ICICI Securities maintains a BUY rating on Aadhar Housing Finance with a target price of Rs 625, implying a 21% upside from the current market price of Rs 517. The company has demonstrated remarkable resilience in FY26, delivering consistent 20% AUM growth and maintaining superior profitability metrics despite sectoral headwinds. With a well-diversified portfolio, strong underwriting discipline, and deep penetration in underserved markets, Aadhar is positioned to sustain growth momentum. Improving asset quality, stable spreads, and a scalable distribution model further reinforce its long-term investment appeal.

ICICI Securities Reaffirms BUY Call with Strong Upside Potential

Recommendation: ICICI Securities has reiterated its BUY stance on Aadhar Housing Finance with a target price of Rs 625, valuing the company at approximately 3x Mar’27E BVPS.

The brokerage underscores Aadhar’s ability to balance growth and profitability in a competitive affordable housing finance (AHF) landscape. The current valuation reflects confidence in sustained earnings expansion, backed by operational consistency and structural demand drivers.

Robust AUM Expansion and Long-Term Growth Visibility

Milestone Achievement: The company surpassed Rs 300 billion in AUM in FY26, delivering a strong ~20% CAGR over FY23–FY26.

Forward Outlook: Management has outlined an ambitious roadmap to reach Rs 500 billion AUM by FY29, implying a sustained 20% annual growth trajectory.

This growth is underpinned by:

Deep distribution capabilities across India
Competitive pricing strategies
Strong demand from first-time homebuyers, especially in tier-2 and rural markets

The company’s diversified geographic footprint—where no single state contributes more than 15% of AUM—provides an additional layer of risk mitigation.

Disbursement Momentum and Business Mix Stability

Operational Strength: Aadhar recorded 30% QoQ and 20% YoY disbursement growth in Q4FY26, highlighting strong credit demand.

Portfolio Composition:

Housing loans account for ~73% of AUM
Non-housing loans contribute the remaining share

While LAP (Loan Against Property) disbursements were moderated due to macro uncertainties, the core home loan segment remained resilient, registering 25% growth.

Strategic Market Segmentation Driving Yield Optimization

Segmented Distribution Model: Aadhar has bifurcated its operations into:

Urban markets (top 15 cities)
Emerging markets (rest of India)

This strategy enables differentiated pricing and improved yield management:

Urban yields: ~12–12.5%
Emerging market yields: up to 16%

The company aims to increase the contribution of emerging markets to 50% of total business, enhancing overall profitability.

Profitability Metrics Reflect Sustained Earnings Strength

Earnings Growth:

PAT grew to Rs 10,959 million in FY26
Expected to rise to Rs 13,553 million in FY27E and Rs 16,787 million in FY28E

Return Ratios:

RoA: Stable at ~4.3–4.5%
RoE: Expected to improve to ~17.2% by FY28

Aadhar continues to outperform peers with industry-leading profitability metrics, supported by disciplined cost control and stable spreads.

Asset Quality Improvement Strengthens Risk Profile

Key Highlights:

Gross Stage-3 improved to 1.08% (down 30bps QoQ)
Net Stage-3 declined to 0.71%

Credit Cost Efficiency:

Credit cost reduced to 14bps in Q4FY26

Additionally, early delinquency indicators such as 1+ DPD and bounce rates remain stable, indicating no immediate stress from macro disruptions.

Margins and Spreads Remain Resilient Despite Rate Movements

Spread Analysis:

Spreads stood at 5.8% in Q4FY26
Slight contraction due to a 15bps PLR cut

Interest Rate Sensitivity:

~74% of assets and ~73% of liabilities are floating rate

This balance minimizes interest rate risk and ensures margin stability over the cycle.

Branch Expansion Strategy Fuels Long-Term Scalability

Network Growth:

Total branches increased to 638 in FY26
Target to exceed 750 branches by FY28

Expansion Focus:

65–70% of new branches in emerging markets
Lower operating costs in rural locations enhance efficiency

This branch-led sourcing model remains a critical driver of AUM growth and customer acquisition.

Cost Efficiency and Operating Leverage Outlook

Cost-to-Income Ratio:

Increased to 37.1% in Q4FY26 due to ESOP expenses
Adjusted ratio closer to 35%

Over the medium term, improving productivity and scale benefits are expected to drive operating leverage, reducing cost ratios.

Financial Performance Snapshot

Key Risks to Monitor

Growth Risk: Slower-than-expected AUM expansion due to macroeconomic slowdown

Margin Pressure: Increasing competition in affordable housing finance could compress spreads

Despite these risks, Aadhar’s diversified exposure and strong underwriting standards mitigate downside concerns.

Investment View: A Scalable Franchise with Strong Earnings Visibility

Aadhar Housing Finance stands out as a structurally strong NBFC within the affordable housing segment. Its disciplined growth strategy, improving asset quality, and robust return ratios position it favorably for long-term investors. The company’s ability to sustain 20% growth while maintaining profitability metrics above industry averages reinforces confidence in its business model.

With a clear roadmap toward Rs 500 billion AUM and continued focus on underserved markets, Aadhar remains well-placed to deliver consistent shareholder returns.