Rating: BUY | Aavas to focus on tech transformation for growth

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We met aavas’ senior & mid management including CEO Sachinder Bhinder, CFO Ghanshyam Rawat, and visited one of its branches in Jaipur. The management reiterated their guidance for a 20-25% loan growth. They expressed confidence in the strength of their core processes.

Additionally, ongoing technological transformation and new initiatives such as centralised underwriting for salaried individuals were highlighted as potential drivers of productivity gains and a reduction in turnaround time (TAT). It was also mentioned that the elevated opex to assets ratio at Aavas could potentially moderate in the future. Considering these factors, we recommend a buy rating.

Regarding their growth strategy, Sachinder Bhinder emphasised a distribution-led model, with a focus on targeting non-salaried borrowers.

The management team reaffirmed their loan growth guidance of 20-25%, primarily driven by core states where Aavas has a presence for more than five years. However, growth from new states like Karnataka is expected to be relatively lower. The introduction of new products—MSME loans and co-lending arrangements is also expected to contribute to Aavas’ growth. By assigning loan against property (LAP) and MSME assets, the company aims to maintain a home loans mix of around 70% while generating healthy spreads of 7% or more on these deals.

Ongoing tech transformation should help them improve productivity and navigate through its next phase of growth. Aavas has leveraged tech in the past, but it had 18 different apps for underwriting, valuations, geo-tagging leading to inefficiencies. It has rolled out Saleforce based loan origination system in April. It will also roll out Oracle Flexcube loan mgmt system, and cloud based Oracle ERP system in FY24.

TAT will fall to 7-8 days from 13-15 days. Aavas has started centralized underwriting for salaried cases (40% of loans) which should free credit team’s bandwidth to handle more cash income cases at the branch. Mgmt expects opex to assets to fall to 3% in next few years.

Aavas has a credit team of 600+ based at branches, who undertake multiple field visits to underwrite the loans. Aavas has a strong branch intensive affordable housing franchise. Steady execution by new CEO could drive re-rating.


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