Aadhar Housing share zooms 6% as Citi initiates with 'Buy'; 42% upside eyed

Aadhar Housing Finance share: Affordable housing finance company, Aadhar Housing Finance shares were buzzing in trade on the last day of the week, January 17, 2025, as the scrip surged up to 5.86 per cent to hit an intraday high of Rs 418.70 apiece. 

 

However, at 12:40 PM, Aadhar Housing Finance share was off day’s high, and was trading merely 0.7 per cent higher at Rs 398.25. In comparison, BSE Sensex was trading 0.55 per cent lower at 76,622.87 levels.

 

The northward move in Aadhar Housing share came after foreign brokerage Citi Research initiated coverage with ‘Buy’ for a target price of Rs 565 per share. The target price reflects an upside of 42.85 per cent from the previous close of Rs 395.50 on January 17, 2025.

 

Analysts highlighted that Aadhar Housing, a leading retail-focused affordable housing finance corporation (AHFC), has consistently grown its Assets Under Management (AUM) at a compound annual growth rate (CAGR) of over 16 per cent over the past 4-6 years, capturing approximately 2 per cent market share. Since its acquisition by Blackstone, analysts believe, the company has shown major improvements in governance, processes, growth, and profitability.

 

“Estimated to deliver profit after tax (PAT) growth of 22 per cent over FY24-27E scaling-up RoA/RoE profile to >4.5 per cent/16.5 per cent led by >21 per cent CAGR in AUM; NIMs (on AUM) at 7.0-7.1 per cent; credit cost at 0.3-0.4 per cent; opex/assets of <3.5 per cent; and higher fee realisation. Using Gordon Growth model, we arrive at Rs 565 target price assigning price-to-book (PB) of 3.2x FY26E book, implying precise-to-earnings (PE) of 21x FY26E earnings per share (PEG of 1x),” said Kunal Shah, Dipanjan Ghosh and Yash Gujarathi of Citi Research, in a note.

 

However, key risks include potential promoter dilution and the increasing share of informal self-employed borrowers in the portfolio.

 

The brokerage also said that it prefers Aavas Financiers, along with Aadhar Housing in the AHFC segment.

 

Given this, here are the top factors for initiating coverage on Aadhar Housing Finance:

 

Scale with precision and focus

 

According to analysts at Citi Research, Aadhar Housing has established a strong regional footprint, particularly in Uttar Pradesh and Madhya Pradesh, where it holds a market share of approximately 3.6 per cent. Rajasthan has emerged as the fastest-growing region with a market share exceeding 4 per cent, while Tamil Nadu, Andhra Pradesh, and Telangana are showing aggressive growth, targeting market shares of 2.8 per cent, 1.5 per cent, and 1.7 per cent, respectively. 

 

The company’s Assets Under Management (AUM) are dominated by retail home loans (75 per cent), with around 57 per cent in the salaried segment and 70 per cent in the economically weaker section (EWS) and lower-income group (LIG). The informal self-employed segment has shown rapid expansion, with a 43 per cent/49 per cent CAGR over the past 4/6 years. This segment's contribution, analysts believe, is projected to increase by 1-2 per centage points annually.

 

Innovative and diversified distribution strategy

 

Aadhar Housing employs a broad and diversified distribution framework supported by a tiered branch structure across 21 states, encompassing 545 branches, analysts noted. No single state contributes more than 14 per cent of the company’s AUM, ensuring a balanced geographic spread. Internal sourcing channels, such as Direct Sales Teams (DST) and Aadhar Mitra, contribute one-third and 22-24 per cent, respectively, while Direct Selling Agents (DSA) account for 42-45 per cent of business sourcing.

 

Analysts further said that the company’s growth is fuelled by regional excellence in Rajasthan, Madhya Pradesh, Maharashtra, and Uttar Pradesh, while operations in Andhra Pradesh, Telangana, and Tamil Nadu are scaling to optimal levels. 

 

Branches with a deeper outreach now contribute 10 per cent of disbursements and 3 per cent of AUM, reflecting a focus on high-impact regions. Operational efficiency has improved, with over 40 per cent of branches having a vintage of fewer than three years. Moreover, efforts to reduce balance transfer (BT)-outflows and prepayment rates further boost retention and growth.

 

Advanced tech stack boosting efficiency

 

Aadhar Housing Finance’s adoption of advanced technology, marked by its onboarding of TCS in October 2021 for enterprise-wide system upgrades, has majorly boosted operational efficiency, Citi Research analyst said. 

 

Approval-to-login rates have improved to 75 per cent, while disbursal-to-login rates have increased to 47-48 per cent. Balance transfer (BT)-outflows have been reduced to 5.8 per cent from 6.5 per cent, and regret attrition has decreased to 15-16 per cent from 22 per cent. A risk-based underwriting approach ensures an optimal balance of turnaround time (TAT), cost, and quality, while in-house collections effectively manage credit costs.