There is a further nuance here. The company has not guided for an 18% ROE on its net worth. The company mentions “incremental ROE” of 18%. I would read it as 18% ROE on that part of net worth which is deployed in the asset light business.
Starting with FY27 asset light AUM of Rs 100,000 Cr. Of this, Rs 40,000 Cr will be on the company’s balance sheet. Further assuming a gearing of 3x (upper end of company’s guidance), the net worth deployed in this line of business will work out to Rs 10,000 Cr. 18% ROE on this would mean PAT of Rs 1800 Cr which will translate to incremental retail ROA of 4.5% (well above the 3.2% for FY27 guided by the company in its latest presentation).
Even their Q1 numbers on ROA and ROE don’t add up without assuming substantial leverage. Company presented Q1FY25 incremental ROA as 2.9% and incremental ROE as 15.3% (slide 5, Q1FY25 deck). This means that the asset light business is operating at a gearing of 4x (even as the gearing for the company as a whole remains at 1.9x).
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