Ladies and gentlemen, good day and welcome to Aadhar Housing Finance Limited Q2FY2026 earnings conference call. 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 touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nidhesh Jain from Investech Capital. Thank you, and over to you, sir.
Thanks, Shruti. Good evening, everyone. Welcome to the Q2FY2026 earnings conference Call of Aadhar Housing Finance Limited, hosted by Investech Capital. We will start the call with the management commentary, followed by a Q&A session to discuss the financial performance of Aadhar Housing Finance Limited. To address your queries, we have with us Mr. Deo Shankar Tripathi , Executive Vice Chairman, Mr. Rishi Anand, MD and CEO, Mr. Rajesh Viswanathan , CFO, and Mr. Sanjay Moolchandani , Head of Financial Planning. I would now like to hand over the call to Mr. Rishi Anand for his opening comments. Over to you, sir.
Thank you very much, Nidhesh, and a very good evening, everyone. On behalf of Aadhar Housing Finance, I would like to welcome all of you to the Q2X1 FY2026 earnings conference call. We would like to wish all of you a belated Happy Diwali and a prosperous New Year. We are pleased to share that the first half of FY2026 has been marked by strong performance and continued progress on our strategic priorities. H1 FY2026 reflects another period of disciplined execution, operational efficiency, and customer-focused growth. Our performance speaks for itself, with our numbers showing the commitment of our teams and the strength of our business model. This milestone reinforces our leadership in the low-income housing finance segment, which continues to play a pivotal role in India's exclusive growth story.
This quarter has witnessed positive developments in the economy, with low-income housing sector poised for further expansion, supported by favorable policy reforms and continued government focus. The recent rationalization of GST rates under the GST 2.0 framework is expected to lower housing costs and provide a significant boost to the affordable housing segment, particularly in the EWS/LIG categories. We expect these measures to drive sustained growth in the sector in the coming quarters. Now, coming to Aadhar's performance for the said period, during the half year, our AUM touched INR 27,554 crore as of 30th September, which is a 21% growth on a Y-O-Y basis. This is another significant milestone for the company. Disbursement stood at INR 4,089 crore, which is a 16% Y-O-Y increase, reflecting consistent lending momentum.
Asset quality remains well-contained, with gross NPA at 1.42%, collection efficiency above 99%, and more importantly, stage two asset improving by 20 basis points on a year-over-year H1 2026 basis, driven by robust risk management and disciplined underwriting. Our portfolio continues to be entirely retail and secured, with home loans forming 73% of the AUM and loan against property remaining at 27%. The average ticket size of INR 1.05 million and average loan-to-value ratio of 60% reflect prudence and stability of our portfolio. The salaried segment contributes 55% of the book, aligning with our focus on borrowers with steady income profiles. Balance transfer out for H1 2026 stood at 5.4%, which is an improvement of 50 basis points as compared to H1 2025. This is an outcome of our centralized retention team and data science team efforts. We continue to expand our presence in high-potential underserved markets through a measured and efficient approach.
During the quarter, we added 20 new branches, taking the total to 611 branches across 22 states and 549 districts, serving over 315,000 live customers. Our portfolio remains well-diversified, with no single state accounting for more than 15% of our AUM, demonstrating the strength of our distribution reach and risk containment framework. Digital transformation remains integral to our operating model. The TCF-enabled core system has streamlined processes across the loan lifecycle, improving turnaround time and enhancing customer experience. We continue to strengthen our data and analytics framework, leveraging AI and machine learning for sharper insights, improved governance, and scalable operations. These capabilities continue to enhance efficiency and prepare us for the next phase of growth. As mentioned earlier, we are very positive on the recent GST 2.0 reforms and are expected to significantly accelerate growth in the low and middle-income housing segment.
The reduction in GST on inputs such as cement, marble, granite, and bricks is lowering the cost of construction for developers, improving project viability, and supporting price affordability for home buyers with lower EMIs. Moreover, low-income and affordable housing projects under the government schemes such as PMAY 2.0 and AgniCARD 2025 stand to benefit the most, with reduced construction costs enabling faster execution and delivery in rural and semi-urban areas. Beyond cost optimization, the reforms are also expected to strengthen credit quality and financial inclusion by improving loan affordability and spurring incremental demand within formal housing finance channels. The affordable housing finance segment in the country is poised for significant growth in the coming quarters, and we continue to support the government in fulfilling the mission of Housing for All.
Looking ahead, Aadhar Housing Finance is well-positioned to sustain its growth trajectory, supported by strong fundamentals and expanding distribution network, and technology-led operating efficiency. With continued policy support and a favorable macro environment, we remain confident of strengthening our market leadership, creating long-term value, and deepening financial inclusion. We remain steadfast in our mission to enable homeownership for low-income families. Backed by a strong balance sheet, enhanced credit profile, and structural tailwinds, Aadhar is well-placed to capture emerging opportunities and continue to drive inclusive and sustainable growth. We have a positive outlook for the next two quarters, and we are confident of meeting our growth guidance given for this financial year. With this, I now hand over to Rajesh, our CFO, to discuss the financial performance in detail. Over to you, Rajesh.
Thanks, Rishi. Good evening, everyone. I would like to take you all through the financial performance for H1 FY2026 and Q2 FY2026. In Q2 FY2026, our overall AUM has grown by 21% on a Y-O-Y basis. Our overall borrowings, as of 30th September 2025, stood at INR 17,600 crore, compared to INR 14,600 crore same time last year, which is a growth of 21% on a Y-O-Y basis. The borrowing mix at the end of 30th September is 50% from banks, NHB share is 21%, NCD is 22%, and ECB and others make up the balance of 7%. Our incremental borrowings for Q2 FY2026 was around INR 1,800 crore, which came in at slightly lower than 8%. We have around 44 borrowing relationships. The exit cost of funds as at 30th September stood at 7.9%.
In terms of fixed and floating nature of our book, 73% of our borrowing is floating and 75% of our assets are floating, so there's a great degree of matching in these. Undrawn sanctions as at 30 September 2025 is INR 2,381 crore, which includes INR 1,250 crore from National Housing Bank. In Q2, we have not drawn down anything from NHB in Q2 of the current financial year. Liquidity for FY2026 stood at INR 2,270 crore, which is around 10% of the loan book. Portfolio yield exit is 13.8% as at Q2 FY2026. Hence, the exit spread stood at 5.9% as compared to 5.8% as at Q1, so there has been a growth of 10 basis points on a sequential basis in terms of spread. Our cost to income for H1 FY2026 stood at 36.1% as compared to 36.4% in H1 FY2025, which is an improvement of 30 basis points on a year-over-year basis.
As we had earlier conveyed, we would like to drop our cost of income by around 40 basis points for the entire financial year, and we are well on track for that. GNPA as at 30 September is 1.4% as compared to 1.3% Q2 2025, and NNPA is 1% versus 0.9%. The stage three provision coverage ratio currently stands at 34.3%. One more important metric which we would like to share is that our stage two on a sequential basis has dropped by 10 basis points. The capital adequacy ratio for Q2 2026 stood at 44.3% for tier one and 0.5% for tier two. H1 2026, we delivered an overall PAT of INR 504 crore compared to INR 428 crore in H1 2025, which is a growth of 18%. On a quarter basis, in Q2 in FY2026, our PAT was INR 266 crore versus INR 228 crore Q2 FY2025, again a growth of about 17%.
As conveyed by Rishi, we are focusing on maintaining a very healthy book and delivering consistent performance on a quarterly basis. With that, we can open up for questions.
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 their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rinesh from ICICI Securities. Please proceed.
Hello. Am I audible?
Yes Rinesh.
Yeah, hi. Hi, sir. Congrats on a good set of numbers, and thanks for the opportunity. Sir, my first question is on asset quality. Right, so when we look at the key asset quality metrics, whether it is credit cost, stage two, etc., improved sequentially. When we look at the other mortgage players, have witnessed margin deterioration on sequential basis. Just wanted to understand what is driving better asset quality performance than the industry? Also, if you can share your exposure in, let's say, some of the shares market like Tirupur, Behmutal, Surat. Also, if you can share OnePlus DPD movement sequentially, would be helpful, sir.
There are three questions in one, Rinesh, but I'll try to answer the first, second, and a little bit issue. I think, to be very honest, the benefit of a more stable credit cost and credit behavior must be because the way we are spread out right through India. If you look at us, one of our main strategies is not more than 15% in any major market or major state. Probably that is helping us quite well. Even if there are other stress states which some of the other peer players may be seeing stress on, probably for us, it is a percentage of that stress. To that extent, we have not seen any specific new spurts in any state which is out of the ordinary. As the first trigger, as all of you will know, is the bounce rate.
We have not seen any inordinate movement in bounce rate. As I have explained, the stage two has also dropped by 10 basis points. To that extent, there is a slight degree of comfort that we are probably going in the right direction. In terms of other micro markets, I think I will ask Rishi to just take that one on Tirupur and Ludhiana and other locations.
Yeah. So Rinesh, thanks for coming on the call. See, the way we look at our business, while I'll give you those numbers, the sequential numbers that you asked for, but the way we look at our business is when it comes to specifically tariffs, is there any particular city, etc., which gets impacted? No, because, for example, textile, pharma, gems, jewelry, they are spread across India. But since you asked a specific question regarding some specific callouts of cities that have happened in various calls, for example, Tirupur, Surat, Coimbatore, all put together close to about 1.6%-1.7% of our AUM. So not a very large exposure. But even in these markets, our sequential OnePlus has dipped. For example, Tirupur from a 9.2%, 9.1%, it has dropped to about 7.1% sequential quarter- on- quarter. Surat has dropped from 8.8% to about 8%.
Coimbatore has dropped from 9.2%, 9.3%- 8.2%, 8.3%. In all the three markets which we have been talking about, we've seen a drop in OnePlus . Our worries, obviously, the worries around these specific cities are not prevalent in Aadhar.
I just try and correct it. Our stage two improvement is actually 20 basis points. It's not 10 basis points, 20 basis points.
Okay. Got it. Overall, OnePlus DPD , how has it moved sequentially?
OneP lus sequentially was 7.18. It is 7.17.
It is slight basically.
That's right.
Okay, okay. My second question on the business mind, right? Before stuff, we do not look better at 15% Y-O-Y. When we look at the sequential business mind, it is actually noted at 4%. Can you throw some light on this business mind and it being lowered in Q2? Are we still confident about delivering 18%-20% business growth in 2026?
Rinesh, it might not be okay to look at, take a view, isolated view on this particular quarter. I'll give you the reason why. This particular quarter, on a quarter- on- quarter basis, will definitely give you a distorted view. If you recall, last year, in quarter one of last financial year, there was a regulatory circular which had come with respect to interest recognition, which was supposed to move from a disbursement to check handover, and because of which there was a substantial business which got carried forward to quarter two of last year. Hence, if you observe, in quarter one of this financial year, our disbursement growth was 32% on a quarter one Y-O-Y basis. Because of the bulge in quarter two, you look at the numbers at 4%.
The better way of definitely looking at it is overall year-to-date H1, which is a 16% growth, which you rightly mentioned. As regards H2, we are very confident of market dynamics. We are looking at market very closely. We are looking at our login parameters very, very closely. We are very confident of the guidance numbers that we had given. Another important aspect of our business is the way H1 versus H2 is tagged. Generally, it is 40-60. This year, already 42% has been delivered of whatever we planned, and the balance should be coming in with a lot of comfort.
Got it. Just last thing, would you like to share October disbursement number?
October disbursement number has been in line with our estimates. In fact, on the budget numbers, we are right on track on 100% achievement.
Got it. Got it. This is very helpful, sir. Thank you and best of luck.
Thank you so much.
Thank you. The next question is from the line of Sonal Gandhi from AM Securities. Please proceed.
Yeah, thanks for the opportunity and congrats on the quarter of Aadhar team. Just going ahead with the question which was asked earlier on the disbursements. Disbursements, if you look at home loan segment particularly, there has been some regrowth over there. If you could just throw some light, if anything that we are doing in terms of tightening the credit policies or if there is any other change that has happened in the system because of which the disbursement set out.
I will not give any particular reason of why disbursement on home loan, it is actually flattish. Primary reason is extended monsoons. When there are extended monsoons and a good chunk of our AUM incremental portfolio happens to be self-construction, for example, in the entire Uttarakhand belt, in fact, the entire north belt saw a heavy impact on login when it comes to self-construction. To add to it, we had slightly issued a caution to our underwriting teams with respect to whatever was going around with the tariff situation across gems, jewelry, pharma to some extent, and primarily textile. I think both of them have contributed a little bit on the login side. Having said that, everything is now behind us, and coming quarters look very, very positive.
Sure. And sir, anything on the P&R hike? How do you plan? I mean, what is the guidance with spreads now? Earlier, we were thinking that it might go down a bit, but it's clearly improving. So how do we see spreads moving in Q3, Q4, or maybe QH of this year?
See, we believe that there may be a further 10 basis points sort of improvement in our overall cost of funds as we exit the current financial year. Having said that, you are right, we have not passed on anything on the RPLR bit. We are actually, the 10 basis points drop will be majorly benefited by the MCLR pass-on, which will happen to us from the banks, which we believe should happen somewhere from December to February, March. Probably that is a period where we will probably take it to the ALCO. If at any point of time, we will calculate and then pass it on to the customer. Our current spread, as you have correctly said, is actually coming at about 5.93% on single digit, looks at 5.9.
The way we look at it is that probably we may end up around 5.8% as we exit the year. 5.78-5.8% is something that we would look at. This is after the pass-on. We should be around 5.8%.
Sure. Sir, just one clarification. In your opening remarks, you said that 40 basis points reduction in cost of borrowing. We are talking about exit quarter, right? I mean, we should be closer to about 7.8, 7.7.
Yeah, this is exit. This is all exit. When I'm saying that when we are exiting the year, we will be exiting in the range of 75-780.
Got it. Got it. Thank you so much.
Thank you.
Thank you, Sonal.
Thank you. The next question is from the line of Kunal Shah from Citi. Please proceed.
Yeah. Hi, Rishi and Rajesh. Thanks for taking the question. Firstly, with respect to recoveries, overall, I think ECL provisions are still up like INR 20-odd crores, but in P&L, it is like almost INR 13-odd crores. Has there been any recovery during the quarter, and what is the nature of that year?
We recovered somewhere in the range of INR 6-8 crore from our old project finance portfolio mainly. If you remember, our project finance portfolio, we had written off. There were some old recoveries to the range of about INR 8 crore that we had in the current year, the current quarter.
Okay. That's almost INR 8 crore.
That's right.
Okay, okay. This would have been entirely written off. This would have been 100% provided or only a part of that is?
No, no. It was 100% written off asset. So technically, it's a P&L pass-through. So it becomes a P&L benefit.
Okay, okay. Is there a more pool to be recovered, or this is more kind of a one-off?
We have an INR 25 crore pool which is left on project finance, which we believe will come over after this recovery, which probably will take another two to three years depending on how these stack up because these are really long-tail sort of recoveries. Whatever comes. For example, this recovery of INR 7 crore-INR 8 crore has come in after a long time, I think, first thing after about seven, eight quarters. In that sense, it is a good thing to come. We have INR 25 crores. We are not sure how much we will recover from that, but it is a good positive to keep with us. To add to it, this INR 25 crores that we are talking about is 100% written off. Right, right. Any benefit will directly come into the P&L.
Sure, sure. Got it. Secondly, in terms of the OPEX, which is up like, say, almost 34% both year- on- year and quarter- on- quarter, is there any one-off element in that?
No one-offs on OPEX.
Overhead costs, yeah.
Yeah. The OPEX is typically the typical management expenses that we generally have, as well as the spike because we have set up approximately 20 branches in the current financial year. The impact of setting up those 20 branches is there. If you look at OPEX, quarter two FY 2026 was in the range of INR 201 crores. We were INR 173 crores last year, same time, and INR 187 crores in quarter one. From INR 187 on a sequential basis, we have grown to INR 201, which is typically not a growth of 16%. It is a year-on-year growth, Q2 versus Q2. On a sequential quarter, we have grown from INR 187- INR 201, which is a quite organic growth. There is nothing special on that.
Sure. Lastly.
So actually.
Sorry.
Sorry, yeah, sorry. Just one point. As we alluded to, our cost to income that we look at very closely, that is where we would like to see a 40 basis points.
Yeah, 40 basis points, yeah.
We would like to see, we are seeing it happen, and probably year-end also, we will see a 40-50 basis points that we'll be able to target.
Sure. Lastly, if you can comment with respect to your entire strategy on the urban and emerging, how it's spanning out, maybe Q1 was the full quarter, but how things have been. Over a period, when we look at it in terms of the proportion of the branches, how much do we think, like, say, A, B, C branches would respectively, maybe what proportion would those numbers be, say, over the medium term?
Kunal, with respect to our strategy, I would say the current quarter in question was a first full quarter because we implemented towards mid of April in quarter one. We obviously did not get the first quarter in full. Whatever we had planned and the timeline that we had planned and the momentum we had planned, we are completely on track. If you recall, we mentioned at some stage that today, 45% of the business comes from the emerging markets, and eventually, we want to get into a 50/50 model. Are we on track? I would say we are on track. The emerging C branches obviously need a little more efforts for them to establish because it's a small setup. It's one kind of manpower, one or two manpower kind of branches.
Broadly, if I were to break down urban and emerging today, urban is about 137 branches. Emerging, A, B, C, and total will be about 475 branches, out of which 400 branches will be in the B and C categories. Broadly, if I were to indicate, are we on track in terms of our commitments and guidance? We are completely on track, and I do not see anything disturbing that 50/50 balance figure that we had indicated.
Got it. Got it. Okay. Yeah. Thanks. Thanks and all the best. Yeah.
Thank you, Sonal. Thank you.
Thank you. The next question is from the line of Shwetha from Aadhar. Please proceed.
Thank you, sir, for the opportunity. Sir, a couple of questions. While you alluded to the fact that bulkier disbursements in Q1 led to slightly slower momentum in Q2, if we were to maintain 80%- 20% full-year target, the ask rate for the second half is going to be pretty much higher, right? I mean, as high as 23%-24% kind of growth. Are we on track to achieve that kind of robustness in disbursements every quarter, like in second half?
Shwetha, hi. Thank you for the question. Yes, as I indicated already. The way to look at it is 42% typically. 40/60 is what H1 to H2 happens across the industry. For us, we have already delivered 42% against what we planned to do this year, and the balance should be coming in easy. Are we on track? If I want to answer that question, yes, we are completely on track the way October has panned out and the way we look at our current month. We are completely on track, and you are right. If we were to look at our guidance numbers, we will have to look in terms of growth. We will have to look at a 22% kind of growth in the coming quarters, and we are completely on track.
Shwetha, just to add, if you look at historically the performance of Aadhar over the last three, four financial years, typically you will see this ratio of 42%-43% in H1, and then quarter three and quarter four actually moving in that direction of 47%. I think that's why the full marketing team, the sales team, as well as the business teams are quite well-guided. Plus, we believe that our entire strategy of emerging, which Rishi just spoke on, will get more activated. Plus, GST, good harvest, good rains, the festival season behind us, PM, all these tailwinds will really help to really push demand and disbursements in the second half of the year, not only for us, but also for the entire industry.
Understood, sir. Second question is, was there movement from stage two to stage three because stage three climbed 13 - 14 basis points sequential basis?
This would typically be the movement, Shwetha, from stage two to stage three. If you look at our NPA at stage three itself, it has gone up from 1.36% or 1.34%- 1.42%. So 1.34%- 1.42%, so the 8 basis points movement has gone from stage two to stage three typically.
Okay. Sir, what has been the bounce rate for this particular quarter and 30 DPD?
The bounce rate is quite static. It is static for the last six quarters in the range of early 20s, and that is where we have been for the last six quarters. What was the second question? The 30+ is in the range of about 4.6%. The 30+ sequential quarter, fiscal year 2026, quarter one was about 4.65%. There is a movement of 5 basis points positive over there.
Perfect, sir. Thank you so much and all the best.
Thank you.
Thank you. The next question is from the line of Shubhranshu Mishra from PhillipCapital. Please proceed.
Hi, Rishi. Hi, Rajesh. Good evening. I just wanted to understand the ease that we get on the retail loans versus other mortgage loans. Essentially, what I'm trying to get at is the contribution to the profit from home loans versus the other mortgage loans.
Hi, Shubhranshu. Ease home to non-home, home gives us close to about 12.15%, and non-home gives 15.75%.
Ballpark non-home would be contributing roughly around 35% kind of a percent to the profit pool, 35%-40% p rofit.
Yeah, I mean, that's a way of looking at it because in terms of contribution, it will be about 23%-24% of our AUM, but obviously, it comes in at higher ROA. That's a way of looking at it. The difference in yield probably directly goes, obviously, the NPA is slightly higher in LAP compared to HL, but otherwise, that will directly be an ROA enhancer. Understood. The second part is about BT out and BT in as well. What would be the net number for the quarter, and how many people do we deploy as a team to address this kind of iteration?
Shubhranshu, our BT out percentage for the third quarter has dropped to 5.4% annualized. There is definitely an improvement of about 50 basis points. BT in, as I have been indicating every time on the call, we are a company which does not entertain too much of BT in because of obvious reasons. We look at actual development of housing. It is close to 0.91%, which is only reference basis from our existing customers. In terms of central retention team that we have employed, there are 16 people, more of telecallers and people who engage with the consumers and one team leader. About 16 people help us retain the consumer. Apart from this, obviously, the data analytics team, they help us churning out a lot of data with respect to consumers, which is a separate team. They have other deliverables as well, but they contribute towards retention.
What percentage of this iteration is actually restrict? I present 100 files in a month. What actually gets retained?
Close to about, if I can put that number, 27%-30% will get retained.
Understood. Understood. Any guidance for FY 2026, for the remainder part of 2026 and for 2027 for disbursements?
On BT out?
Sorry, AUM and disbursements.
On AUM, we've always kept a guidance of 20%-22% and profit again about 18%-20%.
And disbursement?
Disbursement will be, if you look at the reverse calculation, it will be again approximately 18%.
Thank you so much. Have a great and sweet quarter.
Thank you so much, Shubhranshu.
Thank you. The next question is from the line of Rajiv Mehta from YES Securities. Please proceed.
Yeah. Hi, good evening. Thank you and congrats on steady and solid performance. A few of my questions are already answered, but again, just coming back to asset quality and stage two performance, which has been pretty stable, which also implies that your early bucket collections have kind of slightly improved. When I, in fact, look at the flow rates, it seems that your flow rates or your collection performance in the early bucket in this H1 is actually better than last H1. My question is, if the bounce rates are stable, then has the resolution improved in the early buckets? If it has improved, what has driven it? Is it your collection effort, interventions, or is it something like at the customer end, the leverage has gone down, and he's able to kind of make the payment immediately?
I think I will not be able to pinpoint something very specific, Rajiv. It is a matter of continued focus on collection. Our teams, for example, we have separate teams for separate buckets. The focus continues across various buckets. I think multiple things all across, support from the legal system, right? We have an in-house legal team, right, from Section 138, Section 24 filing to extended buckets, filing of SARFAESI memos, DM orders. I think it is a contribution of entire team effort. I will not be able to pick out any single item and say that this has contributed to additional efforts. We have a total close to about 1,500 people on the collection team on the front end who liaise with customers across various buckets. I think it is a team effort across various buckets, Rajiv.
Okay. Okay. Just one last thing. When you look at the asset quality movement at the whole company level, is it reflective of the movement in LAP as well? I mean, because LAP is a much smaller ticket size portfolio than home loans. Within LAP, has the asset quality or the DPD movement been similar to the whole company?
Yes, it is. I think yes, sir. If you look at it, it is only a 10 basis points moment difference in the asset quality when it comes to LAP. Otherwise, it is quite similar.
Quite similar.
For example, home loan moved from 1.1%- 1.2% on a sequential basis, and LAP moved from 1.9%- 2%.
Okay. Sure. Thank you so much, and that's it, sir.
Thank you so much.
Thank you. Participants who wish to ask a question may press star and one now. The next question is from the line of Rishabh, an individual investor. Please proceed.
Hi, Sir. Am I audible? Thank you for the opportunity. Hello.
Hi, Rishabh. You are audible. Sorry, you are audible.
Yes. Yeah. Hi, sir. Thank you. Sir, I have one small question. It's about the leverage on the books. So where do we intend to increase the leverage going ahead so that our overall ROE can reach up to 18% levels?
Basically, currently, our lever is around 2.5-2.6. Honestly, if you remember, in the past, we have been saying that the rating agencies generally are comfortable at a range of about 4.5 for a AA rated company. We are today a AA Plus rated company, at least in one rating agency, and hopefully on the way for the others also. Typically, we would lie somewhere between a AA rated and a AAA rated in terms of leverage, which the rating agency would be comfortable. We have some headroom on that. Having said that, I think getting even to a 3.5x-4x is going to be some way out of where we currently are. It will take some time. We believe that first we should hit the 3x lever and then probably take it up from there.
It will be a slow process, steady process. We do not intend to push lever too much, to be very honest. Internal accruals are fairly strong for us, so we have to take that also, obviously, into account when we look at our overall borrowings. As it is, we believe that we maintain sufficient liquidity also. Keeping all these elements in play, I think the movement is going to be fairly slow towards a 3x first, and then we take it up from there.
Okay. Sure, sir. Third, answer to the question. Secondly, if you can again recall on the collection efficiency, I think I missed it at the beginning of the call.
Collection efficiency stands at 98.96%.
Okay, sir. That's it from my side. Thank you, and all the best to the management.
Thank you. The next question is from the line of Suraj Khan. Please proceed.
Hi. Thank you for giving me the opportunity. Sir, I wanted to understand with respect to our branch addition strategy, how many branches will we be trying to close at the end of FY 2026, and any specific states that we are looking to target?
In terms of branch, Suraj, as we've always indicated, we will keep adding 50-55 branches, out of which 15 will come in the urban category, which means the top 15 metro locations of the country, and the balance 35 will come in the emerging category. Are we looking at any specific state? No. It depends on each state, the zonal head, or the business head looking at the potential of various locations, which the data of which is sent to the data analytics team, which looks at the data very differently from a market potential perspective, delinquency perspective. That is how we boil down to locations. If I were to give you, these will be typically top 10 states of the country for now, which is phase I.
It can be likes of Maharashtra, Tamil Nadu, Andhra Pradesh, Telangana, Rajasthan, Gujarat, Delhi NCR, and so on and so forth.
Understood. Understood. With respect to a couple of questions on competition and your view on the southern piece, in southern India, specifically Karnataka, there are a few locations where one of the participants earlier had said that there was some stress, although we have not seen that much in our book. Any specific ticket size-wise or category-wise, there have been early warning signs. Although we might not see any stress, any warning signs, maybe in the south or in general, any warning sign in specific, say, less than INR 500,000 or less than INR 750,000 ticket size, are you seeing any stress?
Suraj, I would not want to pick out any specific consumer type or state type. Yes, you are referring to Karnataka. Karnataka was not consumer issues. They were more government-related issues with respect to e-Khata policies, which have been sorted already. For us, if I were to talk about stress, it is typically the states that I've been talking about in all my calls, which is typically east, a location like east and Kerala, where and that is also not because of anything else, but because of the lack of legal support system. Our strategy of any state not contributing greater than 15% of our AUM actually plays out very well. I will not pick up any state and say that my portfolio is under stress or a consumer segment or a loan type under stress.
Because of east and Kerala, obviously, our incremental numbers, our focus is much lower in these states. Since we are available there, we continue to do flattish business.
The competition bit, for example, some of our listed players and even unlisted players have been very aggressive with respect to pricing. One of the larger listed players, although not in the same segment, but they had said that they'll try to undercut or price it in a way that they'll try to get good customers that are using their cost of funds advantage. Color on that with respect to the competition in general and in pricing.
Yeah. Okay. Suraj, our view has been, and to all my 8,000 employees in the field, the view has been very clear that we are not in the race of undercutting and a war of rate. We have our own identified customer segment. We will play on technology. We will play on speed. We will play on tax, and we will play on efficiency. End of the day, consumer is more interested in how fast can you provide me the funds rather than looking at this is a very different kind of customer segment. You are talking about larger players trying to undercut. I think it is only a matter of, we have all seen, I have been in the industry for 30 years. We have seen players come and go in various segments. It is a matter of time undercutting.
I don't think too many people are doing undercutting, but undercutting is a mechanism of creating your own space. Since we have a pre-identified space across cities, I don't think there is any cause of worry.
Competition is as is, and you are not seeing much of an issue that it will cause?
No, not really. I can relate to which companies you are referring to. As I told you, our emerging ABC is going to play a very important role and big role in the entire play area that we've been talking about.
Understood. And just finally, with respect to the credit rating upgrades that we've had, AAA Plus and the long-term outlook's improving, I mean, we've already seen a bit of an improvement in the cost of borrowing. How much more, purely because of the maybe although it's difficult to quantify, but how much more of an improvement can we see because of the credit rating and the 10-15 basis points? Because I think now you would be also having access to maybe insurance money, which is longer tenor and that way. So, I mean, how much more?
Yeah. I think you are right. In fact, we have not seen maximum benefit of the rating upgrade in our incremental cost of funds as of yet. You are right. It will appear more in the debt capital market transactions that we do on NCDs. We are eagerly waiting for more rating agencies to upgrade us because that will give us leeway to vie for insurance as well as pension funds. You are right, that will come in. It will not necessarily mean that it will come at lower cost, but it will come at longer duration, which we are also interested in. You are right. The entire game will be on the 25-30% incremental NCD business that we do.
There you will be seeing benefits between a AA and a AAA Plus company of anywhere between 20-25 basis points is something that you can see in a market. That is an incremental, and that is technically not played out till now. Probably will play out in the full way more in next financial year rather than the current part of the financial year.
What is the timeline when you expect these, also everybody, IKRA and everyone, to come up and do it?
I can't speak. Yeah. We can't speak for the rating agencies. The only thing is that they have sort of taken the outlook from stable to positive, which we see is one step towards an ultimate goal for us.
Understood. Thank you.
Thank you. Due to time constraints, that was the last question. I now hand the conference over to the management for the closing comments. Over to you, sir.
Hi. Thanks to everyone to come in and attend this call late on a Friday evening. Hope we have been able to answer all your questions. If there are any unanswered questions, please do feel free to get in touch with our investor relations team, and we will be more than happy to answer your questions. Thank you, and hope to have a good call in quarter three. Thank you very much, and good night. Good night, everyone.
Thank you. On behalf of Aadhar Housing Finance Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.