Aavas Financiers Limited reported a 23% year-on-year increase in net profit to ₹1,713 mn for the quarter ended June 30, 2026, driven by robust growth in Assets under Management (AUM) and improved operational efficiency. The housing finance company’s Net Interest Income (NII) grew by 18% to ₹4,139 mn, while the Net Interest Margin (NIM) expanded by 22 basis points to 7.70%. This performance underscores the company’s ability to sustain profitability despite competitive pressures on spreads, with management projecting sustainable medium-term growth of 20%.

Financial Performance

Total income rose to ₹7,091 mn from ₹6,279 mn in the corresponding period of the previous year, while total expenses increased to ₹4,890 mn. Profit before tax for the period stood at ₹2,201 mn, up from ₹1,791 mn in the same quarter last year. The company's earnings per share (EPS) on a diluted basis increased to ₹21.5 from ₹17.5 in the prior year period. Pre-provisioning operating profit grew by 22% year-on-year to ₹2.33 billion.

Operational Metrics and Asset Quality

The housing finance company improved its asset quality metrics, with the Gross Non-Performing Assets (GNPA) ratio declining to 1.11% and Net Non-Performing Assets (NNPA) at 0.71%. The 1+ Days Past Due (DPD) improved by 39 basis points to 3.76%. The cost-to-income ratio improved by 254 basis points to 43.7%, reflecting better cost efficiency. The Capital Risk Adequacy Ratio (CRAR) remained strong at 44.66%.

Growth and Disbursements

AUM grew by 15.4% year-on-year to ₹23,930 crore as of June 30, 2026. The company disbursed loans worth ₹1,610 mn during the quarter, a robust increase of 41% compared to the same period last year. Net Worth grew by 15.7% to ₹5,220 crore, driven by internal accruals. The Return on Assets (ROA) improved to 3.19% and Return on Equity (ROE) improved to 13.34%.

Strategic Outlook and Funding

Managing Director Manu Singh highlighted that monthly AUM addition improved by nearly 50% year-on-year, enabling the company to achieve in three months what previously took five months. The company aims for 22-23% top-line growth in disbursements and 17-18% AUM growth for the full year. To support this, Aavas raised around ₹14.74 billion at a competitive rate of 7.74% during the quarter. Total outstanding borrowings stood at ₹207 billion. The company implemented an additional 10-basis point reduction in its Prime Lending Rate (PLR) in June 2026, bringing the cumulative reduction to 25 basis points since March 2026. Consequently, the spread moderated to 5.06% during the quarter. Management anticipates spreads may dip slightly below 5% due to competition but expects operating leverage to maintain ROA and ROE targets.

Management Commentary and Future Focus

During the earnings call held on July 21, 2026, Manu Singh emphasized a strategic shift towards regaining market share in the home loan segment, which has seen slower growth compared to non-home loans. He noted that while home loans offer lower yields, the company is focusing on direct sourcing to reduce acquisition costs and improve portfolio quality. Singh also addressed concerns about spread compression, stating that operating levers, particularly improving productivity per resource from ₹8-10 lakhs to ₹20-22 lakhs over two years, will offset margin pressures. The company expanded its branch network to 440 across 15 states, focusing on faster break-evens for new branches. Regarding asset quality, Singh confirmed no geographical stress and highlighted proactive policy changes in February 2026 to mitigate risks from macro factors like rainfall uncertainty and geopolitical conflicts.

Aavas Financiers has approved the issuance of Non-Convertible Debentures (NCDs) amounting to ₹200 crore through a private placement basis to raise capital. The Executive Committee of the Board of Directors sanctioned the issuance of up to 20,000 Senior, Secured, Rated, Listed, Transferable, Redeemable NCDs. Each debenture carries a face value of ₹1,00,000, aggregating to a nominal value of ₹2,00,00,00,000.

The approval was granted during a meeting held on July 21, 2026, exercising authority delegated by the Board on April 24, 2025, and within limits approved by shareholders via a Special Resolution on September 16, 2025. The issuance complies with the Companies Act, 2013, SEBI (LODR) Regulations, and SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.

The NCDs will be listed on the Wholesale Debt Market (WDM) segment of BSE Limited. The tenor of the instrument is set at 3 years, maturing 36 months from the deemed date of allotment. Specific details regarding the coupon rate and the exact date of allotment will be outlined in the Key Information Document (KID).

Interest payments are scheduled to be made annually from the deemed date of allotment, while principal repayment will occur at maturity. The security structure includes a first-ranking exclusive charge covering at least 100% of the principal amount and accrued interest. This charge is created via hypothecation over identified receivables, loans, book debts, and unencumbered fixed deposits as specified in the transaction documents.

Key Details of the NCD Issue