Kotak Securities

Target: ₹550

CMP: ₹416.60

We initiate coverage on Aadhar Housig Finance with a Buy rating and RGM-based FV of ₹550/share. Aadhar stands out versus most affordable peers due to a larger balance sheet, longer vintage and superior RoEs. On the other hand, its loan growth (21 per cent CAGR during FY2024-27E) is comparable more to mature housing finance companies than fast-growing smaller affordable HFCs.

Aadhar (AUM ₹21,100 crore in FY2024), the largest among compared affordable HFCs with 7 per cent market share in FY2024, leverages its diversified customer (57 per cent salaried, 43 per cent self-employed AUMs) and geographic profile (15 per cent of AUM from Uttar Pradesh).

We expect Aadhar to deliver 22 per cent EPS CAGR during FY2024-27E on the back of 21 per cent AUM growth, near-stable spreads, higher fees and consistent improvement in operating leverage.

Key risks include lower NIM or growth due to increase in competition in larger centers or from large HFCs eyeing the affordable housing space, effective execution of consistent growth strategies, especially due to its multipronged growth and appraisal approach, and risk to asset quality from rising share of self-employed and implications of cross-default and crossacceleration clauses in loan agreements