aavas financiers ltd share price Management discussions


GLOBAL ECONOMIC OVERVIEW

According to IMFs World Economic Outlook (Apr22), the world economy is projected to grow by 3.6% both in 2022 and 2023 from a growth of 6.1% in 2021. The growth is expected to normalise in the range of 3.3%-3.4% over the medium term. This improvement was largely due to increased vaccination rollout the world over and a revival in economic activity based on catch-up consumption. The global economic recovery is attributed to accelerated vaccine rollout across 4.4 billion people, around 56% of the global population (single dose).

The spot price of Brent crude oil increased 53.34% from USD 50.37 per barrel at the beginning of 2021 to USD 77.24 per barrel at the end of the calendar year, strengthening the performance of oil exporting countries and moderating growth in importing nations. Global trade growth is expected to slow from an estimated 10.1% in 2021 to 5% in 2022 and further to 4.4% in 2023.

The global economy was affected by prohibitive shipping freight rates and a shortage of shipping containe Rs and semiconductor chips in 2021, affecting global economic recovery. Inflation was at its highest since 2011, especially in the advanced economies, catalysed by a run up in commodity prices. Some emerging and developing economies were compelled to withdraw policy support to contain inflation even as the economic recovery was still incomplete.

The prominent feature of the global economic activity during the year under review was a sharp revival in commodity prices to record levels following the drop at the time of pandemic outbreak. The commodities that reported a sharp increase in prices comprised steel, coal, oil, copper, foodgrains, fertilise Rs and gold.

A higher interest rate environment could affect emerging markets and developing economies with large foreign currency borrowings and external financing needs in 2022.

Regional growth (%) 2021 2020
World output 6.1 (3.3)
Advanced economies 5.0 (4.9)
Emerging and developing economies 6.3 (2.4)

(Source: IMF, World Bank, UNCTAD)

PERFORMANCE OF MAJOR ECONOMIES

United States: The country reported a GDP growth of 5.7% in 2021 compared to a de-growth of 3.4% in 2020, following the governments investment of trillions of dolla Rs in COVID relief.

China: The countrys GDP grew 8.1% in 2021 compared to 2.3% in 2020 despite it being the novel coronavirus epicentre.

United Kingdom: The countrys GDP grew 7.5% in 2021 compared to a 9.9% de-growth in 2020.

Japan: The country reported a growth of 1.7% in 2021 following a contraction in the previous year.

Germany: The country reported a GDP growth of 2.9% in 2021 compared to a decline of 4.9% in 2020.

(Source: World Bank, IMF, Business Standard, Times of India)

INDIAN ECONOMIC OVERVIEW

The Indian economy reported an attractive recovery in FY 21-22, its GDP rebounding from a de-growth of 6.6% in 2020-21 to a growth of 8.7% in FY 21 - 22. By the close of FY 21-22, India was among the six largest global economies, its economic growth rate was the fastest among major economies (save China), its population at around 1.40 billion the second most populous country in the world and its rural under-penetrated population arguably the largest in the world.

Y-o-Y growth of the Indian economy

FY19 FY20 FY21 FY22
Real GDP growth (%) 6.5 3.7 (6.6) 8.7

Growth of the Indian economy, FY 21-22

Q1, FY22 Q2, FY22 Q3, FY22 Q4, FY22
Real GDP growth (%) 20.3 8.5 5.4 4.1

The Indian economy was affected by the second wave of the pandemic that hindered economic growth towards the fag end of the previous financial year and across the first quarter of the financial year under review. The result is that after a growth of 2.5% in the last quarter of 2020-21, the Indian economy grew by 20.3% in the first quarter of FY 21-22 due to the lower base during the corresponding period of the previous year.

Indias monsoon was abundant in 2021 as the country received 99.32% of a normal monsoon, lower though than in the previous year. The estimated production of rice and pulses recorded volumes of 127.93 million tonnes and 26.96 million tonnes respectively. The total oilseeds production of the country recorded a volume of 371.47 million tonnes. Moreover, based on the spatial and temporal distribution of the 2021 monsoon rainfall, the agricultural gross value added (GVA) growth in FY22 is anticipated to be 3-3.5%. The countrys manufacturing sector grew an estimated 12.5%, the agriculture sector by 3.9%, mining and quarrying by 14.3%, construction by 10.7% and electricity, gas and water supply by 8.5% in FY 21-22.

India received the highest annual FDI inflow of USD 83.57 billion in FY 2122, a validation of global investing confidence in Indias growth story. The government approved 100% FDI for insurance intermediaries and increased FDI limit in the insurance sector from 49% to 74% in Union Budget FY 21-22.

The Indian government launched a four- year Rs 6 lakh crore asset monetisation plan (roads and highways, pipelines, power transmission lines, telecom towers, railways station re-development, private trains, tracks, goods sheds, dedicated freight corridor, railways stadiums, airports, projects in major ports, coal mining projects, mineral mining blocks, national stadia, redevelopment of colonies and hospitality assets).

In 2021, India was the largest recipient of global remittances. The country received USD 87 billion during 2021, with the US being the largest source (20%). Indias foreign exchange reserves stood at an all-time high of USD 642.45 billion as on September 3, 2021, crossing USD 600 billion in foreign exchange reserves for the first time.

Indias currency weakened 3.59% from Rs 73.28 to Rs 75.91 to a US dollar through FY 22. The consumer price index (CPI) of India stood at an estimated 5.7% in FY 21-22. India reported improving Goods and Services Tax (GST) collections month-on-month in the second half of FY 21-22 following the relaxation of the lockdown, validating the consumption- driven improvement in the economy. The country recorded its all-time highest GST collections in March 2022 standing at Rs 1.42 lakh crore, which is 15% higher than the corresponding period in 2021.

India ranked 63 in the 2021 World Banks Ease of Doing Business ranking. The country received positive FPI inflows worth Rs 51,000 crore in 2021 as the country ranked fifth among the worlds leading stock markets with a market capitalisation of $3.21 trillion in March 2022.

The fiscal deficit was estimated at- RS 15.91 trillion for the year ending March 31, 2022 on account of a higher government expenditure during the year under review.

Indias per capita income increased 18.3% from Rs 1.27 lakh in 2020-21 to Rs 1.5 lakh in FY 21-22 following a relaxation in lockdowns and increased vaccine rollout.

Indias tax collections increased to a record Rs 27.07 lakh crore in FY 21-22 compared with a budget estimate of Rs 22.17 lakh crore. While direct taxes increased by 49%, indirect tax collections increased by 30%. The tax-to-GDP ratio jumped from 10.3% in FY21 to 11.7% in FY 22, the highest since 1999.

(Source: Economic Times, IMF, World Bank, EIU, Business Standard, McKinsey, SANDRP, Times of India, Livemint, InvestIndia.org, Indian Express, NDTV, Asian Development Bank)

Indian economic reforms and Budget 2022-23 provisions

The Budget 2022-23 seeks to lay the foundation of the Indian economy over the Amrit Kaal period of the next 25 years leading to 100 years of independence in 2047. The government is emphasising the role of PM Gati Shakti, inclusive development, productivity enhancement and investment, sunrise opportunities, energy transition and climate action, as well as financing of investments.

The capital expenditure target of the Indian government expanded by 35.4% from Rs 5.54 lakh crore to Rs 7.50 lakh crore. The effective capital expenditure for FY 23 is seen at Rs 10.7 lakh crore. An outlay of Rs 5.25 lakh crore was made to the Ministry of Defence, which is 13.31% of the total budget outlay. A boost was provided to Indias electric vehicle policy Scheme for Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle in India. An announcement of nearly Rs 20,000 crore was made for the PM Gati Shakti National Master Plan to catalyse the infrastructure sector. An expansion of 25,000 km was initiated for 2022-23 for the national highways network. To boost the agricultural sector, an allocation of Rs 2.37 lakh crore was made towards the procurement of wheat and paddy under MSP operations. An outlay of Rs 1.97 lakh crore was announce for the Production Linked Incentive (PLI) schemes across 13 sectors.

Outlook

The Indian economy is projected to grow by 8% in FY 23, buoyed by tailwinds of consistent agricultural performance, flattening of the COVID-19 infection curve, increase in government spending, favourable reforms and an efficient rollout of the vaccine leading to a revival in economic activity.

India received the highest annual FDI inflow of USD 83.57 billion in FY 21-22, a validation of global investing confidence in Indias growth story. The government approved 100% FDI for insurance intermediaries and increased FDI limit in the insurance sector from 49% to 74% in Union Budget FY 21-22.

HOUSING FINANCE SECTOR OVERVIEW

The Indian housing finance sector is recording multi-year growth on account of a growing population. A rise in economic activities and reduction in the home loan interest rates, coupled with the organic demand for housing, has resulted in optimistic projections for the Indian housing finance sector post the onset of the pandemic. Every Rs 1 lakh invested in housing leads to an addition of Rs 2.9 lakh to the GDP, owing to inter-linkages with almost 270 ancillary industries, which consequently, leads to promoting housing finance, gaining strategic importance.

A robust appetite for new homes, growing economic activity and increasing vaccinations led to strong disbursements and profitability growth in FY 21-22. The result is that housing finance companies could grow 8-10% in FY 21-22 following an economic rebound and increased home demand. Collection efficiency witnessed a revival during the end of June 2021 and further improvements were seen thereafter. During FY 2122, the MSME and infrastructure sector witnessed a strong credit growth of Rs 2.3 lakh crore whereas credit to housing and NBFC sector remained close to Rs 2 lakh crore. As housing credit demand revived, most home financing companies neared their pre-Covid disbursements and were poised to deliver record disbursements in FY 22-23.

The recovery in the second half of FY 21 following release of pent-up demand after relaxation of the Covid-19 lockdown, reinforced revenue and earnings growth. This recovery was hindered by the second Covid-19 wave in Q1 FY 22. The effect was comparatively less than the previous fiscal, with the sector rebounding in Q2 FY 22 following enhanced disbursements and AUM.

From a sectorial perspective, asset quality was affected by an acute increase in overdues and restructured books during Q1 FY2022, which was only partially rectified in Q2 FY2022. Housing finance companies embarked on proactive measures to address the COVID-19 challenge by utilising digitally-enabled services for sourcing, processing and disbursing loans. An increasing population and underpenetrated market could continue to lead the growth of the affordable housing finance segment. From a liquidity perspective, the housing finance companies maintained healthy liquidity through the quarters, moderating their dependence on short-term financing sources like commercial paper that improved asset-liability mismatches in near-term buckets.

Credit rating agencies (India Ratings in this case) elevated the outlook for housing finance companies from Stable to Improving for the second half of current financial year ( RS 2 FY22) on the grounds that they possessed substantial liquidity, adequate capital buffers, stable margins on account of reduced funding cost and on-Balance Sheet provisioning buffers. ICRA anticipated securitisation volumes for housing finance companies and NBFCs to be more than Rs 120,000 crore in FY2022.

The outstanding loan portfolio of home loans in India stood at a sizable Rs 22.4 lakh crore a couple of years ago. The Indian home loan market grew by 32% between FY17 and FY21 and the market is expected to witness robust growth of 22% CAGR between 2021 and 2026, catalysed largely by the affordable housing market. (Source: Business Standard, Hindustan Times, Economic Times)

The affordable housing finance segment

Tier 2 to Tier 5 cities

The affordable housing finance segment accounts for the biggest share within Indias housing finance sector. A majority of Indias affordable housing finance Customers stay in Non-formal Tier-2 and Tier-3 cities and are newly introduced to the facility of credit. These Customers have a shallow informal income and are usually self-employed without formal income documents.

While affordable housing companies have seen a 140 bps spike in gross nonperforming assets, other housing finance companies saw their gross NPAs rising to 3.3% by December, 2021, up from 3% in September 2021. This is primarily because of the November 12, 2021, circular on recognition and calculation of NPAs, rather than any real mark-down in asset quality, according to a report by CRISIL.

As per the estimates of India Ratings and Research, housing finance companies are expected to register a 13% growth in 2022-23 compared to 11% growth in FY 21-22. The outlook for the sector remains positive due to improved affordability for borrowe Rs driven by low interest rates coupled with stable property prices and the low impact of the pandemic on job losses and wage growth in the salaried segment. (Source: Business Standard, Economic Times, Business World, the hindu business line)

The general features of the affordable housing finance segment comprised the following:

Low average ticket size: Around 70% of the segment was accounted by loans of Rs 10 lakh or less.

Self-employed: Almost all HFCs addressed the increasing needs of self employed segment generating higher yield over the salaried segment.

Composition: A majority of the funds were allocated to single units and selfoccupied houses, validating that loans catered to actual use and not investment.

Low loan to value: More than 60% loans possessed a Loan To Value of less than 70%, signifying a greater involvement of the borrower and lower risk for the lender.

Paperless income: Most borrowe Rs did not have a documented formal income and were brought by Customers with fresh exposure to credit. The process mandated a cash flow-based assumption.

SECTORIAL DEMAND DRIVERS

Housing shortage: Indias urban population is expected to nearly double its size between 2018 and 2050.

Over half of the population will need affordable and sufficient housing. This will be coupled with rising per capita income and nuclearisation of families. Affordable housing is the need of the hour. The government acted as a facilitator to make the segment an alluring venture for private develope Rs and introduced several incentives and schemes over the years.

Mortgage penetration: The mortgage penetration in India from formal lending sources stood at a meagre level as most of the houses are built with own funds and informal borrowing sources, indicating a growth headroom for housing finance companies.

Awareness: A growing awareness is seen across the salaried / self-employed segments that residential rental payments are equal to monthly installments that would be paid against home loans, catalysing the growth of housing finance sector.

Monetary support: The Reserve Bank of India extended fresh support under Special Liquidity Facility-2 of Rs 10,000 crore to the National Housing Bank for one year to support the housing finance sector. NHB initiated Special Refinance Facility - 2021 with the objective to offer short term refinance support to housing finance companies and other eligible PLIs on flexible terms and conditions. (Source: nhb.org)

Government support: The Government supported its Housing for all vision under the Pradhan Mantri Awas Yojana (PMAY). The Credit Linked Subsidy Scheme (CLSS) for the EWS and LIG were extended to March 2022.

Growing urbanisation: Indias urbanisation is expected to address around 60 crore Indians in urban cities by 2030. The country requires 700 to 900 million square mete Rs of residential and commercial space to be built annually to accommodate this number.

Demographics: More than 50% of Indias population is below 25 years and 65% of its population is below 35 years both are considered economically productive age group. The number of nuclear families is increasing due to job dispersal and social realities.

Economical: The cost of housing finance in India is the most economical across developing economies, drawing investments from alternative asset classes.

Country-wise mortgage penetration (%)

Denmark 88%
UK 67%
USA 56%
Singapore 52%
Hong Kong 45%
Germany 40%
Malaysia 34%
Korea Republic 31%
Thailand 20%
China 18%
India 11%
India (FY23 Estimated) 13%

Note: Nndia data for FY19, othe Rs for CY15

Source: MOSPI, United Nations Department of Economic and Social affairs, IMF, European Mortgage Federation, HOFINET, NHB, Company reports, CRISIL Research

GOVERNMENT SUPPORT

The RBI issued a master circular called Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021 on February 17, 2021, replacing directions issued earlier by NHB and RBI. The circular offe Rs a consolidated regulatory framework applicable to housing finance companies.

• To qualify as housing finance companies, 60% of the total assets (net of intangible assets) should comprise housing finance, of which at least 50% should be directed towards individual housing loans.

• RBI authorised lending to individual home buye Rs or construction of the same project

• Capital market exposure was capped at 40% of the net worth for housing finance companies

• Housing finance companies will need to achieve a minimum net owned fund of RS 20 crore by March 31,2023

The Government of India implemented the special liquidity scheme of Rs 30,000 crore to increase NBFC/HFC liquidity through a special purpose vehicle to minimise systemic risks. The eligible non-bank lende Rs were offered shortterm liquidity through a special purpose vehicle that would purchase short-term paper from eligible NBFCs/HFCs and use proceeds for extinguishing liabilities (Source: PIB)

Government policies

Atmanirbhar Bharat 3.0: The Atmanirbhar Bharat 3.0 package comprised income tax relief measures for real estate develope Rs and home buye Rs for primary purchase/sale of residential units of value up to Rs 2 crore from November 12, 2020 to June 30, 2021.

Affordable Housing Fund: The Government created an Affordable Housing Fund in National Housing Bank with an initial Rs 10,000 crore, using the priority sector lending shortfall of banks/ financial institutions for the microfinancing of housing finance companies

Alternative Investment Fund: The Union Cabinet set up an Alternative Investment Fund with a corpus of Rs 25,000 crore to revive-1,600 stalled housing projects across prominent Indian cities.

Pradhan Mantri Awas Yojana (Urban): As per the Union Budget 2022-23, the Indian government sought to complete the construction of 80 lakh houses for eligible PM Awas Yojana beneficiaries (rural and urban). An allocation of Rs 48,000 crore was made for this purpose.

Tax moderation: GST Council reduced tax to 5% from 12% on premium houses and to 1% from 8% for affordable houses.

Budgetary provisions

A budget allocation of Rs 48,000 crore for the Pradhan Mantri Awas Yojana (PMAY) has been announced for the fiscal year 2022-23, which is 75% higher than the Rs 27,500 crore budget allocation made in FY22 and marginally higher than the Rs 47,390 crore in the revised estimate for the current fiscal. A goal of completing 80 lakh houses has been set by the end of the fiscal year 2022-23.

The government announced an outlay of Rs 20,000 crore towards Gati Shakti for integrated logistics planning and coordinated implementation of infrastructure connectivity projects.

The Union Budget 2022-23 proposed that 1% TDS would be applied to nonagriculture immovable property of more than Rs 50 lakh on the basis of sale price or stamp duty value, whichever is higher, post an amendment in the Income Tax Act. The new change will come into effect from 1st April 2022.

Outlook

The prospects of Indias housing finance sector are expected to remain strong across the long-term as more Indians construct or purchase homes. As the Indian economy revives, the mortgage- to-GDP ratio of 11% (substantially less compared to other nations) could correct itself upwards, growing the sector to USD 750 billion in five years. The housing finance sector is anticipated to expand due to continuous population growth, increased non-metro growth, higher per capita income, home ownership preference, affordable home costs, continuous government support and sectorial under-penetration.

Projected Indian housing finance market growth

Year Loan assets ( Rs Trillion)
FY13 7
FY14 9
FY15 10
FY16 12
FY17 14
FY18 17
FY19 19
FY20E 22
FY21E 26
FY22E 31
FY23E 37
FY25E 54

COMPANY OVERVIEW

Aavas Financiers Limited (Aavas) is a housing finance company based in Jaipur, Rajasthan. The Company is principally involved in offering housing loans in rural and semi-urban under penetrated markets in states of Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Haryana, Uttar Pradesh, Chattisgarh, Uttarakhand, Punjab, Himachal Pradesh, Delhi, Odisha and Karnataka. The Company has a branch network of 314 (as on March 31, 2022) and assets under management of Rs 11,350.21 crore as on March 31, 2022.

AAVAS PERFORMANCE REVIEW;FY21-22

Financial performance

Income and profits

Total Income of the Company for the year ended March 31,2022 was Rs 1,305.56 crore compared to Rs 1,105.34 crore in the previous year, growing 18.1%. During the year ended March 31, 2022, the Company reported a Profit Before Tax of Rs 454.86 crore as against Rs 353.33 crore for the year ended March 31,2021, growing 28.7%. The Company reported a Total Comprehensive Income of Rs 357.51 crore for the year ended March 31, 2022 as against Rs 290.33 crore for the year ended March 31, 2021, a growth of 23.1% over the previous year.

Statement of profit and loss

Key features of the Statement of Profit & Loss for the year ended March 31,2022 were:

• Profit Before Tax increased 28.7% over Rs 353.33 crore in the previous year.

• Total Comprehensive Income enhanced 23.1% compared to Rs 290.33 crore in the previous year.

• Net Interest Margin stood at Rs 822.34 Cr

• The Companys Return on Average Total Assets stood at 3.57% for the year ended March 31, 2022.

• Total Expenses increased 13.1% during the year under review.

• The Earnings per share (Basic) stood at Rs 45.31 compared to Rs 36.94 in the previous year.

• Return on average net worth was 13.72% compared to 12.91% in the previous year.

• Debt-equity ratio stood at 2.84 times compared to 2.65 times in the previous year.

• The Companys Operating Expenses ratio (to average total assets) stood at 3.45% for the year ended March 31, 2022.

• Net profit margin stood at 27.33% compared to 26.27% in the previous year.

Operational performance

Aavas is a retail affordable housing finance company serving the low- and middle-income self-employed Customers in the semi-urban and rural areas of India. The Company offe Rs its Customers home loans for the purchase or construction of residential properties and the extension and repair of existing housing units.

As of March 31,2022, majority of the home loans disbursed by the Company were for single-unit properties, out of which, almost all of them were to be occupied by the borrowers. A majority of the Companys Customers have limited access to formal banking credit.

Loan products: The Company offered 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 offered Customers other mortgage backed loans including loans against property, which accounted for 27.92% of Gross Loan Assets as of March 31,2022.

As of March 31,2022, 65.4% of our 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

Sanctions: The Company sanctioned Rs 3,762.09 crore loans during the year compared to Rs 2,812.94 crore in the previous year, a growth of 33.7%. The cumulative loan sanctions since inception stood at Rs 18,221 crore.

Disbursements: The Company disbursed Rs 3,602.24 crore mortgage loans during the year compared to Rs 2,656.85 crore in the previous year, a growth of 35.6%.The cumulative loan disbursement since inception stood at Rs 17,357 crore by the end of the year.

Asset under Management (AUM):

The AUM of Company stood at Rs 11,350.21 crore (including assignment of Rs 2,343.78 crore ) as of March 31, 2022 compared to Rs 9,454.29 crore in the previous financial year, a growth of 20.1%. As of March 31,2022, the average loan sanctioned was Rs 8.64 lakh and average tenure was 178.33 months in the AUM (on origination basis).

Spread on loans: The average yield on loan assets as on March 31,2022 stood at 12.65% per annum compared to 13.16% as on March 31,2021. The average all-inclusive cost of funds stood at 6.88% per annum as on March 31, 2022 as against 7.40% as on March 31, 2021. The spread on loans was 5.77% as on March 31, 2022.

Non-performing assets: The Company maintained its gross NPAs at Rs 90.36 crore (0.99% of the loan assets) as on March 31,2022. The Company reviewed its delinquency and loan portfolio on a regular basis. The Company confirmed to a defined policy with procedures to address delinquencies and collections. As a result, Gross NPA and Net NPA as at March 31,2022 were 0.99% and 0.77% respectively (compared to 0.98% and 0.71% respectively as at March 31, 2021).

Capital adequacy ratio: The Company is required to maintain a Capital adequacy ratio of 15% on a standalone basis from March 31,2022. The Companys capital adequacy ratio as of March 31,2022 stood at 51.93% as against 54.38% in the previous financial year, which was far above the minimum required level of 15%.

Lending operations: The Companys lending operations remained strong with the growing demand for housing loans. Loans to the EWS and LIG segment increased by 18.6% and 21.5% respectively, in value terms compared to the previous year. The average home loan to the EWS and LIG segment was Rs 4.78 lakh and Rs 9.05 lakh.

Branch network: Aavas adopted contiguous on-ground expansion across regions; as of March 31, 2022, the Company conducted operations through 314 branches out of which, Aavas enjoys a strong presence in four states (Rajasthan, Gujarat, Maharashtra and Madhya Pradesh). The Companys registered office continued to be located in Jaipur, Rajasthan.

Resource mobilisation

Share capital: The issued and paid-up Equity Share Capital of the Company as on March 31, 2022 stood at Rs 78,93,64,510 (Rupees Seventy eight crore ninety three lakh sixty four thousand five hundred and ten) consisting of 7,89,36,451 (Seven crore eighty nine lakh thirty six thousand four hundred and fifty one) Equity Shares of Rs 10 each compared to Rs 78,50,45,510 (Rupees Seventy eight crore fifty lakh forty five thousand five hundred and ten) consisting of 7,85,04,551 (Seven crore eighty five lakh four thousand five hundred and fifty one) Equity Shares of Rs 10 each in previous year.

ESOP allotment: The Company issued and allotted 4,31,900 Equity Shares during the year pursuant to the exercise of stock options by the eligible employees of the Company under ESOP plans.

Term loans: During the year under review, the company received aggregate fresh loan sanctions amounting to Rs 1,650 crore and has availed loans aggregating to Rs 1,635 crore. The outstanding term loans from Banks and Financial Institutions as on March 31, 2022 stood at Rs 3,883.93 crore with average tenure of 9.15 years.

Securitisation/Assignment of Loan Portfol io: During the year under review, the Company received a purchase consideration of Rs 778.37 crore from assets assigned in pool buyout transactions. The pool buyout transactions were de-recognised in line with RBI guidelines on the securitisation of standard assets.

Refinance from National Housing Bank (NHB): During the year under review, the Company received fresh sanction of refinance assistance of Rs 750 crore under the NHB refinance scheme and Rs 417 crore under Special Refinance Scheme. The Company availed funds of Rs 1,416 crore under various refinance scheme such as for affordable housing fund, regular refinance scheme and special refinance facility. Total outstanding refinance at the end of the current Financial Year stood at Rs 2,206.76 crore (previous year Rs 1,872.39 crore).

Non-Convertible Debentures (NCDs):

NCDs were issued to banks, domestic Financial Institutions and multilateral/ development financial institutions. During the year under review, the Company diversified its borrowings by issuing NCDs to mutual funds. The NCDs of the Company are listed on Wholesale Debt Market segment of the BSE Limited. As on March 31,2022, the Companys outstanding NCDs were from:

• Multilateral/development financial institutions stood at Rs 878.86 crore as compared to Rs 911.38 crore as on March 31,2021.

• Domestic Mutual Funds stood at Rs 98.87 crore as compared to Rs 109.41 crore as on March 31, 2021

• Banks stood at Rs 174.93 crore as compared to Rs 244.92 crore as on March 31, 2021.

The subordinated debt in the form of NCDs stood at Rs 99.83 crore as against Rs 99.74 crore as on March 31, 2021.

Bond issued to multilateral institutions

Masala Bond: As on March 31,2022, the outstanding balance of Masala Bonds issued to multilaterals stood at Rs 199.29 crore.

Social Masala Bond: During the year under review, the Company issued its firsts Social Rupee Denominated Bond of INR 360 crore under the Social Bond Program to British International Investment ("erstwhile known as CDC"), the United Kingdoms Development Finance Institution which were listed on NSE International Exchange. As on March 31,2022, the outstanding balance of Social Masala bond stood at Rs 357.54 crore.

Commercial Paper (CP): The Company had not issued any commercial paper and short-term instrument during the Financial Year FY 21-22 and as on March 31, 2022, the Companys commercial paper outstanding was nil.

Credit rating: During the financial year under review, ICRA Limited and CARE Ratings Limited have upgraded the credit rating outlook of the company from AA-/ Stable to AA-/Positive.

The details of the same are mentioned below:

Nature of debt instrument Rating Agency Term Credit ratings
Non-convertible Debentures CARE Long Term AA-/ Positive
ICRA Long Term AA-/ Positive
Bank loans CARE Long Term AA-/ Positive
ICRA Long Term AA-/ Positive
Subordinated debt CARE Long Term AA-/ Positive
Commercial paper CARE Short Term A1 +
ICRA Short Term A1 +
India Ratings Short Term A1 +

The ratings validate the Companys healthy earnings profile, substantial capitalisation, robust net worth base and gradual improvement in its scale of operations.

HUMAN RESOURCE

The Company believes in its competitive advantage lying in its people. The people at Aavas possess multi-sectoral experience, technological experience and domain knowledge. The HR culture of the Company is embedded in its ability to disrupt legacy norms to enhance competitiveness. The Company takes decisions aligned with employees professional and personal goals, achieving an ideal work-life balance. The Companys permanent employees count stood at 5,222 people as of March 31, 2022.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The internal financial control of Aavas over financial reporting is a process that is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with the generally accepted accounting principles. The Companys internal financial control over financial reporting consists of the policies and procedures:

(1) Pertaining to maintenance of the records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company

(2) Providing reasonable assurance that transactions are being recorded as mandatory to permit the preparation of financial statements according to the generally accepted accounting principles and that the receipts and expenditures of the Company are prepared only in accordance with authorisations of management and Directors of the Company, and

(3) Providing reasonable assurance to prevent or timely detect unauthorised acquisition, use or disposition of the Companys assets which may have a material effect on the financial statements. The Company has a robust internal audit programme, where the internal auditors, an independent firm of Chartered Accountants, conduct a riskbased audit to not only test the adherence to policies and procedures but to also suggest improvements in the processes and systems. The audit program is agreed upon by the Audit Committee. Internal audit observations and recommendations are reported to the Audit Committee, which monito Rs the implementation of such recommendations.

CAUTIONARYSTATEMENT

This statement describes the objectives, projections, expectation and estimations of the Company, which may be forwardlooking statements within the meaning of applicable securities laws and regulations. Forward- looking statements are based on certain assumptions and expectations of future events.

The Company cannot guarantee that these assumptions and expectations are accurate or will be realised by the Company. The actual result may differ materially from those expressed in the statement or implied due to the influence of the external factors, which are beyond the Companys control. The Company assumes no responsibility to publicly amend, modify or revise any forwardlooking statements on the basis of any subsequent developments.