AAVAS Financiers (AAVAS)’s 2QFY26 PAT grew 11% YoY to ~INR1.6b (~8% beat). PAT in 1HFY26 grew ~11% YoY, and we expect PAT to grow ~19% YoY in 2H. NII in 2QFY26 grew 19% YoY to ~INR2.9b (in line). Other income grew 16% YoY, aided by higher assignment income of ~INR700m (PY: INR585m). Reported NIM improved ~55bp QoQ to ~8.05% in 2QFY26. Spreads rose ~10bp QoQ to 5.2% (v/s ~5.1% in 1QFY26). Opex rose ~26% YoY to INR1.7b (in line). Opex/assets stood at ~3.5% (PY: 3.2% and PQ: ~3.45%). We estimate an opex-to-asset ratio of 3.5%/3.4% in FY26/FY27E (vs. ~3.4% in FY25).
OutlookThe stock trades at 2.2x FY27E P/BV, and any valuation multiple re-rating will depend on stronger AUM growth and delivery of operating efficiencies to further improve the RoA profile. Reiterate Neutral with a TP of INR1,800 (based on 2.3x Sep’27E BVPS).
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