Aavas Financiers Q1 Review - Growth Outlook Strengthens: Dolat Capital


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Aavas Financiers Ltd. reported healthy loan growth at 24% YoY and 6% QoQ. Net interest income growth was however weaker at 20% YoY/flat QoQ.

Calculated net interest margin moderated both QoQ and YoY by ~20-40 bps to 6.6%, even as reported spreads were higher QoQ. Profit after tax, up 49% YoY, benefitted from higher other income and negligible provisions.

Aavas’ management highlighted that the housing finance company has already hiked prime lending rate by 25 bps and is expected to announce another hike of 50 bps in August. This, along with recent rating upgrade should ensure stable net interest margins for FY23E in our view.

The HFC has a higher ability versus peers to pass on rate hike, as even in the last rate down-cycle, it had passed on the benefit to borrowers.

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