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Sturdy all-round delivery

Performance was strong on all aspects

Aptus’ performance on NII/PPOP/PAT was strong in Q4 FY24, underpinned by betterthan-expected delivery of disbursements, portfolio spread and asset quality. AUM growth remained brisk at 8% qoq/29.5% yoy and RoE further improved to 17.3%. Disbursement volume witnessed significant increase (up 26% qoq/47% yoy) driven by 1) improved business momentum in TN (disbursements grew 9% qoq - AUM share of 37%) after stabilization of manpower issues, 2) sustained robust growth in other Southern markets aided by branch addition and improving productivity of existing branches, and 3) some increase in origination ATS for both HL and SBL. With no change in competitive landscape in the operating markets and Aptus offering similar or better rates than peers, the BT Out continues to be low at ~2.5% annualized. Portfolio Spread improved by 5 bps qoq to 8.71%, after having declined in each of the preceding five quarters (cumulative reduction ~50 bps). Portfolio Yield improved by 14 bps qoq on the back of rates hikes taken in Q3 FY24. The rate of CoF increase slowed in Q4 FY24 to 9 bps (avg 16-17 bps in preceding five quarters). Asset quality improved materially depicted by 60 bps qoq reduction in 30+ dpd portfolio to 5.4%, and 12 bps qoq reduction in Stage-3 assets/GNPLs to 1.07%. There were negligible write-offs in the quarter, and the improvement in portfolio construct was essentially driven by stronger collection efficiency of 100%+. Credit cost was stable at 45 bps with ECL coverage on Stage-2 loans enhanced to 9.5% from 8% as of Q3 FY24.

Confident of 30% AUM growth and stable spreads for FY25

With business velocity resurrected in TN, improving productivity in younger branches (30% branches <3-year old), and plan to add 32-35 new branches (mainly in MH, OR, KTK & TL), Management expects to deliver disbursements of over Rs40bn in FY25 (v/s Rs31.3bn in FY24) translating into 30% AUM growth. The branch count in the newer markets of MH & OR would be taken up to 10 in Q1 FY25 from 3 as of FY24. Aptus has strengthened its middle management (business and support functions) and IT systems to handle higher business volumes. The incremental funding cost in the HFC has been stable at 8.5-8.6% and in the NBFC could marginally inch-up from current 9-9.25%. The co. does not plan to increase the product yields further. In a falling rate scenario, Aptus’ portfolio spread could benefit from much higher quantum of fixed-rate loans versus fixed-rate borrowings. High focus on branch and resource productivity can likely optimize the opex metrics. The management aspires to further improve the 30+ dpd delinquency level.

Reiterate BUY, preferred pick in Affordable Housing

We maintain our structural liking for Aptus as it has stronger moats than peers (Home First and Aavas), which is reflected in much lower BT pressure, resilient Spread performance, restrained opex and higher profitability. At potentially 4-5x leverage in very long run, Aptus can deliver 22-24% RoE. Expect stock to outperform in Affordable Housing space, as Aptus’ FY26 PE multiple is in-line with peers. Stock trades at 17x PE and 3.2x P/ABV on FY26 estimates. Maintain BUY with unchanged 12m PT of Rs430.

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