Broker’s call: Aavas Financiers (Add)

Our investigation into Aavas Financiers' strategic direction and growth expectations revealed several key takeaways. The management, led by Manu Singh as MD and CEO, anticipates a 16–18 per cent increase in assets under management (AUM) in the fiscal year 2027, with disbursements growing by 22–23 per cent. Over the medium term, they foresee approximately 20 per cent sustainable growth.

Housing continues to be a focal point, with the management aiming to maintain a 65:35 house-to-low-cost housing (HL/NHL) mix, closely aligning with their existing portfolio. While this shift towards housing could impact margins, the management remains committed to risk-adjusted pricing, launching new high-yielding state-specific products, and enhancing income per transaction to mitigate these pressures.

Expansion will be driven by opening new branches, boosting employee productivity, and retaining existing customers, with the goal of doubling field productivity per employee within two years. Profitability is expected to remain robust due to stringent cost controls, increased revenue per resource, and operating leverage. Overall, Aavas Financiers is positioned to deliver sustainable growth, backed by a stable asset quality and a favorable profitability outlook.

With this strategy in place, the management retains an Add rating with a June 2027 target price of ₹1,600, corresponding to a price-to-book (PBV) ratio of 1.9x. The management is confident in Aavas' ability to achieve its 16-18 per cent AUM growth forecast for FY27 and maintain a mid-teens return on equity (ROE), as improvements in employee productivity, margins, and AUM growth are expected to continue driving the firm's performance.