Aavas Financiers : Transcript of Analysts/Institutional Investor Meet/Con. Call

Ref.No. AAVAS/SEC/2022-23/652
Date: October 31, 2022
To,	To,
The National Stock Exchange of India Limited	BSE Limited
The Listing Department	Dept. of Corporate Services
Exchange Plaza,	Phiroze Jeejeebhoy Towers,
Bandra Kurla Complex,	Dalal Street, Fort,
Mumbai - 400051	Mumbai - 400001
Scrip Symbol: AAVAS	Scrip Code: 541988

Dear Sir/Madam,

Sub: Transcript of the Earnings Conference Call for the quarter and half year ended September 30, 2022

Pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and in reference to letter number AAVAS/SEC/2022-23/604 dated October 10, 2022, please find enclosed the transcript of the Earnings Conference Call on the financial and operational performance of the Company for the quarter and half year ended September 30, 2022 held on Friday, October 21, 2022.

The above information is also available on the website of the Company at https://www.aavas.in/investor-relations/investor-intimation

We request you to take the same on your record.

Thanking You,

For Aavas Financiers Limited

SHARAD PATHAK

Digitally signed by

SHARAD PATHAK Date: 2022.10.31 12:26:07 +05'30'

Sharad Pathak

Company Secretary and Compliance Officer (FCS-9587)

"Aavas Financiers Limited Q2 FY2023

Earnings Conference Call"

October 21, 2022

MANAGEMENT: MR. SUSHIL KUMAR AGARWAL - MANAGING DIRECTOR

• CHIEF EXECUTIVE OFFICER - AAVAS FINANCIERS LIMITED
  MR. GHANSHYAM RAWAT - CHIEF FINANCIAL OFFICER - AAVAS FINANCIERS LIMITED
  MR. GHANSHYAM GUPTA - INVESTOR RELATIONSHIP OFFICER - AAVAS FINANCIERS LIMITED

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Aavas Financiers Limited

October 21, 2022

Moderator:Ladies and gentlemen, good day and welcome to Aavas Financials Limited Q2 FY2023 Earnings Conference Call. This conference call may contain forward looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing "*" then "0" on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sushil Kumar Agarwal, MD & CEO. Thank you and over to you, Sir!

Sushil Kumar Agarwal: Good afternoon everybody. Thank you for participating on the earning call to discuss the performance of our company for Q2 and H1 FY2023. With me I have Mr. Ghanshyam Rawat, CFO, Mr. Ghanshyam Gupta, Investor Relationship Officer and other senior member of the management team and SGA, our investor relationship advisor. The results in the presentations are available on the stock exchanges as well as our company website and I hope everyone has had a chance to look at it. I am happy to inform you that during the quarter, the company's long term credit rating was updated from AA minus positive outlook to AA stable outlook by CARE in line with the ICRA. I take this opportunity to thank all our stakeholders for their continued trust and support. After witnessing 90-basis point increase in repo rate in first quarter, RBI has further increased the repo rate by 100-basis points during the second quarter.

Consequently, we have also increased our prime lending rate by 75-basis point during H1 FY2023 and further increase of 50-basis point with effect from October 5, 2022. For Q2 FY2023 we disbursed Rs.1146.7 Crores registering a 27% year-on-year growth and achieving 89% of the disbursement done in seasonally strong Q4 last year. We continue to grow in a calibrated manner and registered AUM growth of 24% as of September 2022. While maintaining our operating metrics we have delivered PAT growth of 29% year-on- year for H1 FY2023. With our continued focus on collections, one plus DPD stood at 4.45% with an improvement of 22-basis point from first quarter. 90 day past due stood at 0.93% in September 2022, but we have also categorized 0.17% of up to 90 day past-due asset as gross NPA or Gross Stage 3 following RBI notification dated November 12, 2021 to harmonize IRACP norms across all lending institutions. As a result, total Gross Stage 3 is 1.10% in September 2022. We will continue our strategy of controlling early delinquencies and strive to maintain 1+ DPD below 5% and 90 day past-due below 1%. I would now hand over the line to Mr. Ghanshyam, CFO to discuss various business parameters in detail.

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Aavas Financiers Limited

October 21, 2022

Ghanshyam Rawat: Thank you Sushil Ji. Good afternoon everyone and a warm welcome to our earning call. During the quarter, company borrowed an incremental amount of Rs.9467 million at 7.55% as of September 2022, our average cost of borrowing stood at 6.99% on an outstanding amount of Rs.109711 million. During the quarter, our long term rating was upgraded by CARE from AA-/positive outlook to AA stable. While ICRA continued to maintain long term credit rating AA stable despite the highest short term rating A1 plus, we continued to maintain zero exposure to commercial papers as a prudent borrowing practice. IGAAP to Ind-AS reconciliation has been explained in detail for profit after tax and net worth on slide #31 and #33 of our presentation.

Key parameters. As on September 30, 2022 total number of live account stood at Rs.166639 that is 23% year-on-year growth, total number of branches was 321, 24 new branches added in last 12 months. Employee count 5702, 23% year-on-year growth. Asset under management grew 24% year-on-year to Rs.125437 million as on September 30, 2022. Product-wise breakup: home loan 70.9%, other mortgage loans 29.1%; occupation-wise breakup: salaried 39.8%, self-employed 60.2%. Disbursements increased by 27.2% year-on- year to Rs.11467 million for Q2 FY2023 and 64.2% year-on-year to Rs.22404 million for H1 FY2023. As on September 30, 2022, average borrowing cost of 6.99% against an average portfolio yield of 12.85% resulted in spread at 5.86%.

Borrowings: access to diversified and cost-effectivelong-term financing, strong relationship with development financial institutions. During the half year, we borrowed Rs.18451 million at an average rate of 6.62%. Overall borrowing mix as on September 30, 2022 is 41.8% from term loans, 23% from assignment and securitization, 20.5% from National Housing Bank, 14.7% from debt capital markets.

Now Assets Quality and Provisioning: 1 day past due stood at 4.45%, Gross Stage 3 stood at 1.10%, Net Stage 3 stood at 0.84% as on September 30, 2022; Gross Stage 3 of 1.10% includes 0.17% up to 90 day DPD assets, which have been categorized as GNPA following RBI notification dated November 12, 2021. During FY2022, resolution plan was implemented for certain borrower accounts as per RBI's Resolution Framework 2.0 dated May 5, 2021. Some such accounts with an outstanding amount of Rs. 1012.5 million as on September 30, 2022 have been classified as Stage 2 and provided for as per the regulatory guidelines. The ECL provisioning including that for COVID-19 impact as well as Resolution Framework 2.0 stood at Rs. 649.1 million as on September 30, 2022.

Liquidity of Rs.28370 million as on September 30, 2022, cash and cash equivalent of Rs.13270 million, un-availed CC limit of Rs.1100 million, document un-availed sanction limited from other banks Rs.14000 million.

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Aavas Financiers Limited

October 21, 2022

Profitability: PAT increased by 29% year-on-year to Rs.1962.6 million for H1 FY2023. ROA was 3.42%, ROE was 13.44% for H1 FY2023. As on September 30, 2022, we are well capitalized with a net worth of Rs.30314 million, book value per share stood at Rs.383.6. With this, now I open the floor for Q&A session. Thank you.

Moderator:Thank you very much Sir. Ladies and gentlemen we will now begin the question and answer session. First question is from the line of Abhijit Tibrewal. Please go ahead.

Abhijit Tibrewal: Thanks for taking my question. Good afternoon Sushil ji and Ghanshyam ji. I hope both of you are doing well. First thing that I wanted to understand is the absolute increase in your Stage 3b which is greater than 90 DPD and is now up 50% in the last two quarters, just wanted to understand are these loans which have slipped from your restructured pool or are these customers who have defaulted because their EMIs have increased when you increased your PLR and related question here is, from your past experience you think that there is a need for the industry to be worried about higher delinquencies in the affordable housing segment when the EMI of the customer is increased.

Sushil Kumar Agarwal: You are asking from Q4 last year to Q2 this year?

Abhijit Tibrewal:

Yes.

Sushil Kumar Agarwal: I think we are normally in 1% here and there and now from April 1, 2022 we have stock mark in cases AFS which was earlier whenever any asset repossessed in the sarfaesi, we used to mark AFS and it will go away, but now AFL will remain in the book, so this amount is an addition, otherwise it is around 0.9. Secondly, the old AFS book we hope it will also get over so we thought we should be more conservative on that aspect and this is why this number is looking like this.

Abhijit Tibrewal: Understood Sir, now we do not classify any assets that we repossessed as AFS they are still classified as stage 3.

Sushil Kumar Agarwal: Yes. That amount is Rs.12 Crores.

Abhijit Tibrewal: Got it. Related to question that I asked that when the EMI of the customer is increased, is the reason to be worried that it can lead to higher delinquencies in the affordable housing segment?

Sushil Kumar Agarwal: It is a cycle, we give 20 years loan sometimes it gets higher but mostly tenure based, the tenure will go up and down, very few cases where we need to increase the EMI of the

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