Global Economy
The worlds economic landscape experienced a series of significant disruptions in 2022,
leading to a challenging and uncertain future. The COVID-19 pandemic, the conflict in
Ukraine, crises in food and energy supply, escalating inflation, tightening of debt, and
the urgent matter of climate change all contributed to a slowdown in global economic
growth. As stated in the 2023 report of the United Nations World Economic Situation and
Prospects (WESP), the projected growth rate of the world output is expected to decline
from an estimated 3.0% in 2022 to a mere 1.9% in 2023, which represents one of the lowest
rates in recent decades. The report presents a pessimistic outlook for the near future,
marked by economic uncertainty. It predicts a moderate recovery in global growth to reach
2.7% in 2024, as some of the challenges begin to diminish. However, this projection
heavily relies on factors such as the speed and order of further monetary tightening, the
developments and consequences of the conflict in Ukraine, and the potential disruptions in
global supply chains.
The sluggish prospects of the global economy also pose a threat to achieving the 17
Sustainable Development Goals (SDGs), as the 2023 SDG Summit in September marks the
midpoint of the 2030 Agenda implementation. The difficult economic conditions could impede
progress toward these goals, emphasizing the urgent need for collaborative efforts and
innovative solutions to address the social, economic, and environmental challenges the
world is currently facing. Overall, the world economy is confronting significant
challenges, and the path to recovery and sustainable development remains uncertain. Close
attention to monetary policies, geopolitical developments, and disruptions in supply
chains will be vital in shaping the global economic trajectory in the years to come.
INDIAN ECONOMY
Indias economic growth demonstrates resilience despite some moderation, according to
the latest India Development Update from the World Bank.
India stands among the fastest-growing economies globally, even in the face of global
challenges. The overall growth estimate for the year is 6.9%, with real GDP expanding by
7.7% year-on-year in the first three quarters of FY 2022/23. However, moderation was
observed in the second half of FY 22/23. The growth was driven by robust investments and
strong private consumption, particularly among higher-income groups. Inflation averaged
around 6.7% in FY22/23, but the current-account deficit in the third quarter improved due
to the growth of service exports and lower global commodity prices.
PROJECTIONS FOR FY23/24
The World Bank has revised its GDP forecast for FY23/24 from 6.6% (December 2022) to
6.3%, anticipating slower consumption growth and challenging external conditions.
Increasing borrowing costs and limited income growth will constrain private consumption,
and reduced fiscal support will lead to a slowdown in government spending.
Inflation is projected to decline to an average of 5.2% in FY23/24, driven by lower
global commodity prices and decreased domestic demand. The Reserve Bank of India has
implemented policies to tighten the economy and control inflation. Indias financial
sector remains robust, with improved asset quality and strong growth in private-sector
credit.
The central government is likely to achieve its fiscal deficit target of 5.9% of GDP in
FY23/24. Alongside state government deficit consolidation, the general government deficit
is expected to decrease, stabilizing the debt-to-GDP ratio. The current account deficit is
projected to narrow to 2.1% of GDP from an estimated 3% in FY22/23, supported by the
growth of service exports and a reduction in the merchandise trade deficit.
REVIEW OF AFFORDABLE HOUSING FINANCE
Affordable housing finance plays a crucial role in meeting the housing needs of low and
middle-income individuals and families in India. With a growing population and increasing
urbanization, there is an urgent demand to provide affordable and adequate housing options
for everyone. In India, affordable housing finance institutions have emerged to bridge
this gap and offer accessible financial solutions to those seeking affordable homes.
The focus of affordable housing finance is to provide financial assistance to
individuals with limited income or resources to purchase a home. These institutions
understand the unique challenges faced by low and middle income group in accessing housing
finance from traditional lenders. Their aim is to provide customized loan products,
simplified processes, and flexible terms to make homeownership more affordable and
attainable for these segments.
In recent years, the affordable housing finance sector in India has witnessed
substantial growth and innovation. Government initiatives like the Pradhan Mantri Awas
Yojana (PMAY) have played a crucial role in promoting affordable housing finance by
offering subsidies, incentives, and support to both borrowers and lenders. These
initiatives have expanded the reach of affordable housing finance institutions and
encouraged them to cater to the diverse needs of potential homebuyers.
OPPORTUNITY LANDSCAPE
Affordable housing is a rapidly growing segment within the consumer finance industry.
Despite Indias low mortgage penetration rate of 11%, this situation worsens in rural and
semi-urban areas, dropping to below 5%. This highlights the significant untapped potential
of the affordable housing finance market, estimated to be worth nearly Rs 30 trillion. To
navigate this landscape successfully, three key factors are critical for consumers:
availability, affordability, and awareness. Consumers need access to suitable properties
and reliable financing options. For financiers to make a substantial impact, a focused
approach is necessary, including a deep understanding of customer behaviours across
different states, the ability to serve the underbanked consumer segment, and the
implementation of policies that effectively address the needs of this stratum.
According to a committee report from the Reserve Bank of India (RBI), there is an
estimated housing shortage of 100 million units, primarily affecting the low- to
middle-income housing segment. Prioritizing affordable housing and its financing not only
improves the quality of life but also has a significant positive impact on GDP.
However, several challenges hinder progress in the affordable housing sector. These
challenges include limited availability of land, concerns related to land ownership,
rising costs of construction and land, and regulatory obstacles in obtaining project
approvals. Overcoming these obstacles and ensuring better availability and affordability
of finance are essential to unlock the untapped potential of the market. Currently, most
financial institutions focus on the formal income segments, leaving the underserved
population without suitable options. Despite the high demand for affordable housing
finance, housing finance companies (HFCs) have not fully utilized their lending capacity
due to a lack of customer awareness about their services.
Consequently, customers often resort to alternative sources of finance, such as local
financiers and loans against gold, which come with significantly higher interest rates
compared to HFCs. While housing in metro cities remains unaffordable for many, there is a
considerable opportunity to provide affordable housing in non-metro areas. This, coupled
with improved access to finance from HFCs that understand the specific needs of this niche
market and can address affordability concerns effectively, will contribute to the growth
and development of affordable housing.
However, unanticipated changes in regulatory norms, competition from small banks and
FinTechs, liquidity crunch arising from reduced loan recovery, increase in borrowing
costs, rising inflation, economic slowdown etc can be major threats to companies in the
affordable housing sector.
THE KEY FEATURES OF AFFORDABLE HOUSING FINANCE IN INDIA INCLUDE
Loan Products: Affordable housing finance institutions offer a range of loan
products specifically designed for low and middle-income individuals. These loans
typically come with competitive interest rates, longer repayment tenures, and flexible
terms to make monthly instalments more affordable.
Simplified Documentation: Recognizing the need to reduce the paperwork burden,
affordable housing finance institutions streamline their documentation processes. They aim
to make the loan application process smoother and more accessible, ensuring a hassle-free
experience for borrowers.
Subsidies and Incentives: Government schemes like PMAY provide subsidies and
incentives to eligible borrowers, reducing the burden of interest and principal repayment.
This support makes affordable housing finance even more affordable and attractive for
potential homebuyers.
Tax Benefits: Customers availing home loans enjoy tax benefits on both interest
payment and principal component. Similarly, Housing Finance Companies are also eligible
for tax deduction on their interest income from housing loans as per the applicable
provisions of the Income Tact Act, 1961.
Partnership with Developers: Affordable housing finance institutions often
collaborate with real estate developers to offer joint financing options, making it easier
for homebuyers to access housing loans for specific affordable housing projects.
Financial Inclusion: Affordable housing finance institutions play a crucial role in
promoting financial inclusion by extending credit to individuals who may have limited
access to formal financial services. By providing affordable housing finance, they
contribute to the overall economic development of the country and upliftment of
marginalised sections of society.
OUTLOOK ON AFFORDABLE HOUSING FINANCE
The Indian affordable housing loan market is expected to witness increased credit
demand due to budget announcements related to credit allocation in the Pradhan Mantri
Aawas Yojana and urban infrastructure development fund. The higher allocation of Rs 79,000
crore for the Pradhan Mantri Awas Yojana, a 66% increase, is anticipated to drive higher
demand for loans in the lower-income segment.
This boost in demand for home loans is particularly significant for the low and
middle-income segments, as the increased PMAY allocation aims to address their housing
needs. The affordable housing sector had faced challenges due to rising input costs,
making the budget announcements and increased allocation even more crucial for the housing
industry.
In the previous years budget, Rs 48,000 crore was allocated for the completion of 80
lakh houses under PMAY. The program has been extended until December 31, 2024, to ensure
the completion of houses sanctioned by March 31, 2022. As of November 2022, over 1.20
crore houses have been sanctioned under PMAY.
While the funding requirement for the rural scheme is adequately addressed, the urban
scheme still requires additional support, which has been extended until FY25 (December
2024). This suggests that there will be ongoing opportunities and demand for affordable
housing loans in urban areas in the coming years.
Overall,the budget announcements and increased location for the PM Awas Yojana are
expected to have a positive impact on the Indian affordable housing loan market. The
higher demand for loans in the lower-income segment and the focus on completing sanctioned
houses under PMAY indicate a favourable environment for affordable housing finance
companies.
ABOUT APTUS VALUE HOUSING FINANCE INDIA LTD
At Aptus Value Housing Finance India Ltd, the primary business objective is to assist
individuals in realising their dream of home ownership. The focus is on providing
accessible and affordable housing finance solutions to individuals from low and
middle-income backgrounds. The company emphasises addressing the specific needs of
borrowers with limited income or resources.
Aptus offers a range of loan products tailored to suit the unique requirements of
customers. These products feature competitive interest rates, flexible terms, and extended
repayment tenures, ensuring that borrowers can manage their monthly instalments
effectively. The loan application process is designed to be streamlined, with simplified
documentation procedures to minimise any potential hassle for applicants.
Aptus also emphasises its commitment to financial inclusion by extending credit to
individuals who may have limited access to formal financial services. This contributes to
the overall economic development of the country and supports the upliftment of
marginalised sections of society.
Aptus Value Housing Finance India Ltd demonstrated a robust and commendable performance
in the financial year 2023. Significant growth was experienced, reflecting a sharp
business focus, deep market penetration, and a customer-centric approach. The adoption of
digital technologies across various operational aspects, such as customer sourcing,
underwriting, collection, and risk management, also contributed to the companys success.
FINANCIAL HIGHLIGHTS Income and Profits
Our total income for the financial year ended March 31, 2023 was 1,129 crores with a
growth of 34% as compared to 840 crores for the previous financial year. Our profit
before tax has seen a substantial improvement, increasing from
480 crores in FY22 to 654 crores in FY23, representing a growth of 36% y-o-y. This
growth is a testament to our enhanced operational efficiency and profitability. We have
worked diligently to optimise our processes and capitalise on market opportunities,
resulting in improved financial performance. Our total profit for the year was 503
crores as compared to 370 crores in the previous financial year, representing a growth
of 36% y-o-y. The Net Profit Margin of the Company for the financial year ended March 31,
2023 was 44.55%.
Key Financial Ratios
Our key financial ratios for the year ended March 31, 2023 as compared to the previous
financial year are given below:
Particulars |
FY 23 |
FY22 |
| Revenue from operations/average |
18.34% |
17.51% |
| loan book |
|
|
| Other income/average loan book |
0.60% |
0.67% |
| Total revenue/average loan book |
18.94% |
18.17% |
| Finance cost/average loan book |
4.63% |
4.51% |
| Spread/Average loan book |
14.31% |
13.66% |
| Operating expenses/Average loan |
2.75% |
2.53% |
| ECL provision, write offs/Average |
0.57% |
0.75% |
| loan book |
|
|
| Profit before Tax/Average loan book |
10.97% |
10.38% |
| Profit after Tax/ Average loan book |
8.44% |
8.00% |
| Profit after Tax/Networth |
16.34% |
14.45% |
OPERATIONAL HIGHLIGHTS
We are an entirely retail focussed housing finance company primarily serving low and
middle income self-employed customers in the rural and semi-urban markets of India. We
offer customers home loans for the purchase and self-construction of residential property,
home improvement and extension loans, loans against property and business loans.
The Company sanctioned loans worth 2,580 crores as compared with the sanctions of
1,799 crores during the previous year.
Disbursements reached INR 2,394 crores, marking a substantial increase of 46% compared
to the previous year, indicating the companys ability to expand its loan portfolio. Aptus
achieved a healthy AUM of INR 6,738 crores in March ‘23, experiencing a notable
year-on-year growth rate of over 30%, signifying success in attracting and managing a
larger customer base.
Through focused collection efforts, Aptus achieved a collection efficiency of over
100%, leading to a reduction in soft bucket outstanding, overdues, and NPAs. This
accomplishment demonstrates effective credit risk management.
Despite facing significant interest rate headwinds, Aptus managed to maintain good
spreads at 14.31%, representing a 65 basis points increase over the previous financial
year, highlighting the ability to navigate challenging market conditions.
Aptus registered a consistent ROA of 8.44% and saw its ROE rise to 16.34% from 14.45%
in the previous year, which is one of the best in the Industry. These figures demonstrate
efficient utilization of assets and the ability to generate returns for shareholders,
positioning the company among the industrys best performers.
The total number of live customers exceeded 107,000, reflecting a notable growth rate
of 28% year-on-year, highlighting the ability to attract and retain customers in a
competitive market.
Aptus expanded its branch network by adding 23 branches during FY ‘23, bringing
the total count to 231 branches, enhancing market presence and accessibility to customers.
The company employed 2,405 individuals, indicating a commitment to building a strong
workforce to support operations and growth objectives.
ASSET QUALITY
Aptus focused on collection efforts, leading to a significant improvement in
delinquency rates. The 30+ DPD rate decreased to 5.9% in March ‘23 compared to 9.91%
in March ‘22, showcasing success in managing the loan portfolio.
The company witnessed a decline in GNPA, with the rate decreasing from 1.44% in
December ‘22 to 1.15% in March ‘23, signifying effective risk management
strategies.
Aptus maintained a healthy net NPA rate of 0.86%, indicating the ability to effectively
recover loans and minimize credit losses.
The provision coverage ratio increased to 1.06% as of March ‘23 from 0.80% in
March ‘22, reflecting prudence in maintaining adequate provisions for potential loan
losses.
BORROWINGS AND LIQUIDITY
Aptus enjoys well-diversified borrowing sources, with 60% of borrowings from banks, 26%
from NHB, 10% from DFIs, and the remaining portion in the form of securitization,
enhancing financial stability.
Aptus holds a rating of AA- from both ICRA and CARE, indicating strong creditworthiness
and reliability in the market.
As of March ‘23, the company had a robust liquidity of INR 1,136 crores, including
an undrawn sanction of INR 625 crores from NHB and banks, providing flexibility to meet
funding requirements efficiently.
The debt equity ratio of the Company as at March 23 was 1.14:1
HUMAN RESOURCES
We believe in providing a conducive work environment that fosters collaboration,
innovation, and growth. We prioritize the professional development of our employees
through training programs, workshops, and performance evaluations. By investing in our
employees growth, we empower them to reach their full potential and contribute
effectively to our overall organisational goals.
As on 31 March, 2023 the company has 2,405 employees Employee engagement is a priority
for us, and we encourage open communication, feedback, and recognition of accomplishments.
We believe that a motivated and engaged workforce leads to higher productivity, customer
satisfaction, and overall business success.
Furthermore, we strive to maintain a culture of fairness, transparency, and equal
opportunities. We are committed to diversity and inclusion, ensuring that all employees
are treated with respect and have equal access to growth opportunities within the
organization.
At Aptus, we understand that our human capital is our most valuable asset. By nurturing
a talented and dedicated workforce, we position ourselves to adapt to market changes,
deliver exceptional customer service, and drive sustainable growth.
The Company has created an ESOP pool of ten million shares for the employees. It helps
in creating a sense of ownership among the employees and improves their morale and
productivity.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an elaborate system of internal controls commensurate with the size,
scale and complexity of its operations; it also covers areas like financial reporting,
compliance with applicable laws and regulations etc. The Companys Internal Financial
Control framework, in line with section 134(5)(e) of the Companies Act, 2013, ensures the
orderly and efficient conduct of its business, including adherence to Companys policies,
safeguarding of its assets, prevention, and detection of frauds and errors, accuracy and
completeness of the accounting records and timely preparation of reliable financial
information.
Aptus has a full-fledged in-house Internal Audit department which monitors and
evaluates the efficacy and adequacy of internal control systems in the Company, its
compliance with regulatory directives, efficacy of its operating systems, adherence to the
accounting procedures and policies at all branch offices of the Company and its
subsidiary. Internal audit reports are placed before the Audit Committee along with
significant observations and suggestions for follow up action. Recommendations of the
statutory auditors are also taken into consideration by the committee for improvements in
control and compliance.
Risk and Risk Mitigation
Type of Risk |
Description of Risk |
Risk Mitigant |
Economic and Market Risks |
(a) Economic Downturn or Recession |
(a) Diversifying the loan portfolio across different sectors and
geographies to reduce the impact of a downturn in any specific markets. Maintaining robust
credit risk assessment processes to ensure borrowers ability to repay during economic
challenges |
|
(b) Interest Rate Fluctuations |
(b) Optimum borrowing mix of fixed and floating rate linked loans and
ensure diversified resource raising options to minimize cost and maximize stability of
funds |
|
(c) Regulatory Changes |
(c) Maintaining a strong compliance framework to stay updated with
regulatory requirements. Establishing close relationship with regulatory authorities to
understand and adapt to any regulatory changes promptly |
Credit and Operational Risks |
(a) Default and Non- Performing Loans |
(a) Implementing a stringent credit assessment process, including
thorough evaluation of borrowers creditworthiness and collateral. Regular monitoring of
loan portfolios and establishing proactive collection and recovery mechanisms |
|
(b) Technology and Cybersecurity Risks |
(b) Investing in robust IT infrastructure and cybersecurity measures
to safeguard customer data and prevent fraud. Conducting regular vulnerability assessments
and penetration testing. Providing cybersecurity training to employees to enhance
awareness and minimise internal risks |
|
(c) Business Disruption |
(c) Developing a comprehensive business continuity plan to ensure that
the companys operations can continue uninterrupted during unforeseen events. Regular
testing and update of plan, including backup systems, alternative work arrangements, and
disaster recovery procedures. |
Competition and Strategic Risks |
(a) Intense Competitive Pressure |
(a) Continuously monitoring competitors activities and market trends
to identify areas of differentiation. Developing innovative products and services, improve
customer experience, and maintain strong customer relationships to retain a competitive
edge |
|
(b) Expansion and Scalability Challenges |
(b) Conduct thorough feasibility studies and market research before
expanding to new regions. Developing a scalable business model and invest in appropriate
technology infrastructure to support growth. Establishing strategic partnerships to
leverage existing networks and resources |
|
(c) Reputation and Branding Risks |
(c) Maintaining strong corporate governance practices and ethical
standards. Implementing effective communication and public relations strategies to manage
reputation risks. Active engagement with customers, stakeholders, and the community to
build trust and credibility |
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