Aptus Value Housing Finance India Ltd Management Discussions

Operational Context

Indias Affordable Housing Finance Sector

Indias affordable housing finance sector continues to represent one of the most durable structural opportunities in the countrys financial services landscape. The convergence of two long run forces the ongoing dispersal of urbanisation into Tier 2, Tier 3, and Tier 4 towns, and the progressive formalisation of credit access for the self employed, low to middle income population has sustained demand for smaller ticket home loans in a manner that is structural rather than cyclical. FY2025 26 demonstrated the resilience of this thesis with particular clarity.

The aggregate AUM of Affordable Housing Finance

crore as at March 2025, having grown at approximately 18% per annum since FY21. Their share of the total HFC portfolio has nearly doubled from 10% to 18% over this period, reflecting the scale of the unmet need rather than any cyclical acceleration. Growth projections for FY26 and FY27 point to sustained AUM expansion in the 20 24% range for home loans, supported by favourable policy and macro conditions.

Policy and Macro Tailwinds FY26

The operating environment for affordable housing finance in FY26 was materially more supportive than in the preceding year across four dimensions:

PMAY 2.0: The revamped Pradhan Mantri Awas Yojana, launched with a significantly enhanced budgetary allocation, continued to generate demand for owner built and self constructed homes among EWS and LIG borrowers, the core customer segment of specialised AHFCs. The s chemes emphasis on beneficiary led construction is a direct catalyst for the type of small ticket, field underwritten lending that defines the Aptus model.

Rate Reduction Cycle: The Reserve Bank of India reduced its benchmark repo rate by a cumulative 100 basis points during the year from 6.25% in February 2025 to 5.25% in December 2025. This was the most significant rate reduction cycle since FY20 and had a direct, positive impact on the cost of borrowings for well rated housing finance companies. Aptuss cost of funds declined to 8.3% in FY26 and further to 8.1% in Q4 FY26 a material improvement that expanded net interest spread.

Credit Rating Upgrades: Both ICRA and CARE upgraded Aptuss long term rating to AA Stable during the year, enabling improved access to capital markets, lower incremental borrowing costs, and broadened lender relationships.

Demographic and Urbanisation Dynamics: Indias self employed informal workforce, the individuals that Aptus primarily serves continued to expand, with urbanisation into Tier 3 and Tier 4 towns generating new homeownership demand. This is not a short term phenomenon; it is the product of decades long structural migration that will continue for at least two more decades.

Sector Growth Metrics

as at March 2025, having compounded at approximately 18% per annum since FY21. Their share of the total HFC loan portfolio has nearly doubled, from approximately 10% as at March 2021 to approximately 18% as at March 2025, reflecting the scale of the unmet need rather than any cyclical acceleration. Rating agencies project sustained sector AUM growth of approximately 20 to 22% for FY26 and FY27, with home loan growth within the AHFC segment expected at 18 to 20%, supported by favourable policy and macro conditions.

Metric	FY22	FY23	FY24	FY25	FY26 (E)	FY27 (P)
	0.80	1.00	1.25	1.55	1.90	2.25
AHFC Sector AUM Growth (%)	15%	23%	29%	21%	22%	20%
AHFC Home Loan Growth (%)	10%	21%	26%	20%	18 20%	18 20%

Source:CareEdge Ratings, CRISIL Ratings

The data above reflects the sustained structural expansion of the AHFC segment, driven by untapped geographic potential, a supportive policy environment, and growing financial inclusion momentum. Within this context, companies with proprietary underwriting capabilities, in house branch networks, and deep community relationships are best positioned to capture the next wave of growth and Aptus has demonstrated precisely these capabilities.

Ticket Size Evolution

A recurring investor question is whether the affordable housing opportunity is shrinking, given that the share of smaller ticket loans appears to be declining across the industry. Bureau data confirms this surface level trend:

16% over the same period. Read in isolation, this looks like premiumisation, a migration of borrowers and lenders away from the smallest ticket sizes.

The more accurate reading, however, is that affordable housing is evolving with inflation rather than disappearing. Indias Housing Price Index (HPI) has grown 1.3x and the Consumer Price Index (CPI) has grown 1.4x since FY19,

approximately 37 40% of total value throughout this period, rather than the 28% suggested by an unadjusted, nominal value reading. The effective addressable market for affordable housing financiers is therefore materially larger than headline ticket size statistics imply.

Ticket Size (FY19 Original)	HPI Adjusted (1.3x) Dec\u201925	CPI Adjusted (1.4x) Dec\u201925

This has a direct and positive implication for Aptus. The Companys core lending range of approximately

Home Loans sits squarely within the inflation adjusted affordable bracket. Borrowers within this bracket are not migrating upmarket in any structural sense; they are organically requiring a larger loan for the same underlying home as construction costs and property values rise. Aptuss ongoing increase in average

policy introduced in FY26 and partly by property value inflation, should therefore be read as a natural and benign repricing of the same addressable customer not as a drift away from the affordable segment that defines the Companys franchise.

Industry data corroborates this reading at the portfolio level: as at December 2025, affordable housing loans

approximately 65% of total housing finance volumes

segment having grown at a CAGR of approximately 12% between FY23 and FY25. Independent market estimates project the affordable housing finance

CAGR of approximately 12% through FY30, expanding

with Aptuss underwriting depth, branch density, and 16 year community relationships in precisely this ticket size band, this represents a long runway of structural, rather than cyclical growth.

Banking Sectors Outstanding Housing AUM Mix Across Ticket Size, FY17 Dec25 (Source: RBI)

This is a structural, not cyclical, trend, and it is directly relevant to Aptuss s trategic positioning. Banks

operating economics of a large bank model: smaller

Banks Retreating from Smaller Ticket Loans

A related and equally important data point for investors is how the banking sectors own housing portfolio has shifted across ticket sizes. Reserve Bank of India data on banks outstanding housing AUM shows a clear and

has fallen from approximately 16.6% of banks housing book in FY17 to approximately 4.7% as at December

approximately 34.6% to approximately 20.9% over the

from approximately 23% of banks housing AUM in FY17 to approximately 43.6% by December 2025.

ticket affordable housing borrowers typically carry informal income profiles, require local, field based sourcing and underwriting, and need higher touch collections and servicing characteristics that are difficult for large banks to serve profitably at scale, but that play directly to the strengths of an in house, branch led, community embedded model such as Aptuss. Rather than signalling weakening demand in affordable housing, the data indicates that banks are reallocating capital toward larger ticket loans while continuing to exit, gradually, the very ticket size band in which specialised affordable housing finance companies operate.

For Aptus specifically, whose core customer segment

toward which banks are increasingly oriented. This dynamic is constructive rather than concerning. As banks continue to reduce their presence in the

Aptuss core customer segment should, if anything, moderate over time, reinforcing rather than eroding the addressable opportunity for a lender purpose built to serve this customer base.

Global and Indian Macroeconomic Developments

The operating environment for Indian housing finance companies in FY2025 26 was shaped by a combination of global and domestic macroeconomic developments. While global conditions remained mixed, the domestic macroeconomic backdrop was distinctly supportive of credit growth in the affordable housing segment, and this section sets out the key developments and their bearing on Aptuss business.

Global Economic Backdrop

Global growth through FY26 remained moderate and uneven, shaped by persistent geopolitical tensions, divergent monetary policy paths across major economies, and continuing volatility in trade and tariff policy. Major central banks, including the US Federal Reserve, pursued a cautious and data dependent approach to monetary easing, while inflation in several advanced economies moderated from the highs of the preceding two to three years but remained above pre pandemic norms in places. Global capital flows to emerging markets were selective, favouring economies with stable macroeconomic fundamentals, credible policy frameworks, and resilient domestic demand.

India was a relative beneficiary of this global environment. With a large, consumption driven domestic economy that is less exposed to global trade volatility than export oriented peers, India continued to attract foreign portfolio and institutional capital even as several other emerging markets saw more volatile flows. For a domestically focused, retail oriented lender such as Aptus, this global backdrop is relevant primarily through two channels: its influence on the Reserve Bank of Indias monetary policy stance, and its effect on the cost and availability of capital for AA rated and similarly placed Indian financial institutions seeking diversified, including overseas linked, funding sources.

Indian Economic Context

The Indian economy continued to demonstrate resilience through FY26, remaining among the fastest growing major economies globally, supported by robust domestic consumption, sustained government capital expenditure, and s teady formalisation of the economy. Headline retail inflation moderated through the year, staying within the Reserve Bank of Indias medium term target band for much of FY26, which provided the central bank with the room to pursue the rate reduction cycle described elsewhere in this report. The Reserve Bank of India reduced its benchmark repo rate by a cumulative 100 basis points during the year from 6.25% in February 2025 to 5.25% in December 2025 the most significant easing cycle since FY20, reflecting policymakers confidence in the inflation trajectory and an intent to support credit growth and investment activity.

Household income growth, while uneven across segments, continued to improve gradually for Indias self employed and informal income population the customer base that Aptus serves. Government emphasis on infrastructure investment, rural and semi urban income support measures, and continued formalisation of credit access through expanding Account Aggregator and Unified Lending Interface (ULI) frameworks all contributed to an improving credit environment for underserved borrowers. Urbanisation into Tier 2, Tier 3, and Tier 4 towns continued at a steady pace, s ustaining the underlying demand for home ownership that underpins the affordable housing finance opportunity.

Implications for the Housing Finance Industry

Lower Cost of Funds: The RBIs rate reduction cycle directly lowered the cost of borrowings for well rated housing finance companies across the sector, expanding net interest spreads for lenders with a meaningful proportion of fixed rate assets and floating rate liabilities a structural position that benefited Aptus directly, with cost of borrowings declining from 8.7% in FY25 to 8.3% in FY26.

Sustained Credit Demand: Moderating inflation and a s table rate environment s upported borrower affordability and sustained demand for home loans, particularly in the affordable and mid income segments where price sensitivity is comparatively higher.

Continued Capital Market Access: Indias relative macroeconomic stability, against a more uncertain global backdrop, supported continued institutional and foreign investor appetite for high quality, well rated Indian financial sector credit dynamic reflected in the strength of demand seen for NCD issuances by AA rated housing finance companies, including Aptus, during the year.

Formalisation Tailwinds: Continuing government and regulatory emphasis on credit formalisation through Account Aggregator adoption, ULI integration, and digital public infrastructure improved the ability of housing finance companies to underwrite informal income borrowers with greater precision, directly s upporting origination quality across the industry.

Taken together, the global and domestic macroeconomic environment in FY2025 26 was constructive for the housing finance industry, and particularly so for affordable housing focused lenders with the underwriting capability to serve Indias employed population. The combination of a benign inflation trajectory, a meaningful rate reduction cycle, and continued formalisation of credit access created conditions in which a well capitalised, in house operating model such as Aptuss was well placed to convert macro tailwinds into operating outcomes as reflected in the Companys FY26 performance set out in the sections that follow.

Overview of Company

Aptus Value Housing Finance India Limited was incorporated in 2009 with a singular, enduring mission: to extend formal home loans to self-employed, low and middle income, first time homebuying families in Indias semi urban and rural heartland households that are structurally excluded from mainstream banking because their income is real but undocumented Aptus is a housing finance Company registered with the National Housing Bank and is classified as a Middle Layer NBFC by the Reserve Bank of India. The Company was listed on BSE Ltd and National Stock Exchange of India Limited on August 24, 2021. As of 31 March 2026,

across 339 branches in 6 states and 1 Union Territory, serving 1,87,889 active borrowers, with a workforce of 3,807 employees.

Financial Performance

For the financial year ended March 31, 2026, the Company delivered another year of strong financial performance, underpinned by sustained business growth, operational efficiency, and disciplined

reflecting the continued expansion of the Companys lending franchise and customer base. Profit before

to translate growth into consistent profitability. The

as of March 31, 2026, reinforcing its robust capital position and long-term value creation capabilities. The Company continued to maintain industry-leading profitability metrics during the year. Return on Assets (ROA) stood at 7.9%, while Return on Equity (ROE) was 20.1%, reflecting the effectiveness of its business model, prudent risk management practices, and focus on operational excellence. The strong ROA underscores the Companys ability to generate superior earnings from its asset base, while the healthy ROE highlights efficient capital deployment and sustained shareholder value creation. The Companys performance during the year was supported by stable asset quality, a diversified funding profile, and continued investments in technology and process enhancement. Despite operating in an increasingly competitive environment, the Company remained focused on profitable growth while maintaining its commitment to prudent underwriting standards and customer-centric service delivery. Looking ahead, the Company remains well-positioned to capitalize on the significant opportunities in the housing finance sector. With a strong balance sheet, scalable operating platform, and disciplined approach to growth, the Company will continue to focus on expanding its reach, enhancing operational efficiencies, and delivering sustainable value to all stakeholders.

Income Statement Analysis

Particulars	FY26	FY25	FY24	FY23	Growth FY26	Highlights
Total Income	2,245	1,798	1,409	1,135	+25%	A record high
Interest Expenses	648	540	388	276	+20%	CoB declined to 8.3%
Net Income Margin (NIM)	1,597	1,258	1,021	859	+27%	13.3% of average AUM
Operating Expenses	324	255	207	165	+27%	Branch expansion + investment in technology
Profit Before Tax	1,211	975	793	654	+24%
Profit After Tax	943	751	612	503	+26%	29% 5 yr CAGR

Key Financial Ratios

Particulars	FY26	FY25	FY24	FY23	Direction
Return on Assets (RoA)	7.9%	7.7%	8.0%	8.4%	Improving
Return on Equity (RoE)	20.1%	18.8%	17.3%	16.3%	Improving
Net Interest Spread	8.9%	8.7%	8.7%	8.9%	Improving
NIM to Average Assets	13.3%	13.0%	13.4%	13.9%	Improving
Opex to AUM	2.7%	2.6%	2.7%	2.8%	Stable
Credit Cost	0.5%	0.3%	0.3%	0.7%	Within guided range
Gross NPA	1.52%	1.19%	1.07%	1.15%	Modest increase
Net NPA	1.15%	0.89%	0.80%	0.87%	Modest increase
Provision Coverage Ratio	25%	25.2%	26.9%	N/A	Maintained
CRAR	71.0%	71.3%	73.0%	77.4%	Well above minimum regulatory requirement
Debt Equity Ratio	1.6:1	1.6:1	1.4:1	1.2:1	Organic leverage growth

Spread Management The Foundation of Aptuss RoA

Metric	FY26	FY25	FY24	FY23
Yield on Advances (%)	17.2%	17.4%	17.3%	17.0%
Cost of Borrowings (%)	8.3%	8.7%	8.6%	8.1%
Net Interest Spread (%)	8.9%	8.7%	8.7%	8.9%
NIM to Average Assets (%)	13.3%	13.0%	13.4%	13.9%

Five Year Performance Trajectory

Metric	FY26	FY25	FY24	FY23	FY22	FY21	5 yr CAGR
	13,107	10,865	8,722	6,738	5,180	4,068	26%
	943	751	612	503	370	267	29%
	5,060	4,317	3,768	3,339	2,916	1,979	~18%
Opex to AUM (%)	2.7%	2.6%	2.7%	2.8%	2.5%	2.7%
RoA PAT (%)	7.9%	7.7%	8.0%	8.4%	8.0%	7.4%
RoE (%)	20.1%	18.8%	17.3%	16.3%	14.5%	14.5%

Operational Highlights

previous financial year.

healthy year-on-year growth of 21%. This sustained growth underscores the trust and confidence that customers, partners, and stakeholders continue to place in the Company. It also highlights the Companys consistent focus on expanding its portfolio, strengthening customer relationships, and delivering sustainable long-term value. The Company has developed strong internal capabilities across critical operational functions, including underwriting, customer onboarding, digital collections, business intelligence, and analytics. These capabilities have enabled the Company to scale efficiently across diverse geographies while maintaining robust risk management and operational discipline.

Technology continues to serve as a key enabler of the Companys growth strategy, driving improvements across the customer lifecycle from acquisition and onboarding to servicing and collections. The Company remains committed to leveraging emerging technologies, particularly artificial intelligence (AI), to enhance decision-making, improve operational efficiency, strengthen risk management, and deliver superior customer experiences.

During the year, the Company achieved a 92% adoption rate for digital agreements, reflecting increasing customer preference for seamless and paperless processes. Customer engagement through digital channels remained strong, with 99.5% of customers actively using the Customer App. Digital collections continued to perform well, with 94% of collections executed through digital modes, demonstrating the effectiveness of the Companys technology-driven collection infrastructure. Additionally, account aggregator penetration increased to 82%, further strengthening the Companys ability to leverage data-driven insights for enhanced credit assessment and inclusive lending.

The Company continued to maintain a prudent approach to asset quality while expanding its geographic footprint. As of March 31, 2026, Gross Non-Performing Assets (GNPA) stood at 1.52%, compared to 1.19% in the previous financial year, while Net Non-Performing Assets (NNPA) stood at 1.15%, compared to 0.89% in the previous year. Despite the marginal increase, asset quality remained well within industry benchmarks, supported by disciplined underwriting practices, effective risk management frameworks, and technology-enabled monitoring and collection mechanisms. The Company remains focused on maintaining a high-quality loan portfolio while pursuing sustainable growth opportunities. The Company expanded its branch network to 339 branches as of March 31, 2026, compared to 300 branches in the previous financial year. This expansion has enabled deeper penetration into underserved markets and enhanced accessibility for customers across rural and semi-urban regions.

The Companys active customer base grew by 16% year-on-year to over 1.88 lakh customers, reflecting the effectiveness of its customer outreach initiatives, tailored financial s olutions, and commitment to building long-term customer relationships. T he continued growth in both physical presence and customer engagement demonstrates the Companys strong execution capabilities and reinforces its commitment to inclusive and scalable growth. As of March 31, 2026, the Company maintained a

including undrawn s anctions from banks. T his provides s ignificant financial flexibility to support business growth and meet funding requirements while maintaining prudent risk standards.

The Company remains well capitalized, with a net

The capital adequacy ratio stood at a robust 71%, significantly above the regulatory requirement, providing substantial capacity to absorb risks and support future growth initiatives.

Reinforcing its strong financial position, the Company achieved a significant milestone during the year with the upgrade of its credit ratings to AA (Stable) by both CARE Ratings and ICRA. The rating upgrade reflects the Companys consistent financial performance, robust governance framework, prudent risk management practices, strong capitalization, and resilient asset quality. This achievement underscores the confidence of external rating agencies in the Companys business model and long-term growth prospects. Collectively, these strengths highlight the Companys resilience, enhance its market credibility, and reinforce its commitment to maintaining a healthy balance sheet while creating sustainable value for all stakeholders.

AUM and Disbursements

Metric	FY26	FY25	YoY Change	Highlights
Consolidated AUM			+21%	26% 5 yr CAGR; highest ever AUM
HFC AUM			+18%	71% of consolidated AUM
NBFC AUM			+29%	29% of consolidated; 100% SBL
Loan Sanctions			+13%	Continued demand across customer segments target
Total Disbursements			+11%
Customers	1,87,889	1,61,597	+16%	1.88 lakh active borrowers at year end
Avg Ticket Size HL			+10%	Quality upgrade + property inflation
Avg LTV	~40%	~40%	Stable	Discipline maintained across all products

Loan Products

Aptuss product architecture is built around a single guiding principle: every product must serve the genuine financial needs of the self employed, low to middle income Tier 2/3/4 borrower within a secured, low LTV framework that protects both customer and Company. There are no unsecured products, no high yield sub prime products, and no documentation shortcuts.

Product	Avg Ticket	Avg	Avg LTV	Customer Profile	Portfolio
	Size	Tenure			Weight
Home Loans (HL)		10.3 years	~40%	Self-employed low/middle income; Tier 2/3/4; first time homebuyers	68% of HFC book
Quasi Home Loans (QHL)		9.4 years	~40%	Self-occupied residential property; home construction, purchase, refinancing	25% of HFC book
Small Business Loans (SBL)		8.1 years	~40%	Self-employed micro entrepreneurs; business expansion; working capital	100% of NBFC book

(Note: The remaining 7% of HFC book comprises of Top-up loans and Insurance loans)

Entity	AUM	Product Mix	Yield	GNPA (approx.)
HFC		68% HL, 25% QHL, 7% insurance & top up	14.5 - 15.5% (HL) 16.5 - 17.5% (QHL)	Lower; stable collateral
NBFC		100% SBL and non HL	~18.0 - 19.5%	Slightly higher; SBL seasoning
Consolidated			17.2%	1.52%

Risk Management Framework

Effective risk management remains a critical enabler of the Companys s ustainable growth, financial s tability, and long-term value creation In an increasingly dynamic and evolving business environment, the Company continues to strengthen its risk management framework to proactively identify, assess, monitor, and mitigate risks arising from internal and external factors. The framework is designed to support informed decision-making, preserve stakeholder interests, and maintain an appropriate balance between risk and return while ensuring compliance with applicable regulatory requirements.

The Company has established a comprehensive Risk Management framework (RMF) that is embedded across business functions and operational processes. The framework covers all material risks inherent in financial services, including credit risk, market risk, liquidity risk, interest rate risk, operational risk(including information technology related risk), cyber security risk, compliance risk, reputational risk, outsourcing risk, fraud risk, and strategic risk. These risks are reviewed annually at the time of ICAAP documentation which identifies material risks not captured by regulatory capital requirements and incorporates stress testing, scenario analysis and projected financials. Though submitted annually, ICAAP is a continuous process involving dynamic reassessment. The outcomes are initially presented to the RMC and once cleared by them is placed before the Board for approval before being submitted to the Regulator. An independent review by an Independent External Consultant is also conducted annually.

The Risk Management Committee ( RMC) of the Board continues to play a key role in overseeing the Companys overall risk profile and strengthening its risk management practices. The Committee is constituted in line with applicable regulatory requirements and comprises members with expertise in finance, risk management, and governance. It meets quarterly during the year to review key risk exposures, emerging risks, and the effectiveness of the Risk Management Framework.

The Chief Risk Officer (CRO) continues to play a pivotal role in driving the Companys risk management agenda. The CRO is responsible for overseeing the implementation of the risk management framework, monitoring risk exposures, assessing emerging risks, and ensuring the effectiveness of risk mitigation strategies across the organization. T o maintain independence and objectivity, the CRO reports directly to the Risk Management Committee and provides regular updates on key risk metrics, control effectiveness, and material risk developments requiring management or Board attention. Through its robust risk governance s tructure, disciplined risk management practices, and strong control environment, the Company remains well-positioned to navigate uncertainties, capitalize on growth opportunities, and s afeguard s takeholder interests. The Board believes that the Companys risk management framework is commensurate with the nature, size, and complexity of its operations and continues to support the achievement of its strategic objectives while maintaining financial and operational resilience.

The Companys commitment to transparent disclosures, prudent risk management practices, and regulatory compliance reinforces its position as a responsible and trusted financial institution, thereby enhancing confidence among customers, regulators, investors, lenders, and other stakeholders.

The Company has identified the following key risks and has implemented appropriate mitigation strategies to manage and monitor them effectively:

Risk Type	Mitigation Strategies
Credit Risk Credit risk is the potential for loss/default due to a borrower\u2019s failure to meet contractual obligations under their respective loan agreements.	Credit including credit concentration risk is important for the HFC and these risks have to be properly monitored and managed to avoid potential losses for the HFC through credit quality downgrade of borrowers, portfolio value deterioration, erosion of collateral value etc. Aptus manages Credit Concentration Risk by planning for a well-diversified and well dispersed credit portfolio. Concentration Risk refers to the risk arising from concentration in certain business sectors or geographical regions. The Housing Finance Company (HFC) has adopted a calibrated approach to sectoral exposure, with a focus on prudent credit risk management. Our risk based underwriting involves comprehensive assessment enabling accurate evaluation of borrowers\u2019 creditworthiness, repayment capacity, and potential risk indicators,. Loan disbursements are executed in a phased manner aligned with project milestones and are subject to validation through independent technical and field verification processes. This ensures that funds are released only after confirming actual progress, thereby mitigating the risk of diversion or misuse of loan proceeds. Our underwriting framework incorporates multiple verification touchpoints including field investigations, document authentication, tele-verification, bureau checks, account aggregator validations and third-party data validation. Continuous portfolio monitoring and early warning signal tracking further strengthen our credit risk management framework.
Market Risk Market risk is defined as the risk of losses in the on-balance sheet and off-balance sheet positions arising from movements in market prices	In accordance with regulatory requirements, the Company has implemented a Board-approved Risk Management Policy and Asset-Liability & Liquidity Risk Management Framework. The Asset-Liability Management Committee (ALCO) discusses the Market Risk at their monthly meetings, and the minutes of these meetings are placed before the Board on a quarterly basis The policy establishes a structured process for identifying, measuring, monitoring, and managing market risks across the organization. The Company continuously monitors developments in the economic and financial environment, including movements in interest rates, inflation trends, funding market conditions, regulatory changes, and government policies. Periodic stress testing and scenario analysis are conducted to assess the potential impact of adverse market conditions on earnings, liquidity, and capital adequacy, thereby supporting informed decision- making and maintaining financial resilience.
Interest Rate Risk Interest rate risk refers to the vulnerability of HFC\u2019s financial health to unfavourable changes in interest rates. Risk Type	This risk affects the net interest margin due to discrepancies in the duration of assets and liabilities. To effectively manage interest rate risk, the Company maintains an optimal balance between short-term and long-term borrowings while diversifying funding sources to ensure cost efficiency and reduce refinancing risk. Under the Asset-Liability Management ( ALM) framework, assets and liabilities are classified into defined maturity and repricing buckets to identify and monitor interest rate sensitivities and mismatches. The Asset- Liability Management Committee (ALCO) regularly reviews ALM reports, interest rate sensitivity analyses, and stress-testing outcomes to evaluate the potential impact of rate movements on earnings and net worth. Appropriate corrective actions are initiated whenever required to ensure alignment with the Company\u2019s risk appetite and business objectives. Mitigation Strategies
Liquidity Risk Liquidity risk arises from the potential inability to meet financial obligations as they become due without incurring unacceptable losses or disruption to business operations.	Liquidity risk is actively managed through a structured governance framework overseen by the Asset-Liability Management Committee (ALCO). Assets and liabilities are periodically analyzed across various maturity buckets to identify potential liquidity mismatches and funding gaps. The Risk Management Committee will be responsible for evaluating the overall risks faced by the HFC including liquidity risk and shall report to the Board. Stress testing is applied across key risk categories including liquidity risks. These tests simulate extreme but plausible scenarios such as asset volatility or liquidity shortages to assess the potential impact on the HFC\u2019s capital adequacy, liquidity position, and overall financial stability. The Company maintains adequate liquidity buffers and diversified funding sources to ensure timely fulfilment of borrower disbursements, debt servicing obligations, operational expenses, and regulatory requirements.
Operational Risk Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events. It also includes the credit and market risk events which have been caused by an operational risk event and non- compliance with a legal or regulatory requirement, internal guidelines, process requirement or fraud	Operational risks include identifying risks like employee dishonesty, fraud, cyber threats, and natural disasters, and assessing their potential impact on financial stability and operational continuity. The Company has established a robust internal control framework focused on proactive risk identification, continuous monitoring, and timely mitigation. Key elements include segregation of duties, maker-checker controls, authorization protocols, process automation, periodic audits, vendor due diligence, and business continuity planning. Regular employee training, performance monitoring, internal audits, and risk assessments are conducted to strengthen operational resilience and ensure adherence to established policies and procedures.
Information Technology Risk Information Technology risk refers to the potential for financial loss, disruption, or reputational damage resulting from the failure, inadequacy, or exploitation of information systems and digital infrastructure. This risk encompasses a wide range of exposures, including system outages, data breaches, cyberattacks, obsolescence of legacy systems, and failures in IT governance or third-party technology services	Well-defined IT policies and procedures are fundamental for managing technology risks effectively. They provide a s tructured approach to risk management and ensure consistency across the organization. The Company has implemented a comprehensive IT and cybersecurity framework comprising preventive, detective, and corrective controls. Key measures include:
	Automated daily backups of critical data in secure cloud environments and periodic restoration testing.
	Cloud-based Disaster Recovery (DR) infrastructure with periodic mock drills and business continuity testing.
	Regular vulnerability assessments and penetration testing are essential for identifying and addressing security weaknesses before they can be exploited. These are being carried out as per regulatory requirements.,
	A formal Cyber Crisis Management and Incident Response Framework to facilitate prompt detection, containment, and recovery from cyber incidents.
	Regular review and reporting of cyber-security policies ensure that the organization remains vigilant and proactive in managing cyber risks as well as have employees take part in cybersecurity awareness programmes, phishing simulations, and other employee training initiatives to foster a strong security culture across the organization.
	External IS audits provide an independent assessment of the organization\u2019s IT controls and processes and IS audit is conducted every year. They help in identifying gaps and ensuring compliance with industry standards

Risk Type	Mitigation Strategies
Compliance Risk Compliance risk refers to the potential for legal or regulatory sanctions, financial loss, or reputational damage a HFC may suffer as a result of its failure to comply with applicable laws, regulations, codes of conduct, and standards of good practice	The Company manages compliance risk through a Board-approved Compliance Policy overseen by the Chief Compliance Officer (CCO) and a dedicated compliance function.
	A digital compliance management platform is utilized to monitor regulatory obligations, assign responsibilities, track due dates, and provide management reporting. T his technology-enabled approach enhances transparency, accountability, and timely compliance execution.
	Periodic compliance reviews, regulatory horizon scanning, policy updates, and employee awareness programmes ensure that the Company\u2019s governance framework remains responsive to evolving regulatory expectations and industry best practices.
Human Resource Risk Human Resource Risk refers to the potential impact on business performance arising from talent shortages, employee attrition, skill gaps, succession challenges, employee misconduct, inadequate workforce planning, and changing workforce expectations.	The Company recognizes that its employees are a critical driver of sustainable growth and operational excellence.
	To mitigate HR-related risks, the Company has implemented a comprehensive human capital management framework focused on talent acquisition, employee engagement, capability development, succession planning, and performance management.
	Key initiatives include:
	i. structured recruitment processes, competitive compensation and benefits programmes, learning and development initiatives, leadership development programmes, employee wellness measures, periodic employee engagement surveys and long-term incentive programmes such as the Employee Stock Option Plan (ESOP).
	ii. T he Company also promotes a culture of integrity, inclusion, diversity, and continuous learning through clearly defined policies, code of conduct requirements, grievance redressal mechanisms, and regular training programmes. T hese measures help s trengthen employee retention, enhance productivity, and ensure the availability of a skilled workforce aligned with the Company\u2019s strategic objectives.

Internal Control Systems

The Company has established and maintained an adequate and effective system of internal financial controls commensurate with the size, scale, and complexity of its operations. The internal control framework is designed to provide reasonable assurance regarding the reliability of financial reporting, safeguarding of assets, prevention and detection of frauds and errors, compliance with applicable laws and regulations, and the efficient and orderly conduct of business operations.

In line with the regulatory requirements prescribed by the Reserve Bank of India (RBI), the Company has implemented a comprehensive Risk-Based Internal Audit (RBIA) framework. The RBIA approach enables a systematic evaluation of key business processes and controls by prioritizing audit coverage based on the significance of risks and their potential impact on the Companys objectives. The framework facilitates the identification of emerging risks, assessment of control effectiveness, and continuous strengthening of the risk management environment.

The Internal Audit function, which operates independently and reports functionally to the Audit Committee of the Board, conducts risk-based audits across various business and support functions as well as across various branches. The scope of internal audit is periodically reviewed and aligned with the Companys risk profile and regulatory expectations. Audit observations, recommendations and s tatus of corrective actions are regularly reviewed by the management as well as discussed in the Audit Committee to ensure effective remediation and continuous improvement in internal controls and governance practices.

To augment the effectiveness of the internal audit function, the Company has engaged M/s. RGN Price & Co., Chartered Accountants, to support the Internal Audit team in conducting audits of Head Office functions and selected key processes. Their professional expertise and independent perspective contribute to a more comprehensive assessment of internal controls and facilitate the timely identification and mitigation of control gaps and process inefficiencies.

The Companys internal control environment is supported by periodic monitoring mechanisms, management reviews, policy oversight, and corrective action tracking processes. Audit observations and recommendations are systematically reviewed, and action plans are implemented and monitored to ensure timely closure and continuous improvement. Further, the Statutory Auditors independently evaluate the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting as part of their s tatutory audit. Their assessment is conducted in accordance with the Standards on Auditing and other applicable guidance issued by the Institute of Chartered Accountants of India (ICAI). The auditors report on internal financial controls provides additional assurance to stakeholders regarding the robustness and effectiveness of the Companys financial reporting framework. All significant audit findings and reports, including those submitted by the Internal Auditors, are placed before the Audit Committee of the Board for its review and oversight. The Audit Committee regularly monitors the implementation of audit recommendations, evaluates the effectiveness of corrective actions taken by management, and provides strategic guidance for strengthening the overall control environment Through its active oversight and engagement, the Audit Committee plays a vital role in enhancing governance standards, accountability, transparency, and risk management across the organization.

The Company remains committed to continuously enhancing its internal control framework and governance standards in line with evolving business requirements, technological advancements, and regulatory expectations, thereby s upporting sustainable growth and protecting the interests of all stakeholders.

Opportunities and Challenges

Affordable housing finance sector continues to play a pivotal role in advancing financial inclusion and supporting Indias housing aspirations. Supported by favourable demographics, increasing urbanization, rising disposable incomes, and continued policy emphasis on affordable housing, the sector remains well-positioned for long-term growth. At the same time, evolving customer expectations, technological advancements, regulatory developments, and macroeconomic uncertainties continue to shape the operating landscape.

As an Affordable Housing Finance Company (AHFC), we remain focused on leveraging emerging opportunities while proactively addressing potential challenges through prudent risk management, digital innovation, operational excellence, and customer-centric solutions. This balanced approach enables . us to strengthen our market position and create sustainable value for all stakeholders.

The following section outlines the key opportunities and challenges that are expected to influence the affordable housing finance sector and our business in the medium to long term.

Opportunities

Key Opportunity	Strategic Relevance to AHFC
Expanding Affordable Housing Demand	India\u2019s housing shortage, particularly within economically weaker and low-income segments, continues to create significant growth opportunities for AHFCs. Increasing home ownership aspirations in Tier II, Tier III and semi-urban markets, coupled with improving affordability levels, are expected to support sustained demand for housing finance.
Government Policy Support and Infrastructure Development	Continued policy focus on affordable housing, infrastructure development, urban renewal initiatives and housing-related incentives is expected to improve housing accessibility and stimulate demand. Government efforts aimed at financial inclusion and formalization of the economy are also expanding the addressable customer base for AHFCs.
Digital Transformation and Process Automation	Advances in digital technologies, analytics, Artificial Intelligence (AI), machine learning and automation are enabling faster credit assessment, improved underwriting accuracy, enhanced customer experience and greater operational efficiency. Digital adoption also supports deeper penetration into underserved markets at a lower cost.
Formalization of the Informal Economy	Increased digitization of financial transactions, wider adoption of GST and growing financial footprints among self-employed individuals are improving income visibility and credit assessment capabilities. This provides AHFCs with greater opportunities to serve customers traditionally excluded from formal credit systems.

Key Opportunity	Strategic Relevance to AHFC
Diversified Funding and Strategic Partnerships	Co-lending arrangements, securitization transactions, assignment of receivables and partnerships with banks and fintech companies continue to provide avenues for funding diversification, risk sharing and market expansion while improving capital efficiency.
ESG and Sustainable Housing Initiatives	Growing focus on sustainability and responsible finance presents opportunities for AHFCs to integrate environmental, social and governance (ESG) considerations into their lending practices. Demand for energy-efficient housing and sustainable financing solutions is expected to gain momentum over the coming years.

Challenges

Key Challenge	Potential Impact on the business of AHFCs
Macroeconomic and Interest Rate Uncertainty	Changes in interest rates, inflationary pressures, geopolitical developments and broader economic conditions may affect borrowing capacity, housing demand and repayment behaviour, particularly among self-employed and informal income borrowers.
Credit Risk and Asset Quality Management	The affordable housing customer segment often exhibits variable income patterns and limited formal income documentation. Economic disruptions, regional slowdowns or sector-specific stress may impact repayment capacity and result in higher delinquencies and credit costs.
Competitive Intensity	Increased participation from banks, housing finance companies, fintechs and digital lenders in the affordable housing segment continues to intensify competition. This may exert pressure on lending spreads, customer acquisition costs and portfolio growth.
Funding and Liquidity	Maintaining access to diversified and cost-effective funding sources remains critical.
Management	Changes in market liquidity conditions, investor sentiment or borrowing costs could impact profitability and growth plans.
Regulatory and Compliance Requirements	The regulatory environment for financial institutions continues to evolve with greater emphasis on governance, customer protection, data privacy, risk management and disclosure standards. Ensuring timely compliance may require ongoing investments in systems, processes and resources.
Technology and Cybersecurity Risks	As digital adoption accelerates, AHFCs face heightened exposure to cyber threats, data breaches, fraud attempts and technology disruptions. Maintaining robust cybersecurity frameworks, data protection measures and business continuity capabilities remains essential to safeguarding customer trust and operational resilience.
Climate and Environmental Risk	Extreme weather events, climate-related disruptions and environmental risks may impact borrower livelihoods, property values and collateral quality in certain geographies. These factors necessitate continuous monitoring and integration of climate considerations into risk assessment frameworks.

The affordable housing finance sector continues to offer significant growth potential, supported by favourable demographics, increasing urbanization, rising homeownership aspirations, and continued policy support. While the operating environment remains dynamic, characterized by evolving customer expectations, technological advancements, regulatory developments, and macroeconomic uncertainties, the Company remains well-positioned to navigate these challenges.

Our focus on prudent risk management, disciplined underwriting, customer-centric innovation, and technology-driven operational excellence will continue to underpin sustainable growth. By strengthening our digital capabilities, expanding our market reach, maintaining robust governance standards, and preserving financial resilience, we aim to capitalize on emerging opportunities while effectively managing risks. We remain committed to creating long-term value for our customers, employees, shareholders, lenders, and the communities we serve.

Human Resources

At Aptus, we continue to deeply value the dedication and contributions of our team members in driving business growth and enabling operational excellence. Our unwavering commitment remains to foster a workplace culture that supports both the professional and personal aspirations of every employee. We believe that an empowering environment one that is safe, inclusive, and growth-oriented is fundamental to unlocking individual potential and collective success.

A significant milestone during the year was Aptus being officially recognized as a winner of The Hindu Best Places to Work 2026 . This prestigious recognition reflects our continued focus on creating a people-centric workplace, fostering employee well-being, and building a culture of trust, collaboration, and excellence.

Our Core Values Accountability, Professionalism, Teamwork, Unity, and Success continue to guide everything we do. Through structured workshops, induction programs, and continuous learning and development initiatives for both new hires and existing employees, we consistently reinforce these values across all levels of the organization.

Aptus remains strongly committed to building a diverse, equitable, and inclusive workplace that respects individual differences and promotes fairness. Our people practices are anchored in a merit-based approach, where hiring, development, and progression decisions are driven by skills, competencies, experience, and performance. Our appraisal and recognition frameworks are transparent, consistent, and firmly rooted in meritocracy, ensuring fairness in performance evaluation and reward systems. To further empower our people, we have introduced Employee Stock Ownership Plans (ESOPs), aligning the success of our team with the long-term growth of the organization. We believe in shared success, where each employee feels valued as a key stakeholder in our journey forward. A key focus of our people strategy is to promote growth from within the organization, providing employees with clear career paths and opportunities for advancement.

In support of our inclusive and ethical workplace culture, Aptus has implemented a comprehensive set of policies, including:

Anti-Bribery & Anti-Corruption Policy

Health & Safety Policy

Appointment, Remuneration, and Evaluation Policy

Equal Employment Opportunity Policy

Diversity & Inclusion Policy

We also maintain a fair and transparent grievance redressal mechanism to ensure that employee concerns are addressed promptly and respectfully. By upholding these standards, we strive to build a harmonious, respectful, and high-performing work environment for all.

During the year, the Human Resources function continued to focus on enhancing employee experience, strengthening organizational capabilities, and improving operational efficiency through several key initiatives. T he following were the major HR initiatives undertaken during the year:

Retention Bonus Policy Introduced a structured Retention Bonus Policy aimed at recognizing employee contributions, improving retention of key talent, and supporting workforce stability.

Apprenticeship T raining Program Launched an Apprenticeship Training Program to develop emerging talent, enhance employability s k ills, and create a strong pipeline of future-ready professionals.

Enhancements in HRMS Upgraded and strengthened HRMS capabilities to improve employee s elf-service, data management, reporting, and overall user experience.

Digitalization for Claims Streamlined the employee reimbursement and claims process through digital workflows, improving efficiency, transparency, and turnaround times.

These initiatives reflect HRs continued commitment to operational excellence, employee experience, and organizational growth. By embracing digital transformation, investing in talent development, and implementing progressive people practices, the HR function has played a pivotal role in supporting the Companys strategic objectives and fostering sustainable long-term success.

Outlook for FY2026 27

The global outlook for the finance industry in 2026 remains highly dynamic, shaped by rapid technological advancement, evolving regulatory expectations, and continued macroeconomic uncertainty. Artificial intelligence, particularly generative AI and advanced data analytics, is increasingly embedded across the financial services value chain, transforming how institutions assess risk, enhance operational efficiency, detect fraud, and engage with customers. The convergence of embedded finance, open banking ecosystems, and AI-driven platforms is enabling more seamless, real-time, and personalized financial experiences, further accelerating the integration of technology and traditional financial services. Sustainability continues to be a central theme, with Environmental, Social, and Governance (ESG) considerations becoming more deeply integrated into core financial decision-making. Regulatory frameworks across multiple jurisdictions are progressively strengthening disclosure requirements, pushing financial institutions to adopt more robust reporting standards and incorporate sustainability-linked criteria into lending, investment, and capital allocation s trategies. Stakeholders, including investors and customers, are increasingly prioritizing transparency and measurable impact, reinforcing the shift toward responsible finance.

At the same time, the global financial environment continues to navigate persistent macroeconomic challenges, including geopolitical tensions, inflationary pressures in select regions, and divergent monetary policy approaches across major economies. Central banks remain focused on balancing inflation management with financial stability, while also responding to s tructural s hifts s uch as energy transition financing, rising public debt levels, and evolving global trade dynamics. These factors collectively contribute to uneven growth patterns across regions and heightened market volatility. Looking ahead, the financial services industry will be defined by its ability to adapt to continuous disruption while maintaining resilience, trust, and compliance.

Institutions that effectively leverage technology, strengthen governance frameworks, and align with sustainability imperatives will be better positioned to navigate uncertainty and capitalize on emerging opportunities in an increasingly interconnected global financial ecosystem.

Forward Looking Statement Disclaimer

This Management Discussion and Analysis Report may contain forward looking s tatements based on the current expectations and projections of the Company. These statements relate to future events and involve risks, uncertainties, and assumptions that are difficult to predict. Actual results, performance, or events may differ materially from those reflected in the forward looking s tatements. Readers are cautioned not to place undue reliance on forward looking statements, which speak only as of the date of this report. The Company undertakes no obligation to update or revise any forward looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable laws and regulations.