Aptus Value Housing : Is valuation justified or just another HFC?

Few of my takeaways from Q1 FY25 of Aptus Value Housing Finance

𝐂𝐨𝐫𝐩𝐨𝐫𝐚𝐭𝐞 𝐓𝐫𝐚𝐣𝐞𝐜𝐭𝐨𝐫𝐲:

Aptus Value Housing Finance demonstrated strong performance in Q1 FY25, with 27% YoY AUM growth to Rs. 9,072 crores and 21% PAT growth to Rs. 172 crores. The company maintains a positive outlook on growth opportunities in Tier 2-4 cities, driven by low mortgage penetration and significant housing shortage. Management expressed confidence in achieving their 30% disbursement growth guidance for FY25.

𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐁𝐥𝐮𝐞𝐩𝐫𝐢𝐧𝐭:

1. Geographic expansion: Opening 40 new branches in FY25, including in new states like Maharashtra and Odisha.
2. Technology adoption: Implemented a mobile-first lead management system to improve efficiency and productivity.
3. Digital channels: Increased focus on customer referral app, construction ecosystem app, and social media channels for lead generation.
4. Productivity enhancement: Rationalization of collection team and focus on improving per-employee productivity.

𝐌𝐚𝐫𝐤𝐞𝐭 𝐃𝐲𝐧𝐚𝐦𝐢𝐜𝐬:

1. Increasing penetration in existing geographies
2. Contiguous expansion into new states
3. Focus on digital channels for lead generation
4. Emphasis on productivity and cost efficiency

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐓𝐚𝐢𝐥𝐰𝐢𝐧𝐝𝐬:

1. Low mortgage penetration in Tier 2-4 cities
2. Significant housing shortage in target markets
3. Government initiatives supporting affordable housing sector

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐇𝐞𝐚𝐝𝐰𝐢𝐧𝐝𝐬:

1. Potential cyclicality in affordable housing segment
2. Rising interest rates impacting borrowing costs
3. Competition from other players in the affordable housing finance space

𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫/𝐀𝐧𝐚𝐥𝐲𝐬𝐭 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬:

1. Concern: Slowdown in Tamil Nadu growth
   Response: Management acknowledged issues but expects 20% growth in FY25 with corrective measures in place

2. Concern: Rising 30+ DPD
   Response: Attributed to seasonality and elections; expect improvement in coming quarters

3. Concern: NIM compression
   Response: Expect 10-15 bps NIM compression due to rising borrowing costs

𝐂𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞 𝐋𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞:

Aptus faces competition from other affordable housing finance companies and small finance banks targeting similar customer segments in Tier 2-4 cities.

𝐅𝐮𝐭𝐮𝐫𝐞 𝐏𝐫𝐨𝐣𝐞𝐜𝐭𝐢𝐨𝐧𝐬:

1. 30% overall disbursement growth for FY25
2. 20% disbursement growth in Tamil Nadu
3. Credit cost guidance of 0.3-0.35% for FY25

𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐃𝐞𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭:

The company maintains a strong capital position with a net worth of Rs. 3,800 crores. No specific capital raising plans were discussed, indicating sufficient capital for near-term growth.

𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 & 𝐑𝐢𝐬𝐤𝐬:

Opportunities:

1. Large addressable market in underserved segments
2. Expansion into new geographies
3. Leveraging technology for improved efficiency

Risks:

1. Potential asset quality deterioration in economic downturn
2. Increased competition in affordable housing finance
3. Regulatory changes impacting business model

𝐑𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐂𝐥𝐢𝐦𝐚𝐭𝐞:

The company benefits from priority sector classification for housing finance. Management mentioned adapting to recent RBI circulars on disbursement practices.

𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐏𝐮𝐥𝐬𝐞:

The management indicated strong on-ground demand for both home loans and small business loans in their target markets.