Aptus Value Housing Finance India Ltd Management Discussions

Indian Economy

Economic performance and outlook

The Indian economy registered a growth of 6.5% in FY25, marking a four-year low. However, the January–March quarter surprised on the upside with a robust 7.4% expansion, driven by a recovery in agriculture, steady industrial output, and a strong showing in services, particularly in IT and computing-related sectors. The agriculture, forestry, and fishing sector witnessed notable improvement, growing at 4.6% compared to 2.7% in the previous year. This rebound in agricultural activity also translated into improved rural demand, supported by higher farm incomes. Additionally, the rural economy has been buoyed by broader welfare gains, with the World Bank reporting that India lifted 171 million people out of extreme poverty between 2011–12 and 2022–23, reducing the extreme poverty rate from 16.2% to 2.3%.

Looking ahead, the Indian economy is projected to grow between 6.3% and 6.7% in FY26, sustaining its position as the fastest-growing major economy globally. While global headwinds persist and have prompted slight revisions to some international forecasts, India continues to demonstrate resilience and macroeconomic stability. For the affordable housing sector, this economic trajectory offers a favourable backdrop. Strong rural consumption, increased agricultural output, and poverty alleviation measures collectively strengthen the base of potential first-time homebuyers, especially in semi-urban and Tier 2/3 markets. As incomes rise and employment stabilises, demand for affordable housing is likely to deepen, creating both a developmental imperative and a market opportunity.

Affordable housing finance has emerged as a vital catalyst for inclusive economic development in India. Over the decades, government policy has steadily evolved from direct provision of housing to enabling institutional frameworks and market participation. The sectors transformation gained momentum with the establishment of pivotal institutions such as Housing and Urban Development Corporation (HUDCO) in 1970, the National Housing Bank (NHB) in 1988, and pioneering private sector participation through entities like HDFC. Despite these developments, access to housing finance remained limited for low- and middle-income groups for much of the post-liberalisation era, as traditional banks and large lenders focused on higher-income customers with formal credit profiles.

A turning point came with the launch of the Pradhan Mantri Awas Yojana (PMAY) in 2015, a flagship policy initiative under the broader vision of "Housing for All." The scheme marked a shift towards demand-led interventions, with the Credit-Linked Subsidy Scheme (CLSS) emerging as a central tool to make home loans more affordable. CLSS offers interest subsidies for first-time homebuyers in the Economically Weaker Section (EWS), Lower-Income Group (LIG), and Middle-Income Group (MIG) segments, significantly reducing their borrowing burden and improving credit accessibility. Alongside CLSS, PMAY incorporates multiple delivery mechanisms—including in-situ slum redevelopment, affordable housing in partnership, and beneficiary-led construction—making it one of the most comprehensive affordable housing schemes globally.

In the interim budget for FY25, the government significantly increased the PMAY outlay by approximately 50%, raising it to 806.71 billion from 541.03 billion in FY24 BE. This enhanced allocation aims to support the construction of an additional 2 crore houses over the next five years.

Further, The Reserve Bank of Indias (RBI) decision to reduce its benchmark repo rate by 25 basis points to 6.00 per cent may finally incentivise more buyers in the affordable housing segment.

According to CRISIL Ratings, Affordable Housing Finance Companies (AHFCs) in India are expected to witness robust yet moderated growth in assets under management (AUM) of 22–23% in the current and subsequent fiscal years, compared to the ~31% growth recorded in the previous fiscal year. This recalibration reflects evolving market conditions, where the loans against property (LAP) segment—previously a key growth engine—is now expected to experience moderated expansion due to regulatory constraints, including compliance with principal business criteria (PBC) and monthly sell-down reporting norms. Meanwhile, home loans are set to benefit from favourable government interventions, especially the revamped interest subsidy scheme and a potential easing of interest rates. These supportive macro and policy measures are expected to improve borrower affordability and drive home loan AUM growth to ~24% in the next fiscal. Although yields and net interest margins (NIMs) may face mild compression, CRISIL estimates that return on managed assets (RoMA) will remain healthy at around 2.4% by fiscal 2026.

CRISILs analysis highlights that AHFCs have consistently outpaced the broader mortgage finance segment due to their focused reach into underserved borrower profiles, limited competition from banks in the affordable housing space, and strong policy support for low-cost housing. Urbanisation and a relatively low base have further catalysed their growth. Over the past three years, the LAP portfolio has grown at a compounded annual rate of ~32%, driven by demand from micro, small, and medium enterprises (MSMEs), improved access to borrower data, and stronger underwriting practices. However, with regulatory pressures mounting—particularly monthly PBC compliance—growth in this segment is projected to stabilise at 22–23%. Despite potential yield compression due to floating rate loan contracts, CRISIL notes that the impact on net interest margins could be partly offset by borrowers lower sensitivity to rate changes and the possibility of downward repricing of bank borrowings, which comprise ~60% of the funding mix. With credit costs under control and gross NPAs expected to rise only modestly, CRISIL anticipates that AHFCs will maintain their overall financial health and continue to play a crucial role in supporting affordable housing penetration across India.

For the financial year ended March 31, 2025, the Company achieved a total revenue of 1,798 crores, representing a strong year-on-year growth of 28% compared to the previous financial year. Profit before tax stood at 975 crores, reflecting a notable increase of 23% over the previous year. Profit after tax also rose by 23%, reaching 751 crores. As of March 31, 2025, the Companys net worth was 4,317 crores, demonstrating a solid financial foundation and consistent value creation for stakeholders.

For the financial year ended March 31, 2025, the Company reported a robust Return on Assets (ROA) of 7.73% and a Return on Equity (ROE) of 18.76%, both of which remain well above the industry averages. These strong return metrics reflect the Companys efficient operating model, disciplined asset quality management, and strategic focus on high-yield segments.

The superior ROA highlights the Companys ability to generate strong earnings relative to its asset base, while the sustained ROE demonstrates effective capital utilization and shareholder value creation. These results affirm the Companys position as a leading performer in the sector, despite an increasingly competitive and dynamic lending landscape.

Going forward, the Company remains committed to maintaining healthy return ratios through prudent risk controls, scalable technology investments, and customer-focused growth initiatives.

( in crores)

Our key financial ratios for the year ended March 31, 2025, as compared to the previous financial year are given below:

During the financial year ended March 31, 2025, the Company sanctioned loans aggregating to 3,867 crores, reflecting an increase over 3,320 crores sanctioned in the previous year. Loan disbursements during the year stood at 3,604 crores, registering a robust growth of 15% compared to 3,127 crores disbursed in the previous year.

As of March 31, 2025, the Companys Assets Under Management (AUM) stood at 10,865 crores, representing a healthy year-on-year growth of 25%. This strong performance is a clear testament to the growing trust and confidence that customers and partners continue to place in the Companys ability to deliver accessible, reliable, and value-driven financial solutions. It also reflects the Companys consistent focus on expanding its portfolio, strengthening customer relationships, and delivering long-term value to stakeholders.

The Company has built robust internal capabilities across key operational areas including underwriting, customer onboarding, digital collections, and advanced analytics. These competencies have enabled the Company to scale efficiently and profitably across a wide range of geographies while maintaining a strong risk management framework. Technology continues to be a core differentiator, driving end-to-end enhancements—from customer acquisition to loan servicing and collections. Looking ahead, the Company is focused on deepening its use of emerging technologies, particularly artificial intelligence (AI), to further strengthen decision-making, automation, and customer experience. During the year, the Company achieved a 92% adoption rate for digital agreements, reflecting growing customer preference for seamless, paperless processes. Digital collections remained robust at 95%, underscoring the effectiveness of the Companys tech-led recovery infrastructure. Additionally, the penetration of account aggregators rose to 57%, reinforcing the Companys commitment to leveraging data for smarter credit assessments and more inclusive lending.

The Company continued to maintain a prudent and disciplined approach to asset quality, even as it expanded its geographical footprint. As of March 31, 2025, the Gross Non-Performing Assets (GNPA) stood at 1.19%, compared to 1.07% in the previous financial year. Net Non-Performing Assets (NNPA) were at 0.89%, up slightly from 0.80% in the previous financial year. Despite this marginal increase, the Companys asset quality remains well within industry benchmarks, reflecting the effectiveness of its risk management practices, strengthened underwriting standards, and technology-driven monitoring and collection systems. The Company remains committed to maintaining a high-quality loan book while pursuing sustainable growth across geographies. The Companys branch network grew to 300 branches, compared to 262 in the previous financial year. This expansion has enabled deeper penetration into underserved markets and improved accessibility for customers across rural and semi-urban regions. The Companys customer base grew by a robust 21% year-on-year, crossing 1.62 lakh active customers. This reflects the effectiveness of the Companys outreach strategies, tailored financial solutions, and emphasis on building long-term relationships.

The 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 part of its proactive and diversified funding strategy, the Company successfully raised 1050 crores through the issuance of non-convertible debentures (NCDs) to leading mutual funds during the year. This strategic initiative expanded the Companys lender base and underscored investor confidence in its creditworthiness and financial discipline.

As on March 31, 2025, the Company maintained a strong liquidity buffer of approximately 1,155 crores, including undrawn sanctions of 678 crores. This ensures ample financial flexibility to meet business requirements and pursue growth opportunities without compromising on risk standards.

The Company remains well-capitalized, with a net worth exceeding 4,317 crores. The capital adequacy ratio stood at a robust 71% as of March 31, 2025, well above regulatory thresholds, demonstrating significant capacity to absorb risks and support future expansion.

Reinforcing this strong financial position, the Company continues to enjoy AA- credit ratings from both ICRA and CARE Ratings, reflecting its consistent performance, strong governance, and sound asset quality. These factors collectively highlight the Companys resilience, market credibility, and commitment to maintaining a healthy balance sheet while delivering long-term stakeholder value.

The affordable housing finance sector operates at the intersection of social impact and financial inclusion, playing a critical role in enabling access to homeownership for underserved and economically weaker sections of society. As we continue to align our mission with the national agenda of "Housing for All," it is imperative to assess the external and internal factors that influence our strategic direction.

This section presents a comprehensive evaluation of the key opportunities and challenges that define the operating environment for Affordable Housing Finance Companies (AHFCs). These factors are instrumental in shaping our business priorities, guiding our risk management framework, and informing our medium to long-term growth strategies.

By identifying and responding to emerging opportunities, ranging from supportive policy frameworks and digital innovation to demographic shifts, we aim to strengthen our market presence and enhance stakeholder value. At the same time, we remain cognizant of potential threats, including economic volatility, funding constraints, regulatory changes, and credit risks, which necessitate vigilance and adaptive strategies.

The analysis below outlines the landscape in which we operate, serving as both a strategic lens and a foundation for sustainable, inclusive growth.

In the evolving affordable housing ecosystem, our proactive approach to risk management, combined with customer-centric innovation, will be instrumental in capitalizing on growth opportunities. We remain committed to sustainable expansion by reinforcing our operational capabilities, digital infrastructure, and governance frameworks to mitigate emerging challenges.

The Company has established a robust framework of internal financial controls, aligned with the evolving regulatory and operational landscape. These controls are designed to ensure the reliability of financial reporting, the safeguarding of assets, compliance with applicable laws and regulations, and the efficient conduct of operations.

As mandated by the Reserve Bank of India, the Company has adopted a Risk-Based Internal Audit (RBIA) framework. This strategic approach enables the Internal Audit function to focus on critical risk areas, providing assurance on the effectiveness of risk management processes and internal controls. The RBIA methodology ensures that audit resources are optimally deployed, covering high-risk areas and emerging risk trends in a systematic manner.

The Internal Audit function plays a pivotal role in the Companys overall governance structure. Operating independently of the business and support functions, it provides an objective assessment of the adequacy and effectiveness of the internal control systems. The scope of internal audit covers operational, financial, and compliance controls, with a focus on identifying process improvements and control enhancements. To strengthen the internal audit processes, the Company has engaged M/s. RGN Price & Co, Chartered Accountants, to support the Internal Audit team in auditing the head office functions. Their expertise and external perspective provide valuable insights, enhancing the overall coverage, depth, and quality of audits. The collaboration ensures a comprehensive review of central operations, enabling the timely identification and remediation of control weaknesses. Inadditiontotheinternalreviews,theStatutoryAuditors independently evaluate the adequacy and operating effectiveness of the internal financial controls over financial reporting. Their assessment, conducted in accordance with the applicable standards prescribed by the Institute of Chartered Accountants of India, forms an integral part of the Audit Report. The Statutory Auditors certification provides additional assurance to stakeholders regarding the integrity of the financial reporting framework.

All audit reports, including those from internal auditors are placed before the Audit Committee of the Board for detailed review. The Audit Committee not only monitors the implementation of audit recommendations and oversees the effectiveness of the internal control environment but also provides valuable inputs and insights to strengthen the control framework. It ensures that corrective actions are taken in a timely manner and that control deficiencies are adequately addressed. This active involvement of the Audit Committee significantly enhances the governance and accountability mechanisms within the organization.

Effective risk management is not only a strategic advantage but a foundational pillar for the sustained success, resilience, and long-term growth of our Company. Recognizing the dynamic nature of the financial services landscape, we have embedded risk management deeply into every facet of our operations. This integrated and proactive approach enables us to maintain an optimal balance between risk and reward while ensuring full compliance with all applicable laws, regulations, and internal policies. By institutionalizing risk awareness across the organization, we strengthen our ability to anticipate, assess, and respond to potential threats and opportunities. Employees at all levels are encouraged to remain vigilant and are supported with access to relevant information that help them understand and manage the risks associated with their respective roles. This fosters a culture of accountability and informed decision-making, ensuring that risk management is not a siloed function but a collective responsibility. The Risk Management Committee plays a vital role in overseeing the Companys enterprise-wide risk management framework. The committee is responsible for formulating, implementing, and periodically reviewing risk management policies and strategies aligned with the Companys business model and risk appetite. It regularly evaluates the effectiveness of the risk governance structure, processes, and controls designed to mitigate identified risks across operational, financial, market, credit, and compliance domains.

The Company has appointed a Chief Risk Officer (CRO), who plays a central role in driving the risk management agenda. The CRO is responsible for identifying, assessing, and monitoring key risks, and ensuring that appropriate risk mitigation strategies are in place. To ensure independence and effective oversight, the CRO directly reports to the Risk Management Committee, facilitating regular updates on risk exposures, key risk indicators (KRIs), and the effectiveness of risk controls. This reporting structure ensures that risk considerations are consistently integrated into strategic and operational decisions at the highest level.

Through this comprehensive and disciplined approach to risk management, we continue to reinforce stakeholder confidence, safeguard our reputation, and secure the long-term sustainability of our business.

Through transparent disclosures and robust risk controls, Aptus positions itself as a responsible and dependable financial institution. This approach enhances confidence among regulators, investors, and other stakeholders. Below are the principal risks faced by the Company and the corresponding mitigation strategies deployed:

• Enhanced Stakeholder Engagement: Conducted regular engagement meetings with Branch Managers and Cluster Heads to align on recruitment strategies, delivery expectations, and compliance adherence.

• Strengthened Risk Mitigation: Introduced objective human risk mitigation measures and post-onboarding background verification processes for Cluster Managers and Head Office personnel.

• Field Feedback Reporting: Institutionalized monthly branch visit reports by HR, aimed at identifying field-level challenges and recommending actionable improvements.

These initiatives reflect HRs continued commitment to operational excellence, employee experience, and organizational integrity. By embracing digital transformation, fostering transparent communication, and reinforcing compliance, the HR function has played a pivotal role in supporting the companys strategic goals and driving sustainable growth.

The global outlook for the finance industry in 2025 remains dynamic, shaped by continued technological innovation, evolving regulatory frameworks, and shifting macroeconomic conditions. The acceleration of artificial intelligence and data analytics is redefining how financial institutions deliver services, manage risks, and interact with customers. Embedded finance, open banking, and the integration of generative AI are driving hyper-personalized experiences and operational efficiencies, further blurring the lines between traditional finance and technology sectors. Sustainability and ESG (Environmental, Social, and Governance) considerations continue to gain prominence, with regulatory bodies increasingly mandating disclosures and transparency. Financial institutions are embedding ESG principles more deeply into lending, investment, and reporting practices, as stakeholders demand clearer alignment with sustainable and socially responsible goals. Geopolitical instability, inflation volatility, and divergent monetary policies across major economies pose ongoing challenges for financial markets. While some regions face economic headwinds, others are benefiting from structural reforms and digital growth. Central banks are now balancing the dual priorities of inflation control and financial system stability, amid concerns around sovereign debt, energy transitions, and global capital flows.

Looking forward, success in the finance industry will depend on the ability to remain resilient amid uncertainty, agile in responding to regulatory shifts, and innovative in harnessing technology to deliver value. Institutions that can adapt to the rapid pace of change, while maintaining trust and compliance, will be best positioned to thrive in an increasingly interconnected and complex global environment.