, 55% of my incremental business was coming from urban. The intent is to change this 55% from emerging.
Got it. The second is on this MFI exposure-related customers, which you had shared last time as well, which I believe had dropped to around 7,000 customers. Any meaningful impact we saw in the, you know, obviously, it is seasonality in one queue, any meaningful impact we saw from Tamil Nadu, Karnataka as well?
Not specific to Tamil Nadu, Karnataka. The number of customers remained more or less the same, 7,077 customers. Delinquent broadly has dropped to about 2,000 customers. From 2,600 customers, it dropped to about 2,100 customers. NPA out of each, and when I say delinquency across the bucket, NPA will be around close to about 550 customers. I would say there is a slight improvement rather than a recognition.
Okay, slight improvement in the sort of this MFI-led customer.
Performance of the MFI exposed customers, yes.
Okay, MFI exposed.
is nothing very specific in Karnataka and Tamil Nadu.
Got it. Lastly, sir, if you could just share the incremental yield in Q1.
Incremental yield stands at 13.45%.
It's slightly dropped from 13.55, is it?
No, it was 13.5%, which is the full year. So 13.43%, more or less there.
Okay. Got it. Thank you, sir. That's it from me.
Thank you, Yash.
Thank you. The next question is from the line of Lalit from Antique Stock Broking. Please go ahead.
Yeah, hello, sir. Thanks for giving the opportunity and congratulations on your number results. Two brief questions. Your gross stage 3 FIC as a % has actually improved on a sequential basis. Generally, it is seen that there is some seasonality impact in the first quarter, which is not visible this time. One thing that could be that, you know, the book is behaving really well, or is there some kind of a spillover or late spillover of that aspect that can be seen in Q2? Just your sense on thoughts on that, sir. Secondly, overall, you know, our self-employed LAP category loans, particularly, are you seeing any change in the environment, or have you done any changes in your credit tightening or things like that? How are you reading the situation, sir? Thank you.
Thank you, Lalit. I will answer your second question first. As I indicated, we are not MSME LAP consumers because our ticket size remains very, very small. We are incrementally only INR 900,000 ticket size. On the book, it's about INR 780,000. We do micro loans against property. No stress observed even on a year-over-year basis and even on a sequential basis. Our bounce rates, our NPAs, our delinquency remain steady state. Hence, we don't want to change our approach, whether on underwriting or on property. One thing I would want to add is close to about 95% of our consumers in LAP are self-occupied residential property. The only change that we have done in approach recently is we wanted to take only residential properties, which will mean that new incremental business will be 100% residential property. That is only temporarily we have taken that decision, but we will continue to focus only on micro LAP.
On the first part of your question, the seasonality that we keep talking about is a comparison of as we end year-end, which is March 2025 versus June 2025. March 2025, when we ended, our NPA on AUM was around 1.05%, which has moved to 1.34%. This is the movement of anywhere between 25- 30 basis points, which is always visible between quarter four and quarter one of the next year. That is a seasonality impact, which basically stems down during the year. As we end the year, again, we probably go back to the 1.10% type level.
Yes, sir. Thank you. Thanks a lot.
Thank you. The next question is from the line of Faraz Motani from Paragon Partners. Please go ahead.
Hi, thank you so much for the opportunity. I have a couple of questions on geographical expansion. I see that we have entered a new state in the northeastern region, Assam. The first question is, is it more of a pilot expansion wherein we are opening a couple of branches, or is this a full-blown expansion by opening, say, an external state and potentially the returning state? The second question along similar lines is, what kind of competition are you seeing in our affordable housing finance products, maybe from other HFCs that are already present in those states?
Okay, great. Thank you, Faraz, for asking those questions. When it comes to geo-expansion, when it comes to new states, the strategy is very clear. First, we identify the relevant cities and branches, cities where we can go and open branches. We identified as step one, Guwahati, in Assam. Given the dynamics, geopolitical dynamics that operate around the northeast states, we have not wanted to go full-blown, but we have identified four or five branches or cities which make business sense to be in. We will take calibrated steps as we move ahead. Right now, it is going to be Guwahati. We are going to be settling down in Guwahati, understanding the dynamics of northeastern states, and then expand thereon in relevant cities. Your second question was with regards to competition.
As I said in one of the discussions a little while ago, we are not seeing any fierce competition because the number of players broadly remains the same. There is a little more than opportunity available in the market. We are all operating in the same market. We have created our own niche. As in the opening statement I said, we happen to be the largest in terms of AUM, largest in terms of incremental disbursement, largest in terms of our distribution network in the segment that we operate.
Got it. Thanks, sir.
Thank you, Faraz.
Thank you. The next question is from the line of Darshan Deora from Indvest Group. Please go ahead.
Yeah, thank you for the opportunity. Just a question on the ROA and ROE. Can you give some guidance on what we plan to achieve in terms of ROA, ROE for FY 2026? Also, what would be our aspirational ROE for this business?
Okay, aspirational is okay. I'll come to aspirational. I think we will be targeting an ROA in the range of about 4.2%- 4.3% as we exit current year, current financial year. 4% is obviously because of the credit cost, which gets baked in in quarter one. Aspirationally, if you look at the way the business is, or this is more of not a long-term guidance, but more of the way the math stacks up, if you look at the way the ROA and ROE will happen, two years back, we delivered ROA in between 4.2%- 4.3%, which also translated to around 18% ROE. To be very honest, on a long-term sustainable basis, that is a sort of ROE that we would like to hit. Whether it's going to happen in two or three years, I don't want to comment on that.
Typically, anywhere between a 4.2% ROA and anywhere between a 17% and 18% ROE is a sort of a good sort of math for the business that we run. Current year, we would like to end between 4.2%- 4.3% ROA.
Got it. The second question I had was regarding the loan book. What percentage of our loan book would be self-construction, whether the customer, the applicant is self-constructing his home vis-à-vis purchasing a ready flat or either resale or a built flat?
Darshan, I'll give you the complete breakup. Self-construction happens to be 25%. Purchase of ready-built property is about 43%. P+C, purchasing a plot and constructing thereon, is about 7%, and the balance is micro loans against property.
Okay. Got it. Appreciate that. Thank you. That's awesome, sir.
Thank you.
Thank you. The next question is from the line of Dixit Shah from Ascent Capital. Please go ahead.
Hello. Am I audible?
Yes, yes, very much, Dixit.
Yes, Mr. Dixit. Please go ahead.
Yeah, my question was firstly with respect to a statistical one. What is that of the total AUM, individual housing loan book as a percentage of the number?
You want pure home loan, right?
Individual housing loan %.
Individual housing is 73%, and the balance happens to be loan against property.
Understood. Now, coming to a question with respect to the strategy. With respect to the urban and emerging strategy that we have, what will be the approximate rate differential with respect to the yields that we would say that an emerging location will have over your urban location?
If I can indicatively tell you, urban typically gives about 12.5% incremental yield. Your emerging will range between 14.5% up to 16%.
14.5%- 16%. Understood.
That's right.
With respect to the question on our underwriting, typically, with respect to what I'm on call of one of our peers, not exactly in the segment that we have, but the peer that is more focused in the southern region, they have categorically called out that they are seeing a little bit of a slowdown, specifically in the sub INR 20 lakhs increment of the ticket size. They are not seeing enough demand, or the PMAY 2.0 has not seen as euphoric as the demand that was seen in PMAY 1.0. What is your sense in this space with respect to the southern markets? From the data that I have seen with respect to your presence in the southern region, you are a good player and leading in some of the states. What is the sense of the competition in that segment, and how would you look at the demand environment in that region for that segment?
Right, Dixit. Yes, you are right. We happen to be a relevant player in the southern market as well. In fact, one of the largest markets in the top three markets is Andhra Pradesh, Telangana. While he was making this statement, I was thinking, you know, I don't know why this statement has come in the industry that there is a slowdown. There seems to be no slowdown. In fact, our quarter one numbers have moved positively across the three, four, seven states. I don't see any slowdown happening there. I missed the second part of your question, but we don't see any slowdown.
With respect to that, how was the credit culture? Is there, like, because of the MSME audience in the state of Karnataka, Telangana also having a few bills being passed, is there any, you know, materially different credit behavior? Some of the peers were saying that they are seeing a bit of a spillover impact in their books.
If I can give you a top five states in best credit culture, out of the top five states, two states are from south, which is Andhra Pradesh, Telangana, and Tamil Nadu. I fail to understand why people are making such statements. These are good states. I think this is eliminating from the fact that the MFI issue and which happened in the ordinance that was passed in Karnataka and Tamil Nadu. Fortunately for us, we are a secured loan product, so we are seeing no impact. In fact, these are pristine locations.
Understood. Just the final one, what would we look at with respect to branch addition with respect to long term? The 50- 60 branches that you had said, will that be steady state, say, for two, three years, or is it year by year you might revisit and then?
No, when we say 50- 60 branches year on year, this is for three years from now.
Add 50- 60 branches year on year.
Probably by FY 2028 would be around the 700+ branches.
That would be okay.
750 branches.
Okay, thank you very much.
Thank you so much, Dixit.
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
On behalf of the Aadhar management, thanks a lot to all the participants on this call for taking time out on a Friday evening and joining the call. I'm sure that this has been a very eventful quarter for the company, and hope we have similar results to share with you in the forthcoming quarters of the current financial year. Thank you and good evening.
On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.