Synopsis:
A small-cap company’s shares rose over 8 percent in today’s trading session after announcing Q2 results.
A small-cap company that provides housing loans & advances, is in the spotlight today after posting strong Q2FY26 results. Read the article below for detailed insights into their performance.
With a market capitalization of Rs. 13,648.36 crore, the shares of AAVAS Financiers Limited were trading at Rs. 1,724, up by 6.47 percent from its previous closing price of Rs. 1,619.20. In today’s trading session it has touched an intraday high of Rs. 1,748.70, implying an upside of 8 percent from previous close price. As of September, 2025, the CVC capital firm owns 48.96 percent stake in the company.
Q2FY26 Results
AAVAS Financiers Limited reported Rs. 388.93 crore of net total income for the second quarter of FY26, a 18.1 percent increase over the Rs. 329.42 crore for the same period in FY25. It increased by 9.8 percent as compared to Rs. 354.34 crore in Q1 FY26.
The consolidated net profit for the second quarter of FY26 was Rs. 163.93 crore, which was 17.77 percent higher than the Rs. 139.23 crore reported in the previous quarter and increased by 10.82 percent from Rs. 147.91 crore in Q2 FY25. Profit growth was also reflected in earnings per share (EPS), which increased to approximately Rs. 20.71 in Q2 FY26 from Rs. 17.59 in Q1 FY26 and Rs. 18.69 in Q2 FY25.
Other Updates
Strong Growth and Profitability
Aavas Financiers reported a 16 percent YoY rise in AUM to Rs. 213.6 billion as of September 2025, supported by strong demand with disbursements up 21 percent YoY and 36 percent QoQ to Rs. 15.6 billion. Spreads expanded by 34 bps YoY to 5.23 percent, while NIM improved to 8.04 percent, reflecting margin strength.
Operational Efficiency and Asset Quality
Operational metrics showed continued improvement, with the Cost-to-Income ratio falling 262 bps QoQ to 43.7 percent, while Opex-to-Assets remained stable at 3.51 percent. Asset quality stayed strong with 1+ DPD improving to 3.99 percent and GNPA steady at 1.24 percent. Credit costs declined by 8 bps sequentially to 16 bps, highlighting disciplined underwriting and collection efficiency.
Capital Strength and Expansion
Aavas maintained a healthy capital position with net worth growing 16 percent YoY and a well-diversified borrowing mix, including 50 percent term loans and 11 percent from development finance institutions. Return ratios improved notably, with ROA up 46 bps QoQ to 3.40 percent and ROE rising 175 bps to 14.31 percent. The company also expanded its footprint to 405 branches after adding eight new locations during the quarter.
Management View
According to CEO Sachinder Bhinder, Aavas Financiers achieved strong operational momentum in Q2FY26, driven by its focus on serving unserved and underbanked customers across Tier 2–5 markets. The company recorded a robust 36 percent QoQ growth in disbursements, with the sanction-to-disbursement ratio improving to ~80 percent. Strategic efforts to optimize yields and manage credit quality led to a 10-bps YoY rise in yields and a 17-bps QoQ reduction in borrowing costs, maintaining a healthy spread of 5.23 percent.
Bhinder highlighted that the company’s digital transformation is showing measurable results, with turnaround time for loan sanctions halving to six days and paper usage reduced by 59 percent. During the period, Aavas expanded its footprint to 405 branches across 14 states, adding eight new branches in Tamil Nadu. The company remains well-capitalized with a CRAR of 46.4 percent and continues to maintain strong asset quality, with 1+ days past due at 3.99 percent and Gross Stage 3 at 1.24 percent. Its strategic priorities remain focused on disciplined growth in affordable housing, portfolio optimization, digitization, and prudent liability management.
About the company
Aavas Financiers Limited, founded in 2011 in Jaipur, is a retail affordable housing finance company focused on providing home loans, loans against property, and MSME loans to low- and middle-income self-employed customers in semi-urban and rural India through an in-house execution model ensuring strong business performance.
A return on capital employed (ROCE) of about 10.1 percent and debt to equity ratio at 3.08 demonstrate the company’s financial position. At the moment, the company’s P/E ratio is 22.6x which is higher as compared to its industry P/E 18.3x.
As of September 2025, the company’s shareholding pattern shows that promoters hold 48.96 percent of the total equity, indicating strong promoter ownership. Foreign Institutional Investors (FIIs) hold 25.88 percent, while Domestic Institutional Investors (DIIs) own 14.13 percent. The public shareholding stands at 11.02 percent, reflecting a healthy level of institutional and retail participation in the company.
Written By Akshay Sanghavi
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