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. Aptus is an affordable housing finance company incorporated in 2009 and headquartered in Chennai with focus on self employed individuals who are first time home buyers and are ignored by most banks; ATS (Avg, Ticket Size) is at just Rs.8 Lac and total AUM is at Rs. 6,738 Cr

. Home loans constitute 65% of AUM while the balance is towards Small Business Loans / LAP

. Its presence is entirely in South India with TN/AP/Telangana/Karnataka having mix of 43%/35%/14%/8%

. ATS of < Rs. 10 Lacs is a tough segment to crack owing to complex operational challenges such as (i) requirement of deep knowledge of local area and customer behaviour, (ii) tricky collateral evaluation (iii) difficulty in assessing volatile informal customer cash flows (iv) ensuring timely collections. Thus, building expertise takes time. (Yields of Aptus have been stable at 17% demonstrating its pricing power)

. We expect Aptus to deliver a strong AUM CAGR of 30% over FY23-25E along with superior return metrics (RoA/RoE of 7%/18% in FY25E). We recommend ‘BUY’ with a target of Rs. 365 based on 24x FY25E

EPS at 1x PE/G (assuming FY23-30E AUM/earnings CAGR of 27%/24%)

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