Recommendation from Finance - Housing Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

APTUS VALUE HOUSING FINANCE INDIA : FULFILLING A SOCIAL AND ECONOMIC NEED

HERE IS WHY
✓Government schemes to boost housing finance
✓Impressive increase in net profit
✓Ambitious expansion plans across geographies

India’s home loan market is expected to double in the next five years, mirroring the overall trend in the country’s aspirations to become a USD 5 trillion economy. India’s home loan market is valued at USD 300 billion and is expected to register a CAGR of 22.5 per cent during the period 2024 to 2029. Under the Pradhan Mantri Awas Yojana-Urban 2.0 scheme, the objective is to construct 1 crore homes for the urban poor and middle-class families over the next five years.

This will call for an investment of ₹10 lakh crore and a government subsidy of ₹2.30 lakh crore. Keeping in mind the growth potential in the housing finance sector, our recommendation is Aptus Value Housing Finance India Limited (AVHFIL) for this issue. The company is a home loan company. formed to primarily address the housing finance needs of the self-employed and low and middle-income families.

These needs arise primarily arise from the semi-urban and rural areas. The company targets first-time home buyers where the collateral is self-occupied residential property. In terms of financials, in Q1FY25, on a consolidatedbasis, the revenue of the company increased by 29.22 per cent YoY to ₹394.94 crore compared to ₹305.63 crore from the previous year’s same quarter. On a sequential basis, its revenue increased by 5.44 per cent.

The PBIDT excluding other income increased by 28.44 per cent to ₹334.4 crore YoY as compared to ₹260.36 crore from the previous year’s same quarter. It sequentially increased by 8.13 per cent. The net profit stood at ₹171.75 crore compared to ₹142.26 crore, a YoY increase of 20.73 per cent, while sequentially increasing by 4.7 per cent from ₹164.03 crore. The company has ₹9,072 crore of assets under management, growing by 27 per cent YoY and 4 per cent QoQ.

It has maintained its gross NPA at 1.30 per cent and net NPA less than 1 per cent while the net interest margin (NIM) stands at 12.80 per cent. Up to 60 per cent of the company’s AUM are in home loans, 16 per cent in quasi home loans, 20 per cent in small business loans and the balance 4 per cent in insurance loans and top-up loans. AVHFIL operates in the affordable housing finance sector, focusing on Tier II, III and IV cities in India, which will be major growth areas in the coming years.

It plans to open 40 new branches in FY25, with 16 branches already opened in Karnataka, Telangana and Maharashtra. Additionally, the company is focusing on digital adoption, with 18 per cent of its business in Q1FY25 generated through customer referral apps, construction ecosystem apps and social media channels. It is focusing on technology-based risk and data sciencebacked centralised processes that helps the company approve more than 90 per cent loans within 72 hours. AVHFIL has a robust funding management and credit profile with strong relationships with 20+ lenders.

The shares of AVHFIL are currently trading at a price-to-book value of 4.4 times as against its five-year median PE of 4.7 times. In the last three years, the company has delivered average ROE of 16.3 per cent and ROCE of 14.3 per cent. Taking into account the company’s business and its market, we recommend BUY.