Ladies and gentlemen, good day and welcome to the Aavas Financiers Limited FY 2026 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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 a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rakesh Shinde, Head Investor Relations of Aavas Financiers Limited. Thank you and over to you, sir.
Thank you, Yusuf. Good evening, everyone, and a warm welcome to all participants joining us today to discuss the financial and operating performance of Aavas Financiers Limited for quarter four and FY 2026, along with our outlook for the business. The results and the investor presentation have been uploaded to the stock exchanges and are also available on our website. I hope you have had a chance to review them. We have also uploaded Excel fact sheets containing historical data on our website for your easy reference. Joining me today is the entire management team of Aavas. We will begin this call with opening remarks from our CEO, Manu Singh, CFO, Ghanshyam Rawat, and CRO, Ashutosh Atre. This will be followed by question- and- answer session. With that, let me now hand over the call to Manu. Over to you, Manu.
Good evening, everyone, and thank you so much, Rakesh and Yusuf. Before I delve into the quarterly results, let me tell you that it's an absolute privilege to address you first time as the CEO of Aavas. I'm grateful to the board and to the entire Aavas family for their trust and confidence. Myself, I bring over 25 years of experience in lending with track records of scaling lending businesses across both geographies and product suites. My experience spans across sourcing, credit, operations, collections, and a deep exposure to operating in regulated environments with very strong focus on risk management, governance, and execution discipline. Over the years, Aavas has built a very high quality franchise defined by prudent growth, disciplined risk management, and a strong commitment to the communities we serve.
This is evident in our consistently pristine asset quality, strong governance standards, rigorous compliance and best-in-class underwriting capabilities, particularly in the assessed income segment. As we step into the next phase of our growth journey, our priorities are very clear. To scale the franchise responsibly, enhance operating efficiency, and continue to deliver sustainable risk-adjusted returns. We will remain firmly anchored to a customer first and credit first philosophy and strengthen our core fundamentals in each market that we serve. We see a significant opportunity ahead in deepening our presence, improving per person productivity, driving profitable growth, all of this without compromising on asset quality or our governance standards.
Me and my team are very, very optimistic about the opportunities ahead and look forward to working closely, engaging actively with all of you as we build the next chapter of Aavas' journey with two very important focal points, sharper execution and long-term value creation. Quickly coming to operations for Aavas for FY 2026, this was a year of landmarks and milestones. In the year, we saw a change of promoters welcoming CVC Capital Partners, our balance sheet crossing INR 200 billion and our net worth crossing INR 50 billion marks. We have expanded our reach to the southern markets and our lifetime disbursements have crossed INR 400 billion mark, enabling 4 lakh customers to have their dream Aavas, which is homeownership. Further, our credit rating outlook was upgraded to positive by ICRA and CARE both.
All of these stand testament to the trust customers and stakeholders place in Aavas, and we know this fiduciary responsibility of continuing to deliver on the same quarter- on- quarter. At a very macro level, FY 2026 has seen multiple structural enablers, including policy reforms, continued FDI liberalization and progress in trade agreements. The focus on Tier 2 and Tier 3 markets have also strengthened the ecosystem. Yes, the cumulative 125 basis repo cut by RBI has improved affordability, creating strong tailwinds for the segment as a whole, which is affordable housing demands. From a business perspective, Q4 was encouraging. We disbursed INR 23.5 billion, 16% higher than same time last year, and 36% growth quarter- on- quarter, which firmly reflects an improving operating rhythm of the business.
Our AUM at the end of FY 2026 stood at INR 234.5 billion, registering a YoY growth of 15%, while disbursements for the year grew 11% at INR 67.8 billion . More importantly, our credit first approach continues to benefit us with best-in-class asset quality. Our 1+ DPD has shown sharp improvement across geographies, resulting in a lower GNPA, almost tracking close to historical low levels of 1%. During the last quarter, we added 31 branches, taking our total network to 435 branches across 15 states. This is a testament to us progressively and continually investing in our business. This expansion is largely concentrated in focused growth markets such as Tamil Nadu, Uttar Pradesh, Gujarat, aimed at deepening our presence, improving the reach, and driving incremental disbursement momentum in areas which have really good high potential.
As we look ahead, our long-term strategic priorities remain firm and clear. To leverage our distribution network, to take advantage of years of developed local market knowledge which our branches have, drive scale efficiently, optimize costs, enhance productivity, and start leveraging our digital platforms. With that preamble, I now take you through our quarterly performance. Our net profit for quarter four grew by 18% to INR 1.82 billion, led by a robust 17% YoY growth in NII on account of healthy improvement in our NIMs. Our network continues to compound steadily, growing at 16% YoY. Our NIMs expanded 44 basis points sequentially to 8.45% during the quarter. NIMs improved by 29 basis points overall in FY 2026. This was supported by improvement in spread, coupled with our continuous focus on risk-adjusted pricing suiting our customer segments.
Our asset quality remains pristine, with 1+ DPD well below 4%, improving 63 basis points sequentially to 3.17% as of March ending, while GNPA improved by 14 basis points quarter-on-quarter to 1.05%. Credit costs improved to 13 basis points, driven by lower 1+ flow and improved across buckets. We continue to maintain our guidance on keeping credit costs under check below 25 basis points for sure on a sustainable basis. Our ROA improved by 13 basis points to 3.5% and ROE improved 38 basis points quarter-on-quarter to 14.67% in quarter four. Together as a team, we remain focused on delivering quality, profitable growth, strong risk discipline, getting tech-led efficiencies into our business while creating consistently long-term value for stakeholders. With that, ladies and gentlemen, I would now hand over to our CFO, Mr. Ghanshyam Rawat, to discuss the financials in detail with you.
Thank you, Manu. Good evening, everyone, and a warm welcome to our earnings call. First, to provide update on borrowing. The improvement in cost of funds continue to underscore the strength and resilience of Aavas' well-diversified liability franchise. In line with our strategy of innovation and liability sourcing, we proactively anticipated the potential softening of interest rates and strategically shifted a sizable portion of our borrowing to EBLR-linked instruments and various market link benchmarks. This forward-looking approach has continued to yield tangible benefit in FY 2026 as our liabilities are repriced faster than those of many peers, which led to contained overall borrowing cost. This position us well to maintain a competitive cost of funds while supporting sustainable long-term quality growth.
During FY 2026, we also successfully secured commitment of INR 975 crore, $908 million from a multi national financial institutions at a very competitive cost. This represent the largest NCD placement in the company's history and underscore our position as one of the leading players in affordable finance. It also reflect strong external confidence in our measured quality-led growth strategy and a long-term vision of servicing in affordable housing space. The proceeds from this financing will be deployed to support affordable housing loans to EWS and LIG category, promote women ownership, scale green certified housing, and expand our MSME lending in underserved regions, further strengthening our development focused lending franchise. A well-diversified liability franchise linked to various benchmark and competitive price, we were able to deliver 62 basis point improvement in overall cost of funds for FY 2026.
Our spread improved by 31 basis points year- on- year to 5.20% in FY 2026. We continue to borrow judiciously, raising around INR 67.05 billion at competitive rate at 7.61% for FY 2026. As on 31st March 2026, the outstanding borrowing stood at INR 204 billion. Our tenure borrowing continued to longer than our total of our assets, ensuring a positive ALM across all the buckets. We have an optimum mix of various benchmark of interest rates such as 40% borrowing linked to external benchmark such as repo, T-Bill, MIBOR and 33% linked to three month MCLR, enabling faster repricing of nearly 73% of our borrowing in line with the interest rate movements.
We have successfully accessed a cost-effective fundraising avenue through the issuance of around INR 500 million of AAA rated PTC first time in Aavas history. Lender support remains strong as Aavas continue to evolve. We maintain access to diversified and cost-effective long-term funding. Our relationship with developers and institutions remain robust, supporting our strategic funding goals. As of 31st March 2026, we maintain ample liquidity includes cash and cash equivalent and unveiled cash credit limits of INR 19 billion. Documented unveiled sanctions of INR 9.75 billion. Profitability and capital positions. Total net total income NIM in absolute terms grew by 18% year-over-year in quarter four FY 2026 and 18% in full- year.
Net interest margin, NIM as a percentage total assets expanded by 44 basis points quarter-over-quarter to 8.45% in quarter four FY 2026 and 29 basis points in FY 2026. We remain well-capitalized with a net worth of INR 50.5 billion, with a capital- to-r isk-weighted assets ratio of 44.6%, significantly above the regulatory requirement. Net profit for FY 2026 grew by 14% and net worth continued to grow at 16%. I would like to hand over the line to our CRO, Ashutosh Atre, to discuss the asset quality.
Thank you, Ghanshyam ji . Good evening, everyone. I am pleased to share the key portfolio risk parameters with you. Asset quality and provisioning. Aavas is strongly positioned to continue delivering industry-leading asset quality. Our asset quality remains within the guided range, with one day past due well below 4% at 3.17% in FY 2026 versus 3.38% in FY 2025. Gross Stage 3 and net Stage 3 improved to 1.05% and 0.68% respectively. During the quarter, there was a reduction in absolute value of 1+ DPD in percentage, which improved by 63 basis points and gross Stage 3 by 14 basis points from December 2025. From a geographical perspective, asset quality in our vintage states continue to remain healthy.
The average 1+ DPD and GNPA stood well below 4% and 1.25% of AUM. Similarly, in our emerging markets, we are observing healthy credit performance with 1+ DPD and GNPA levels remaining comfortably within 4% and 1% of AUM respectively. Our total ECL provisioning, including that for COVID-19 impact as well as Resolution Framework 2.0, stood at INR 1.3 billion as of 31st of March 2026. Our disciplined underwriting standards, coupled with proactive risk management framework, have enabled us to stay ahead of emerging macroeconomic challenges. We continue to follow a rigorous credit assessment process, stress-tested across multiple economic scenarios and remain selectively calibrated in our exposure to high-risk segments. This approach has helped us preserve asset quality, which continues to rank among the best in the industry. With this, I open the floor for Q&A. Thank you.
Thank you very much, sir. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Renish Bhuva from ICICI Securities. Please proceed.
Yeah. Hi, sir. Congratulations on a good set of numbers. Sir, just two question. One, on the sort of medium-term strategy. Right. I do understand, you might have spent only 10, 15 days, but maybe if you can just broadly guide us, you know, how do you think about, you know, the sector's medium-term growth and where does Aavas stand in terms of growth outlook and maybe what is your aspirational growth target for 2027 and 2028? That's my first question, sir.
Hi. Thank you so much for that question. I'll take them separately. The first I'll take your second question first, which is long-term growth strategy. Our aspiration-
Yeah.
Clearly is to consistently deliver, 20%+ AUM growth, largely to outperform industry. On your question of short and medium-term growth, I think me and the team is very clearly focused on sharp execution of our already laid down strategies of growth. When I mean sharp execution, I mean the following two, three things, which is getting the product and customer suite along with its pricing right. Second, l ooking at the channel composition today in the sourcing funnel and tweaking that for optimization. Third, we've invested in geographical expansion and other than Rajasthan, getting the high potential states like Maharashtra, Gujarat, U.P., Southern states, quickly climb up to their potential because they are now well-staffed.
Last but not the least, managing leakages. Leakages in funnel, which is what are your sources, login, sanction, disbursement, and is it weekly disciplined into an order which follows a particular pattern of percentages. Sharper execution resulting in consistency of performance and getting both product channel and geographies into their right slots. Thank you.
Got it. Thank you very much. Now just a follow-up on that, right. I mean, where do you see ROE settling? I mean, the execution obviously is also linked to yields, OpEx, optimization, et cetera. From an exit 15% ROE, where do you see ROE also moving, going ahead?
As I mentioned on your second question, which is long-term growth strategy on if the question still pertains on the fact of long-term indications, I think high teens is where our eyes are very clearly set on, return on equity.
Okay. Okay. Got it. Got it. My second question is for Ghanshyam. You know, though we witness a YoY product function, but when we look at the sequential moment, it is down 15 basis point. You know, largely due to PLR cut in March, but now we also intend into further PLR cut of 10 basis point maybe in June, right? Where do you see ultimately spreads settling, right? I mean, otherwise, ROE will again moderate in course of 2027.
Thank you for your question. Thank you for your question. If you see in the full- year basis, we have came down 62 basis points in overall cost of borrowing. Which is largely stabilizing at this level, we reached a spread of 5.2% basically. As Manu mentioned, along with the all team, we talk about right placement of product at the right price, basically. That will help us going forward a slight improvement in the yield placement of a product and cost of borrowing stabilize at this level. We are very confident to maintain the spread 5%+ .
Okay. Okay. Okay, my observation is, sir, you know, with 15 basis point PLR cut, you know, yields are down, 20 basis point. You know, which essentially means that the book yield is actually converging towards disbursement yield, which is, you know, lower as maybe high teen. Just wanted to understand, you know, how your disbursement yields will move going ahead, which will ultimately take care of your blended yields?
Perfect. Thank you so much for articulating that clearly. I think that is well established with us. Going back to my previous answer, I would like to repeat it that there is enough headroom to place the product on risk-adjusted pricing. We are in an income assessment, assessed income group.
Got it.
Every transaction is a transaction which is unique and hence I am confident of the fact along with my team that the right placement at the right product will help us bridge this gap.
Got it. This is very helpful, sir. Thank you and best of luck.
Thank you.
Thank you. Next question is from the line of Kunal Shah from Citigroup. Please proceed.
Yeah. Couple of questions on the growth side. You articulated aspiration to get towards 20%+ , we are seeing the network expansion. This quarter again, larger part of the network expansion was in Gujarat, Tamil Nadu and U.P., wherein we would have added, like, say, eight to 10 odd branches in each state. Would that be the strategy maybe in terms of expansion? We have seen almost flat branches in Maharashtra, M.P. and Rajasthan, maybe hardly like 3%, no maybe three branches, getting added as such. Do we see that the larger part of the expansion would be coming in these states in terms of the branches and even in terms of the incremental growth?
So that's on, maybe firstly on the geography and secondly on the productivity side, maybe what are the initiatives we are taking incrementally just to ensure that the productivity and maybe the disbursements per sales officer that also increases up. If you can highlight in terms of what would be your near-term strategy in terms of increasing the productivity up.
Thank you so much for those two specific questions. To answer your first question on geography, yes, we are continuously focused on adding branches in states like Maharashtra, Gujarat, Tamil Nadu, where we find the perfect balance of potential as well as risk, which we are ready to underwrite. That's a balance to look at. We will continue doing that. On the second question of productivity, I'd like to answer that in a fork approach of two points. The first is the RO enabled and understands what to source.
Source is first time right, is assessed based on our risk adjustment assessment, and then any flow-through, which is from login to sanction to disbursement, those handover gaps, at efficiency levels today can be moved up 15%, 20% by concentrating on every branch productivity end-to-end and not purely looking at a bucket which is only either login or end-to-end result of disbursement. Secondly, it is important for us to rebuild the muscle, which is when I mentioned in the previous question about channel management. Where is this sourcing coming from into the funnel?
Hence, in a branch network where there is 10, 12 years of experience available for local market expertise, the muscle of direct business is a focus that all of us together as management team are going to continuously work upon, which reduces dependency or, If I can say it kind of gives more control on consistency of what comes in and hence what goes out. Those two would be my specific answers to these questions.
In terms of indirect sourcing, would we want to take that proportion up or maybe still the focus will be more on direct sourcing, as you mentioned, like since we have the control out there?
I'll answer that by saying and I'll give you an analogy on, say, for example, Rajasthan being our primary state. When we say that we are investing in other state does not mean I'm disinvesting in Rajasthan. Similarly, when I look at and the team looks at channel management, it does not mean we de-grow some channel. It's about rebuilding muscle into channels where we have direct control. It's largely about being very clear about focusing on direct and getting that muscle built up again. Indirect continues the way it continues. It's an important part of the ecosystem. We value that part of the ecosystem. We just want to continue building on our own strengths, which is the direct sourcing through channels like CSC, develop our digital avenues, which is the website, our own app, which has a referral pro-program. It's a step-by-step continual journey. Yes, I would pause the answer there for further questions.
Sure. One last one with respect to yield. You also indicated in terms of risk-adjusted pricing to be optimized. Have you started increasing yields in any of the product segments, any of the particular profile? How we are looking at it, and when would that journey start in terms of the yield optimization? Has it been rolled out on, say, a pilot basis? When do we see the full-fledged rollout of that happening?
As we speak, there is no better way to start a good deed than today. It has already started in the financial year. As I mentioned, it's a progressive journey, but we have the expertise of underwriting risk very well. You've seen in the last many years that the quality of the book is pristine, and hence our ability has to build that muscle on risk-adjusted pricing across 435 branches. Is a journey which is already on its way. It's not something which has to be taught very differently. It's just about those boundary cases which need to be looked at, paused and focused to be got on to back to the core area that you serve. It's always the distraction of a business which becomes the attraction. We don't want to be distracted by attraction. We have core strengths. We have to deepen them.
Got it. Thanks. Thanks and all the best. Yeah.
Thank you.
Thank you. Next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Thank you. Am I audible?
Yeah, you are audible. Thank you.
Yeah, please proceed.
Yes, sir. Just one question and maybe just trying to paraphrase what some of my friends earlier in this call have asked. Where if you look at the last two years, we were growing below 20%. If you could first articulate where was the problem when peers with larger balance sheets were able to grow upwards of 20%, why were we not able to grow? Was it an execution problem? Was it a competition problem? That is the first thing I wanted to understand. Since you have articulated about product placement, geography. If you could add some nuances around it in terms of channel. Are we going to do more of DSA sourcing going forward? When you speak about geography, what are the plans to maybe add more states in Southern India? If you could just start with that.
Sure. I'll take the two questions one by one. The first is on about your question about the past. You know, every human being, including me, becomes wiser in hindsight. I would start answering by saying at every point in time, and my predecessors and the management team have done their best in those times. Times are different, variables are different. Looking progressively ahead on growth, my response would go back to the earlier two questions that we are focused on not only looking at sustainable growth, we are also investing continually in geographies like South, Gujarat, Maharashtra, U.P., where we see potential balanced with quality of the book. My answer very clearly remains this is a vastly untapped market. Growth rates are there. We have to make sure that we assess it right, price it right for our growth.
On your second question of sourcing, largely between direct and indirect sourcing, as I mentioned earlier, direct sourcing has always been the branch-driven model, and it has been our strength. We are attempting very quickly to rebuild. You don't forget cycling even if you pick it up after many years. It's a strength that we have, and we are just gonna polish it and double down on it. The second is it's not about reducing channel partners. Channel partners are an important source of the ecosystem. We value them. We continue doing that. As I mentioned, if there are, if there ever have been when I look at hindsighting, if there are cases which are external to boundaries, cases which don't suit our name profile, we will try and make sure that we are not attracted by distraction. I hope I answered your question. Else I'm happy to have, the question again.
Yes, yes, that answers my question. Just one last thing.
Yeah.
You spoke about right product at the right price. Maybe earlier in the call you also said that there will be an effort to improve the yields at which we operate. Just trying to understand Aavas, for at least the whole of its listed history, has been a franchise which has been very strong on asset quality. Credit costs have remained benign. Are we now planning to move to a slightly different customer segment or a product segment? This would mean, while the risk-adjusted yields go up or the yields go up, commensurately the risks also go up. At the same time, I mean, we might see credit costs also inching up.
Now, why I ask this is in your press release, I remember reading that you still continue to guide for a less than 25 basis points in credit costs. Wherever we talk about a yield increase, there is a commensurate increase in risk as well. Just trying to understand that trade-off.
I'm very thankful to you for having picked this question. It gives me and my team a big opportunity to vehemently, assertively mention that increase of yield by no manner suggests increase of risk. I will repeat that. Increase of yield by no standards equals mathematically to increase of risk. We take pride in the fact that our micro market knowledge is exceptional, a muscle exceptionally built over time. We continue to be very vigilant about it. We are not overconfident, but we are confident on the fact that our placement pricing based on every individual case has scope of improvement, and we have already started that in practice and are seeing some early results. Having said that, this is a journey. Nothing changes overnight. Overnight always has problems of breakage or the engine jamming.
It's a journey. Yes, answering the question once again, we are not going to get into more riskier segments. We continue to maintain our guidance on credit costs.
Okay, Manu. This answers my question. Thank you very much.
Okay.
I wish you and the team Aavas the very best.
Thank you.
Thank you. Next question is from the line of Gaurav Khandelwal from JP Morgan. Please go ahead.
Hi. Good evening. Thanks for taking my questions. I've got a couple of those. First one is a follow-up on the yield part. 20 basis points decline in yields in fourth quarter, 15 basis points on back of the PLR cut. Can I also understand the competitive dynamics in that compression? Is it largely a function of the other part of the yields declining because of competition being too high? That's one. The other part to this question is, are you seeing some of the bigger HFCs now trying to enter into some of the ticket sizes, zip codes that you operate in? Primarily also because they are being pushed out from the prime mortgage side, so they wanting to come into your zip code. Any thoughts around that, please?
I think quarter four. Quarter four, the number which you are referring has a impact of we have reduced our 15 basis point PLR, which is effective on the 1st March. You can see a large impact what you're referencing the number is on account of that, basically. Rest obviously, this June quarter is a good number growth quarter, basically, where definitely competition comes in this quarter because everybody in competition wants to underwrite maximum business in that quarter. We also fall in the same category. If you see larger picture for the full- year basis or coming year, we are deep market presence, and we don't see a competition which has a, let's say, impact on a yield placement. It's more largely, as Manu said, we have to be conscious while underwriting the case to have a right placement of yield on that assets.
Got it. Thank you. My other question is on your OpEx. If I look at cost to assets or cost to AUM, in last three years, that had been declining, but FY 2026 it's moved up again year- on- year. Where do we see this settle? I understand you are still investing in some of the new states and there's some branch expansion. Where do on a steady state, where do we see this number settling? Also could you highlight some of the use cases on tech-led efficiencies that you've been talking about?
Yes, we agree with you. Our OpEx efficiency in two year continuously we've shown improvement. This year, we have higher OpEx than the last year. Is a, has two factors basically, largely. We have invested in the branch expansion, which has led to higher manpower because we firmly believe that we have to invest in the branch expansion, which will give us a better growth momentum than what we have done in the past. We have invested there basically, and those branches will start to give the result in the next full- year basis.
Apart from that, CVC came and we brought a long-term retention plan of a new ESOP and PSOP schemes, which has also given us some extra cost in the last full- year basis. Secondly, thirdly, what we thought of, let's say, growth for which we have invested, we have missed that growth during that year. That has also a impact on because denominators was not there what we thought of, invested in the branch expense and people investment. We are hopeful, we are confident, along with the entire team and Manu is also on the board now. We hope we will grow full back in the next year. That will bring down our OpEx to AUM ratio. We maintain that once we reach at a double size of the balance sheet, it will be somewhere 2.75% of OpEx to AUM ratio.
Got it. Thank you. Those were all my questions. Thank you and good luck.
Thank you.
Thank you. Next question is from the line of Raghav from Ambit Capital. Please go ahead.
Hi, good evening, thanks for the opportunity. I have a few questions. One, see when I look at your number of loans dispersed data, right? That's disbursement value divided by the disbursement ticket size. For full- year and even for the last three quarters, which is a cumulative of Q2, Q3, Q4, because I think you had some problems in Q1. The volumes have not exactly grown. On a full- year basis, the total number of loans disbursed are flat. In home loans, in fact, you've declined on a YoY basis in terms of volumes. What are you doing to improve that? Because I see that your employee base has expanded, your branch network has expanded, still the volumes are down. I just want to get some sense there.
Yeah. Thanks for that observation. It is very clear to us that this is an area of immediate attention for all of us on which as we laid down our FY 2027 plans, we've taken numbers and April has been for us quite effective. There is also a slight change in the sense that realization of an instrument in the customer's banking account is now the order of the day rather than the previous regime of where demand drafts used to be cut. Some of these have now settled down very well, hence we see that progressively the investments having been done in both people as well as branches, along with our technology efforts, as I mentioned in the call earlier, sharper execution focus should start sweating these assets out.
Productivity per person as well as revenue per person deployed on the field is going to be a matrix that we will track hawkishly ourselves against as we move quarter- to- quarter.
Understood. You know, as you're saying that your volumes should increase and volumes either per person or on per branch basis should increase, ideally that should lead to better cost absorption, right, from a unit cost economics point of view.
Yes.
You know, what are you guiding for in terms of OpEx to assets or OpEx to AUM, whichever way you wanna guide for? Sorry if I've missed that guidance, but generally, you know, what kind of levels do you see yourself achieving there? Not just for FY 2027, but, you know, on a steady state basis. Can it go below 3%?
I think on a two to three year platform, yes. We are shooting for something below 3%. However, as I mentioned, it's a journey. This journey both in terms of market as well as either tailwinds or headwinds will have some nuances quarter- to- quarter.
Understood. Would you also or how do you think about your, you know, ticket size strategy or ticket size segment? Because, say when I look at other mortgage loans, which is essentially, all the non-home loans, there the ticket size has increased by substantially quarter-on-quarter and even on a year-on-year basis. How are you thinking about your ticket size strategy, going ahead?
From a strategic perspective, I don't think we are changing our customer segment or geographical segment by anything, including, I am repeating at the cost of repentance, our credit understanding and credit cost guidance. ATS, both tactically and strategically, ideally should be moving only from an inflation perspective. The productivity lever is to be applied on number of customers coming in and growth there. The advantage of the ATS should just flow into the P&L. That's a consequence, not a strategy.
Understood. Very clear. Just one more thing. Why are your overall repayment rates higher, even though your DP rate, DPO rate has declined? You know, why is that happening?
Sorry, I missed the question please. If you could repeat.
I'm asking, when I look at your calculated repayment rate on an overall basis. It's about almost 20% versus say 17.5% in Q4 of last year and 16.5% in Q3. Even though your BT out rate has declined, why have the repayment rates gone up?
Yeah. Yeah, thanks. This has three components, basically. One important component is which we keep monitoring month after month, balance transfer to the, let's say, peer group. We have a guidance as a management team. We want to keep control at less than 6%. This year also we have closed 5.5% for full- year basis. No doubt, customers, sometimes they get extra money, and they pay back the part closure or let's say extra EMI they pay. Only largely on that account we have slightly higher repayment during this year. Otherwise, balance transfer to BT very much in control, which is less than 6%. Very precise for this year, 5.5%.
Understood. essentially it's just customer prepayment.
Yeah. Customers can get extra money that they want to pay more, excess, more EMIs or part payments, which is, which we accept.
Okay, thanks a lot. Thank you.
Thank you. Before we move to the next question, a reminder to the participants, to ask a question, you may press star and one. Next question is from the line of Shreepal Doshi from Equirus Securities. Please go ahead.
Hi, sir. Thank you for giving me the opportunity. My first question is on technology and digital platform that we have developed over the years. Do you feel that there is further investment required on that front to make it more aligned with the industry requirement and also to bring down debt and also smoothen the overall functioning?
No. We have done, I think, a good investment in the Salesforce, as well as the lifecycle management, Oracle FLEXCUBE. We have best-in-class Oracle ERP system, which is Fusion. All, I think, most of the capitalization has been done. We are not seeing any further investment in the entire module. Yes, one of the collections here, one of the best and we see in last so many years when DPD and as well as a collection. We want to be as a more technology-driven collection, which will bring down our one per unit cost down. We had some investing we do in the collection software, but which is not so material amount.
Which is not so material, which is not a material amount. Yes, what we invested, it will need some small investment every year, like AI, GenAI. It needs to be further sharpen our underwriting, acquisitions, collections, and which will save us some other cost also basically in OpEx. Which you have invested here some amount that will save in other our OpEx, manpower OpEx, manpower efficiency will bring the saving in the company.
Nothing major as such on the tech and digital side. The majority of our OpEx will be towards branch expansion and network expansion broadly, right?
Yes. Yes, yes.
Got it. The second question was pertaining to, you know, how are you seeing the ground trends in terms of business momentum as well as bounce rates, delinquency in the early part of 1 Q? How are we sort of planning or positioning ourselves to face the unfolding situation because the Middle East war and the impact of inflation going ahead for our customers broadly?
Thank you. I am Ashutosh. I will answer this question. we are also keeping very, you know, close watch on what is happening on the equality or maybe market trends based on this Middle East war. Thankfully, as of now, we are not seeing any one kind of a trend either in bouncing or in our collections. In fact, bouncing in the month of April was less than the previous month. This year April is better than the previous year April. At the same time, we are also keeping an eye on ground feedback that if some checks is getting bounced, and if it is from a profile where we envisage that it might have been affected because of this war or anything.
The reason or a PTP or the reason for the delay or reason for, you know, if it is linked with the macroeconomic challenges. So far, we have not seen anything. Of course, we are keeping an eye, very close watch, because ultimately all of us are going to get affected if the petrol prices have gone up by INR 10 or something. It is going to get affected. As of now, thankfully, nothing has happened.
Sir, any profiles that we have filtered, which we will, let's say not, do or, maybe do more checks in certain profiles? Any customer profile that you have filtered, keeping in mind the current situation?
Yeah, it is. See, it is as your guess as mine.
Right.
The immediate visibility comes to, say, travel, tools and travels and you know, hotel, restaurants and maybe even. Anything which is related to energy-related things that are directly getting affected. One thing I can tell you that the profile we are not financing which are directly affected, like chemical factory or anything who's into energy. Our clients are the Tier 2 kind of a person who are getting affected. Will get affected. As of now, not. Yes, we have kept some five, six profiles which are, as per our general guess, might get affected, and we are keeping track on their bouncing 1+ or whatever. That is what we've been doing as of now.
Got it. Thank you, sir. Thank you so much for answering my question.
Just to add, it's a very well-diversified book over a period of time and hence that's the, you know, strength of the retail business. There's no concentration risk at all.
Right. Excellent. Thank you, sir. Thank you for answering my question.
Thank you so much.
Over to the next person.
Thank you.
Thank you. Ladies and gentlemen, we will take this as the last question for the day. I now hand the conference over to the management for the closing comments.
Thank you. Ladies and gentlemen, as we conclude today's earnings call, I would like to sincerely thank each one of you for your time, continued engagement and support. The progress we have made reflects the strong execution by our team, the trust of our shareholders and the confidence our customers place in us. I must also thank our regulator, NHB, for always being with us, guiding us, strengthening us as we progress into the growth journey. Looking ahead, we remain optimistic about the opportunities in front of us. With our focus on disciplined growth, prudent risk management, and customer-first credit-led approach, we find ourselves well-positioned to deliver sustainable growth and consistent long-term value for our shareholders. Should you have any other questions that require additional information, please feel free to reach out to Rakesh Shinde, our Head of Investor Relations. Thank you once again for your continued trust and partnership.
Thank you, have a very good day ahead.
Thank you very much, sir. On behalf of Aavas Financiers Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your line.