Aadhar Housing Finance emerging-market expansion supports AUM growth and stable spreads

Investment View and Valuation

In its August 2, 2026 result update, ICICI Securities retained its BUY rating on Aadhar Housing Finance. The broker cited resilient affordable-housing demand, emerging-market expansion, disciplined pricing and prudent underwriting.

ICICI Securities maintained its target price of Rs 600, valuing the stock at approximately 2.5 times FY28E book value. The broker expects AUM to grow at about 20 per cent CAGR, while steady-state return on assets is expected to remain above 4 per cent.

Q1FY27 Operating Performance

Aadhar Housing Finance reported healthy operating performance in Q1FY27. AUM increased 18.2 per cent year on year and 2.6 per cent quarter on quarter to Rs 31,364 crore.

The company adopted cheque-realisation accounting from Q1FY27, removing the five-to-seven-day gap between cheque handover and realisation. Management indicated that the resulting interest-income impact was limited to two to three days and was immaterial.

Portfolio Mix and Customer Trends

The portfolio remained granular, with home loans accounting for 73 per cent of AUM and loans against property, or LAP, comprising 27 per cent. Salaried borrowers represented 55 per cent of AUM. Average ticket size increased to Rs 11 lakh from Rs 10.4 lakh, while loan-to-value remained at 60 per cent.

Aadhar Housing Finance consciously reduced non-home loans to about 24 per cent of incremental disbursements, compared with a roughly 30 per cent run rate, amid geopolitical uncertainty in West Asia. Management expects the historical 70:30 home-loan to non-home-loan mix to normalise.

Balance-transfer outflow improved to 5 per cent of AUM, the lowest level in eight to 10 quarters, supported by analytics-led customer retention.

Profitability and Funding Costs

Profitability remained robust in Q1FY27. Net interest income rose 19.2 per cent year on year to Rs 510 crore, while profit after tax increased 19.0 per cent to Rs 282 crore.

Portfolio spread stayed at 5.8 per cent despite a 15 basis point PLR reduction in February 2026. Exit portfolio yield was 13.5 per cent and exit borrowing cost was 7.7 per cent.

Cost-to-income was 36.3 per cent, including a Rs 14 crore ESOP charge. Excluding this charge, cost-to-income was 33 to 34 per cent. Management expects limited cost-of-funds pressure over the next one to two quarters, supported by competitive incremental borrowings and the floating-rate mix, which stood at 78 per cent of borrowings and 73 per cent of assets.

Asset Quality and FY27 Guidance

Asset quality remained contained. GNPA stood at 1.31 per cent versus 1.34 per cent in Q1FY26, while Stage 2 assets were 3.3 per cent. Collection efficiency was 99 per cent and 1+ DPD was 7 per cent.

Management reiterated its FY27 guidance for 20 per cent AUM growth, 20 per cent PAT growth and 17 to 18 per cent disbursement growth. Cheque-handover disbursement growth is expected to remain above 20 per cent for the remaining quarters.

Branch Expansion and Key Risks

Aadhar Housing Finance had 628 branches across 22 states and more than 550 districts. The company plans to add 45 to 50 branches in FY27.

ICICI Securities identified elevated competition in affordable housing finance and volatility in spreads as the key risks.