Check Before You Invest : Aavas Financiers Ltd

BSE: 541988 NSE: AAVAS ISIN: INE216P01012

| Sector: BFSI | Industry: Finance - Housing

Snapshot

Q.1 Which industry/sub-sector does Aavas Financiers Ltd belong to?

Aavas Financiers Ltd belongs to the BFSI sector, operating specifically within the Finance - Housing segment.

Q.2 Is Aavas Financiers Ltd a good quality company?

Aavas Financiers Ltd is a good quality company, based on a consistently good 10-year financial track record.

Q.3 Is Aavas Financiers Ltd undervalued or overvalued?

Aavas Financiers Ltd appears Undervalued, as its key valuation ratios are below with their past averages.

Q.4 Is Aavas Financiers Ltd a good buy now?

Aavas Financiers Ltd is a good buy now, based on strong price trend analysis suggesting prices may rise. However, you need to check its quality and valuation before making a decision

Performance Analysis

Q.1 Total Income growth of Aavas Financiers Ltd?

Aavas Financiers Ltd Operating Income growth is 16.7% for FY-2025, which is below its 5-year CAGR of 21.15%, indicating slower growth.

Q.2 Return on Assets of Aavas Financiers Ltd?

Aavas Financiers Ltd Return on Asset is 3.3%, which is below its 5-year historical median of 3.5%, indicating deteriorated earnings on assets.

	Current Level	5-year Historic Median
NPM%	24.38	26.24
PPOP%	17.17	17.56
RoA%	3.3	3.5

Q.3 Return on Equity (ROE) of Aavas Financiers Ltd?

Aavas Financiers Ltd Return on Equity is 14.3% for FY-2025, which is above its 5-year historical median of 14.1%, indicating the business is making better use of its shareholders capital.

Q.4 Pre-provisioning operating profit margin of Aavas Financiers Ltd?

Aavas Financiers Ltd Pre-provisioning operating profit margin, which is the bank’s core operating profit before provisioning for bad loans, is 17.17% for FY-2025, which is below its 5-year median(17.56%), indicating decreasing margins.

Q.5 Net Profit Margin of Aavas Financiers Ltd?

Aavas Financiers Ltd Net Profit Margin, which is the difference between the rate of interest earned on assets and the rate of interest paid on liabilities, is 24.38% for FY-2025, which is below its 5-year median( 26.24%), indicating decreasing margins.

Q.6 Total Asset growth of Aavas Financiers Ltd?

Aavas Financiers Ltd Total Asset growth is 12.71% for FY-2025, which is below its 5-year CAGR of 19.45%, indicating slower growth.

Q.7 Capital Adequacy ratio of Aavas Financiers Ltd?

Aavas Financiers Ltd Capital Adequacy ratio (CAR) is 44.5% for FY-2025, which is above the regulatory requirement of 15%, indicating strong capital position.

Q.8 Asset Quality of Aavas Financiers Ltd?

Aavas Financiers Ltd Gross Non-Performing Assets, which are loans overdue by more than 90 days, is 1.08% for FY-2025, which is above its 5-year median 0.98%, while Net Non-Performing Assets, which is GNPA minus provisions made for bad loans is 0.73% which is above its 5-year median( 0.71%), indicating deteriorating asset quality.

Ownership & governance

Q.1 Promoter shareholding and pledge status of Aavas Financiers Ltd?

Promoters hold 48.88% of the Aavas Financiers Ltd, with 0.00% of their stake pledged, indicating no pledge risk.

Peer comparison (industry-wise, mcap)

Q.1 AUM Growth of Aavas Financiers Ltd vs Industry Peers?

Aavas Financiers Ltd AUM CAGR is 19.45%, compared to the 5-year industry median CAGR of 4.02%, indicating faster growth and gaining its market share.

Q.2 Profit metrics (NPM, PPOP, RoA) of Aavas Financiers Ltd vs industry peers

Aavas Financiers Ltd profit metrics are above the industry median level of 10.39%, indicating stronger profitability compared to peers.

Profit Metrics

	Current Level	5-year Industry Median
NPM%	24.38	17.47
PPOP%	17.17	11.85
RoA%	3.3	1.85

Q.3 Operating efficiency of Aavas Financiers Ltd vs industry peers?

Aavas Financiers Ltd ROCE (10) is above the industry median of (8.9); while the current ROE (14.1) are above than the 5-year average Industry ROE (13.55). This shows that the business is positioned in the top quartile of the industry.

Operating Efficiency

	Current Level	5-year Industry Median
NPM%	24.38	17.47
PPOP%	17.17	11.85
RoA%	3.3	1.85
ROCE%	10.2	8.9
ROE%	14.3	13.55

Valuation & price assessment

Q.1 Stock return of Aavas Financiers Ltd over the last decade?

Over the last 5 years, the stock has delivered a CAGR of -9.51% based on the current price.

Q.2 What return has the stock given over the last decade?

	9Y	5Y	3Y	1Y
Share Price CAGR	-	-9.5%	-0.5%	-25.2%

Q.3 How do the current valuation ratios compare with 5-year historical median and industry numbers?

Valuation Ratios	Current	5-year Historic Median	5-year Industry Median
Price to Earnings	17.44	28.28	14.89
Price to Book	2.25	3.77	1.26
Price to Sales	4.2	7.18	3.55
EV to EBITDA	10.96	16.02	10.70

Q.4 Valuation ratios of Aavas Financiers Ltdvs historical and industry averages?

The current Price to book ratio (P/B) 2.25% is lower than its historical median of 3.77%, indicating that at the current price the stock is undervalued. However, you need a deeper analysis to make a better judgement.

Strategic outlook

Q.1 Does its ROIC exceed its WACC?

Aavas Financiers Ltd return on invested capital (ROIC) is 7.46% for FY-2025, is lower than its estimated weighted average cost of capital (WACC) of 13.5%, indicating value erosion.

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