Aptus rallies 11% on hopes of stable asset quality, healthy profitability

Till 11:55 am; as many as 12.31 million equity shares representing 2.5 per cent of total equity of Aptus Value changed hands on the NSE, the exchange data shows.

Shares of Aptus Value Housing Finance India (Aptus) hit a record high of Rs 401.65, as they rallied 11 per cent on the National Stock Exchange (NSE) in Monday’s intra-day trade amid heavy volumes on expectations that the company would be able to maintain a stable asset quality performance and healthy profitability, while sustaining its portfolio growth over the medium-term.

The stock of this housing finance company (HFC) surpassed its previous high of Rs 393.05 touched on October 9, 2024. In the past two months, it has surged 33 per cent. At 11:55 am; Aptus was trading 9 per cent higher at Rs 393.50, as compared to 0.70 per cent rise in the Nifty 50. The average trading volumes at the counter jumped over four-fold. As many as 12.31 million equity shares representing 2.5 per cent of total equity of Aptus Value changed hands on the NSE, the exchange data shows.

Aptus was incorporated on December 11, 2009 with the primary objective of carrying on the business of providing long-term housing finance to meet the housing needs of the low and middle income segment in the country. The company is also engaged in providing loans for non-housing finance activities in the form of Loan Against Properties (LAP).

The company has a wholly-owned subsidiary, Aptus Finance India Private Limited, which is a Non Banking Finance Company registered with Reserve Bank of India (RBI) and engaged in the business providing finance in the form of loan against immovable properties.

The Indian government’s focus on affordable housing schemes such as Pradhan Mantri Awas Yojana (PMAY) and initiatives like Housing for All by 2022 have bolstered demand for affordable housing. HFCs can cater to this segment by offering specialized loan products and financing options.

Urbanization trends and rural-urban migration continue to drive demand for housing in urban centres. HFCs can tap into this market by providing housing finance solutions tailored to the needs of urban dwellers, including first-time homebuyers and migrant populations. Continued government support through subsidies, interest rate incentives, and tax benefits for homebuyers and developers under schemes like PMAY-Urban and PMAY-Gramin can stimulate housing demand and affordability, benefiting HFCs, Aptus said in its FY24 annual report.

On September 13, 2024, CARE Ratings revised ratings outlook to positive on expectations of continued growth momentum while maintaining capitalisation, good profitability and asset quality, along with strengthening of its resource profile. However, the outlook may be revised to stable in case the company is not able to grow its loan portfolio or if there is any significant moderation in asset quality and profitability.

With higher proportion of non-housing loans with the presence of NBFC subsidiary, yields of Aptus are relatively higher, which results in better profitability ratios. CARE Ratings expects profitability to remain healthy in the medium term supported by healthy net interest margin (NIM) and lower credit cost.

The present level of net worth of Rs 3,793 crore (as on June 30, 2024) along with retained profits will enable the company to grow its asset under management (AUM) for the next 3-5 years without any further equity infusion while maintaining gearing at comfortable levels, the rating agency said in rationale.

Meanwhile, Aptus Group has a track record of maintaining a healthy asset quality over the years. Given the secured nature of its exposures, write-offs and delinquencies have remained under control over the years.

The Group’s gross stage 3 (GS3) remained comfortable at 1.3 per cent as of June 2024 and 1.1 per cent as of March 2024 (1.2 per cent as of March 2023) and the restructured book stood at a modest level of less than 0.4 per cent of the portfolio. Softer bucket delinquencies have also improved over the last two years, with 30+ days past due (dpd) of 6.3 per cent as of June 2024 (5.4 per cent as of March 2024 and 5.9 per cent as of March 2023) vis-à-vis 9.9 per cent as of March 2022, according to ICRA.

The rating agency notes that the Group’s leverage has largely remained stable, supported by strong internal accruals, with its managed gearing at 1.4 times as of June 2024 and March 2024. Going forward, the Group’s strong capitalisation is expected to sufficiently support the envisaged portfolio growth over the medium term.

Aptus continues to deliver compelling return ratios, and analysts at JM Financial Institutional Securities expect this trend to continue led by a rebound in growth momentum, increased focus on high yielding Small Business Loans (SBL) in addition to existing Home Loans (HL), and improving productivity and asset quality metrics.