AAVAS Financiers Share price and Fundamental Analysis

Company History

Aavas Financiers Ltd. (Formerly known as 'Au Housing Finance Limited') is registered as a Housing Finance Company (HFC) with National Housing Bank (NHB)and is engaged in the long term financing activity in the domestic markets to provide housing finance. It chose to serve the growing needs of housing finance customers in the low and middle income segments of sub-urban and rural India, to serve the customers in the metro cities and urban regions of the country. The majority of customers have limited access to formal banking credit facilities. It uses a unique appraisal methodology to assess these customers individually and delivers financing solutions.

The Company offers customers home loans for the purchase or construction of residential properties, and for the extension and repair of existing housing units. In addition to home loans, the company offers customers other mortgage loans including loans against property. Since the commencement of operations in March 2012, the company has served more than 1,29,000 customers.

The Company is a technology driven company and it leverages information technology and data analytics for on boarding customers, underwriting analysis, loan monitoring, and risk management and collection functions. Between Fiscals 2014 and 2018, the company invested Rs 150.45 million in information technology systems.

The Company secures financing from a variety of sources including term loans and working capital facilities; proceeds from loans assigned and securitized; proceeds from the issuance of non-convertible debentures ('NCDs'); refinancing from the National Housing Bank ('NHB'); and subordinated debt borrowings from banks, mutual funds, insurance companies and other domestic, foreign and multi-lateral financial institutions to meet its capital requirements.

The Company is led by a professional management team and its Key Managerial Personnel held 7.19% of the outstanding equity interest of the Company.

The Company was initially promoted by Au Financiers (India) Limited, (now known as AU Small Finance Bank Limited ('AuSFB'), which sold 90.10% of the outstanding equity interest of the Company in connection with its conversion to a small finance bank, to Lake District Holdings Limited (a subsidiary of Kedaara Capital I Limited) ('Lake District'), Kedaara Capital Alternative Investment Fund - Kedaara Capital AIF 1 ('Kedaara AIF-1'), Partners Group ESCL Limited ('ESCL') and Partners Group Private Equity Master Fund LLC ('Master Fund') in June, 2016.

Aavas Financiers Limited was incorporated as private limited company with the name Au Housing Finance Private Limited' on February 23, 2011. During the year under review, the company was registered with National Housing Bank (NHB) as a housing finance institution without accepting public deposits'. In 2012, the Company launched its first branch at Jaipur and received its first rating 'BBB+/Stable' from CRISIL for long-term bank facilities of Rs 1,000 million.

Pursuant to a special resolution passed by the shareholders on January 10, 2013, the company was converted into a public limited company and the name was changed to AU Housing Finance Limited' on January 11, 2013. Consequent to the conversion of into a public limited company, the NHB issued a fresh certificate of registration to the company. In 2013, the company received its first refinancing assistance from NHB. In 2014, the company issued its first tranche of non-convertible debentures (NCDs).

In 2015, the company entered into its first pool buyout transaction in housing loan priority sector. Pursuant to a notification dated December 18, 2015 issued by the Central Government, the Company was identified as a financial institution' under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

In 2016, the company received investment from Lake District, Kedaara AIF-1, Master Fund and ESCL. During the year under review, the company received its first subsidy from NHB under CLSS-PMAY'.

Aavas Financiers Ltd. was originally incorporated as 'Au Housing Finance Limited' on February 23, 2011. The Company was registered with National Housing Bank as a housing finance company. It was converted into a public limited company in 2013 and was renamed as Aavas Financiers Limited on 30 November, 2017. Subsequently, upon the change of name to Aavas Financiers Limited', the NHB issued a certificate of registration dated April 19, 2017.

In 2017, Aavas Financiers Limited entered into first pass through certificate (PTC) transaction with IDBI Trusteeship Services Limited.

Aavas Financiers Limited came out with an initial public offer (IPO) during the period from 25 September 2018 to 27 September 2018. The IPO was a combination of fresh issue of Rs 400 crore and an offer for sale of upto 1.62 crores equity shares from 6 selling shareholders. The IPO was priced at Rs 821 per share. The stock made its debut on the bourses on 8 October 2018.

During the year 2018, the Company has issued and allotted 432,500 two thousand five Equity Shares of Rs 10/- per share aggregating to Rs 28,372,000/- on preferential issue basis. Further the Company has received Rs 2/- per share as application money.

During the Year 2018, the Company has received Rs 2/- per share aggregating to Rs 31,000,047/- as 1st call Money in respect to the 720,094 partly paid up equity shares of Rs 10/- each.

During the year 2018, the Company has issued and allotted 360,000 and 440,000 Lakh share warrants convertible into equity shares of Rs 328/-and Rs 430.50/- per share respectively. Further the Company has received Rs 3/- per convertible share warrants as warrant subscription money.

During the year 2018, the Company has altered its Object Clause of Memorandum of Association (MOA) as per the suggestions given by the National Housing Bank during its onsite Annual inspection. Further the altered MOA is available at the registered office of the Company in the Business hours.

During the year, the Company expanded its branch network to 165 branches as of 31st March 2018 and plans to scale up its operation to newer geographies in 2018-19.

During FY 2019-20, Company conducted the operations through 210 branches, covering 122 districts in 10 States. It received fresh sanctions from banks amounting to Rs. 630 crore and availed loans aggregating Rs. 645 crore. The outstanding term loans from banks and financial institutions as of March 31, 2019 were Rs. 2,041 crore. It raised Rs. 10 crore through issue of Rated, Secured, Redeemable, Non-Convertible Debentures on a private placement basis to domestic financial institutions.

During the financial year 2019-20, the Paid-up Equity Share Capital of the Company was increased on conversion of 7,20,094 partly paid Equity Shares into fully-paid Equity Shares of a face value of Rs. 10/- each, consequent upon the receipt of the balance call money of Rs. 6 per share; conversion of 4,32,500 partly paid Equity Shares into fully paid Equity Shares of a face value of Rs. 10/- each consequent upon receipt of balance call money of Rs. 8 per share and conversion of 8,00,000 Convertible Share Warrants into fully paid Equity Shares of face value of Rs. 10/- each.

During the Financial Year 2020-21, Company added ADB as new lender and raised aggregate amount of Rs. 789.40 crore through the issue of Rated, Secured, Unlisted, Redeemable NCDs on private placement basis to IFC and ADB. It expanded branch network to 10 states with 250 branches as of March 31, 2020.

In FY 2020-21, the Company conducted operations through 280 branches covering 11 States, of which it accounted for a significant presence in four states such as Rajasthan, Gujarat, Maharashtra and Madhya Pradesh. It created an MSME loan pool, which enabled to mobilize funds at low rates and lend to small businesses.

As of March 31, 2021, 65.16% of Gross Loan Assets were from customers who belonged to the economically weaker section and low income group, earning less than Rs. 50,000 per month and 31.46% of Gross Loan Assets were from customers who were new to credit. The Company's active loans grew to Rs. 1,25,000. It sanctioned Rs. 2,812.93 crore housing loans during 2020-21. The average loan sanctioned was Rs. 8.49 lakh and average tenure was 183.53 months in the AUM. It received fresh sanction of refinance assistance of Rs. 850 crore under the NHB refinance scheme and Rs. 366 crore under Special Refinance Scheme. It added Central Bank of India (CBI) and Kotak Mahindra Bank Limited (KMBL) as new lenders for NCDs.

As of March 31, 2022, the average size of loan sanctioned was Rs. 8.64 lakh and average tenure was 178.33 months in the AUM. Majority of the home loans disbursed by the Company were for single-unit properties, of which, almost all of them were occupied by the borrowers. The Company offered customers home loans for purchase or construction of residential properties, and for extension and repair of existing housing units. In addition to home loans, it offered customers other mortgage backed loans including loans against property, which accounted for 27.92% of Gross Loan Assets as of March 31, 2022. 65.4% of Gross Loan Assets were from customers who belonged to the economically weaker section(EWS) and low income group(LIG), earning less than Rs. 50,000 per month.

During FY 2021-22, Company diversified funding sources by exploring the Debt Capital Market through private placement of Secured NCDs to Mutual Funds, Issuance of Masala Bonds, NHB Refinance, Securitization/ Direct Assignment and banking products like Priority Sector/Non-Priority Sector Term Loans, Cash Credit Facilities and Working Capital Demand Loans. As at March 31, 2022, Company's sources of funding were primarily in the form of long Term Loans from Banks and Financial Institutions, followed by Securitization/Direct assignment, NHB Refinance, Debt capital market.

During the Financial Year 2021-22, it added some 34 more branches and thereby expanded branch network to 13 states. It conducted operations through 314 branches .These branches were distributed across Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Haryana, Uttar Pradesh, Chhattisgarh, Delhi, Punjab, Uttarakhand, Himachal Pradesh, Karnataka and Odisha.

During the year 2021-22, it received a purchase consideration of Rs. 778.37 crore from assets assigned in pool buyout transactions, which were derecognised with RBI guidelines on the securitisation of standard assets. It received fresh sanction of refinance assistance of Rs.750 crore under the NHB refinance scheme and Rs. 417 crore under Special Refinance Scheme. It availed funds of Rs. 1,416 crore under refinance scheme such as for affordable housing fund, regular refinance scheme and special refinance facility. It diversified borrowings by issuing NCDs to mutual funds. As on March 31, 2022, Company's outstanding NCDs were from Multilateral/development financial institutions, Domestic Mutual Funds, Banks and Subordinated Debts.

As of March 31, 2023, the Company conducted operations through 346 branches in 13 states and increased branches by 32 in FY23. In 2023, Company embarked on the journey to become India's most trusted affordable housing finance player led by people, process and technology.

During the year 2022-23, the Company availed a Rs 1,044 crore line of credit from National Housing Bank. The Assets under Management (AUM) stood at Rs 14,167 in FY 22-23.