Aadhar Housing Finance's shares rose 6.3% after Kotak Institutional Equities initiated coverage with a 'buy' rating and a target price of ₹550, signaling a 41% upside.
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Aadhar stands out in affordable housing finance with a larger balance sheet, longer operational history, and superior return on equity (RoE) compared to peers.
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Kotak projects Aadhar's loan growth at 21% CAGR for FY2024-27, aligning more with mature housing finance companies than smaller peers.
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Aadhar's loan book is geographically diversified, with its largest state, Uttar Pradesh, accounting for only 15% of exposure.
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Aadhar has a higher proportion of salaried customers at 57%, compared to the 26%-68% range among its peers.
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Aadhar ranks third in branch productivity with ₹428 million AUM per branch, following Aavas and Home First.
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Aadhar's RoE was 18.4% in FY2024 but is expected to moderate to 16.9%-17.6% in FY2025-27E due to capital issuance during its IPO.
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Aadhar is gradually increasing loans to self-employed and informal segment customers, with self-employed loans rising from 36% in FY2021 to 43% in FY2024.
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Self-employed customers have higher yields but also more volatile gross NPAs (1.7%-2.8%) compared to salaried customers (0.7%-1.3%).
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Kotak estimates Aadhar's medium-term earnings growth at 18% (FY2026-36E), with long-term growth expected to moderate to 13% and 11% in subsequent decades.