Whalesbook
Aptus Value Housing Finance's strategic shift to larger loan sizes and higher-quality customers has driven its return on assets (RoA) to 8.2%, aiding its stock recovery. This follows a period of underperformance attributed to institutional investor sales.
Expansion Drives Growth
Aptus is experiencing strong performance with record disbursements in the March quarter. The company is expanding its operations by targeting Odisha and Maharashtra, with plans to open around 60 new branches in FY27. This expansion is expected to drive asset under management (AUM) growth of 22-24% for FY27. Despite a 33% rise in employee costs, the company maintains a high return on equity (ROE) above 20%. Its stock is trading at an attractive valuation of 1.7 times FY28 estimated book value.
Navigating Risks and Valuations
The company, valued at approximately ₹12,749 crore, has improved its asset quality, with Gross Non-Performing Assets (GNPA) at 1.52% and Net Non-Performing Assets (NNPA) at 1.15% as of March 2026. However, the small business loan (SBL) segment, serving self-employed clients, still presents some asset quality stress. Management expects credit costs to remain stable at 50 basis points for FY27. Reduced funding costs have boosted spreads to 8.9% in FY26, with a Net Interest Margin (NIM) of 13.3%. Competitive pressures and potential interest rate increases could lower NIMs by 15-20 basis points.
Key Concerns
Despite growth plans, Aptus faces risks from geographic concentration, with Tamil Nadu accounting for over 30% of its AUM. The SBL segment's exposure to self-employed clients carries inherent asset quality risks. Net interest margins are sensitive to market pricing and interest rates, potentially facing a 15-20 basis point compression. Although Aptus's credit rating was upgraded to '[ICRA]AA (Stable)', its focus on a segment with higher delinquency rates requires attention. The stock has underperformed the S&P BSE 100 Index by 14.57% in the past year.
Future Outlook
Management forecasts 22-24% AUM growth in FY27, supported by branch expansion, larger loan sizes, and continued focus on the SBL portfolio. The company aims to maintain an ROE above 20%. Analysts maintain a 'Buy' rating, citing significant upside potential from strategic expansion and operational efficiencies.