Aavas Financiers Limited (NSE: AAVAS) Q3 2026 Earnings Call dated Feb. 05, 2026
Corporate Participants:
Rakesh Shinde — Head of Investor Relations
Sachinder Bhinder — Managing Director & Chief Executive Officer
Ghanshyam Rawat — Co-Founder & Chief Financial Officer
Ashutosh Atre — President & Chief Risk Officer
Analysts:
Unidentified Participant
Kunal Shah — Analyst
Abhijit Tibrewal — Analyst
Raghav Garg — Analyst
Shreepal Doshi — Analyst
Chintan Shah — Analyst
Rajiv Mehta — Analyst
Sonal Gandhi — Analyst
Presentation:
operator
Ladies and Gentlemen, good day and welcome to the AWAS Financers Limited 9 month and Q3FY26 earning 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 guarantee of future performance and involve risk and uncertainties that are difficult to predict. As a reminder, all participant line 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 Star then zero on your touchdown phone.
Please note that this conference is being recorded. I now hand the conference over to Mr. Rakesh Shinde, Head of Investor Relations of AWA’s Financiers Ltd. Thank you and over to you sir.
Rakesh Shinde — Head of Investor Relations
Thank you Dhanesh Good evening everyone. I extend a very warm welcome to all participants and thank you for joining us on today’s earning call to discuss the financial and operational performance of our company for nine months and Q3FY26 along with the business outlook going forward. The result and the investor presentation have been uploaded on the stock exchanges and are also available on our company website. I hope you have had chance to review them. We have also uploaded Excel fact sheet containing historical data on our website for your easy reference. Joining me today is the entire management team of AWAs.
We will begin this call with the opening remark from our MD Sachinder Binder, CFO Kinsham Rawat and CRO Ashutosh Atre. This will be followed by Q and a session. With that. Let me now hand over the call to Sachinder. Over to you Sachinder.
Sachinder Bhinder — Managing Director & Chief Executive Officer
Thank you Rakesh. A good evening to all and I. Thank you all for joining this earning call. I wish you a happy 2026. The recent macro developments have been very encouraging for the Indian economy. The atmanirbar Union Budget followed by the positive progress on the India US Trade Agreement marks an important inflection point. These developments are expected to support external stability, improve systemic liquidity, ease interest rates and create a more favorable environment for credit growth. Q3 also saw several structural reforms including GST rationalization, labor code implementation, progress on key trade agreements and continued FDI liberalization. Together these measures should strengthen household balance sheets and drive urban and rural consumption recovery. The Union Budget 2026 reinforces the government’s focus on capex led growth while continuing to support consumption and affordable housing.
Alongside this, the High Level Committee on The banking for Vixit Bharat clearly positions NBFCs and housing finance companies as key. Enablers of credit expansion. The emphasis on developing Tier 2 and Tier 3 city economic regions creates a strong structural tailwind for affordable housing overall. We believe the macro environment is becoming increasingly supportive for housing finance with improving affordability, stable funding conditions and a strong Runway for sustainable growth on AWAAS performance. I am pleased to share that during Q3FY26 our balance sheet size crossed rupees 20,000 crores, marking an important milestone in our growth journey. During the quarter we also successfully raised approximately 975 crores equivalent to US$108million for a marquee multilateral financial institution at a competitive cost. This represents the largest NCT placement in company’s history and underscores our position as one of the leading players in affordable housing finance.
It also reflects strong external confidence in our measured quality led growth strategy and long term vision. The proceeds from this financing will be deployed to support affordable housing loans for EWS and LIG households, promote women homeownership, scale green certified housing and expand MSME lending in underserved regions, further strengthening our development focused lending franchise. During the quarter we rolled out a Branch Excellence program to drive sustainable quality growth across branches. Project ME focusing on strengthening pre login discipline and frontline effectiveness through better field management and coaching. Project Nippon institutionalizing the post login rigor by improving improved quality documentation discipline and turnaround times.
Project Sampun drives a first time right culture to enhance login quality and reduce rework. Project SETU optimizes our channel management through digital integration and more effective partner management. And finally the Project RISE which strengthens employee engagement through structured rewards, recognition and clear career pathways. Together these initiatives are creating a strong operating backbone for consistent and sustainable growth onto the business front. After the transition to the new disbursement recognition framework in Q1 operations have normalized resulting in a 10 percentage QoQ growth in disbursement due to over quarter three. Our sanction to disbursement ratio which was impacted in quarter one has recovered and now stands at more than 80 percentage demonstrating improved conversion efficiency.
Traditionally, Q4 is a strong quarter for us and we expect this momentum to sustain. Our credit first approach continues to benefit. Us with best in class asset quality. Our one DPT has shown a sharp improvement across geographies resulting in lowering GNP. During the quarter our AUM grew by 15% YoY to rupees 222 billion. The broader economic backdrop remains supportive and conducive interest scenario continues to support affordability and demand momentum in our core segments. During the quarter we further benefited from a lower cost of funds following a 25bps cut in the repo rate in today’s ALCO meeting, it was decided to pass on 15bps of of this benefit to our customers effective the 1st of March. This revision will benefit around 70% of our customers who are on the floating rate book while maintaining an appropriate balance between customer benefit and margin sustainability.
Furthermore, government initiatives like the interest subsidy scheme under PMI 2.0 coupled with a stable interest rate environment continue to support. Home buyer sentiment and affordability. We are pleased to report that over 2,800 Avaas customers have already benefited from this scheme, receiving subsidies amounting to more than rupees ninety million. As we look ahead, our long term strategic priorities remain clear to fully leverage our digital platforms distribution network, further strengthen governance, drive scale efficiently optimize cost and enhance productivity across the organization. With that preamble, I will now take you through our quarterly performance. Our AUM has now reached at rupees 222 billion. During quarter three FY26 we disbursed loans worth rupees 17.2 billion registering a 10% sequential growth while maintaining our strong focus on quality origination and prudent underwriting.
Our Net profit for quarter three FY26 grew by 16 percentage YoY to rupees 1.7 billion in LED by 17% YoY growth in NII on account of healthy improvement in spread. Our network continues to compound steadily growing at 16% yoy with the strength of our capital position driven by consistent compounding internal accruals. Our NIMS expanded by 27bps sequentially to 8.01% during the quarter. This improvement was supported by improvement in the spread coupled with our continuous focus. On risk adjusted pricing. Our OPEX to asset ratio saw an improvement of 8bps sequentially to 3.44 percentage while the cost to income ratio continued to trend lower by 66 bips sequentially to 42.9% reflecting improved efficiency gains. Our asset quality remains pristine with 1 GPT well below 5 percentage improving by 19bps sequentially to 3.80 as of December 2025. While GNP improved 5bps QoQ to 1.19%. Credit costs stood anchored at 16bps driven by lower 1 plus DPD floor and improvement in stage 2 and stage 3 buckets. We continue to maintain our guidance of keeping credit costs below 25bps on a sustainable basis.
Our ROA improved by 6bps, y o wide to 3.43% and ROE improving by 8 bits yy to 14.29 percentage. We remain committed to delivering quality, profitable and sustainable growth powered by tech led. Efficiency and cost optimization. With a robust risk management framework, deep and diversified distribution network and the strong execution capabilities of our experienced team, we are confident of achieving a strategic milestone and delivering long term value to all stakeholders. With that ladies and gentlemen, I will now hand over to our CFO Ghenshyam. Rawat to discuss the financials in detail.
Ghanshyam Rawat — Co-Founder & Chief Financial Officer
Thank you Sachinji Good evening everyone and a warm welcome to our earning call to provide update first on the borrowing part. The improvement in cost of fund continue to underscore strength and resilience of AWAs well diversified liability franchise. In line with our strategy of innovation in liability sourcing, we proactively anticipated a potential softening in interest rate and strategically shifted a sizable portion of our borrowing to ABR linked instruments and various market linked benchmarks. This forward looking approach has continued to yield tangible benefit in Q3 also as our liabilities are repriced faster than those of many peers.
This position us well to maintain a competitive cost of fund while supporting sustainable quality growth well diversified liability franchise linked with various benchmark and competitively priced in Q3 FY26 we were able to deliver an additionally 16 basis point improvement sequentially in our cost of fund and 56 basis point improvement in nine months of this year. In today’s Alco we decided to pass on benefit of 15 basis point to our customers with effect from 1st March 2026. Our spread improved by 40 basis points year on year to 5.34% in quarter three. While calculated spread increased by 65 basis point year on year.
We continued to borrow judiciously raising around 15.41 billion rupees at competitive rate. At 7.784 quarter 3 FY26 the average tenure of borrowing continue to be longer than that of our assets ensuring a positive ALM across all the buckets. As of 31st December 2025, total outstanding borrowing stood at 193 billion. We have optimum mix of borrowing linked to the various benchmarks of interest rates such as 35% borrowing linked to external benchmarks such as repo, TBIL, MyBoard and 34% linked with the SIR 3 month MCLR enabling faster repricing of nearly 69% over borrowing in line with the interest rate movement.
Lender supports remain strong as awas continue to evolve. We maintain access to diversified and cost effective long term financing. Our relationship with development finance institutions remain robust in supporting our strategic funding goals. As of 31st December 2025 we maintain ample liquidity and including cash and cash equivalents and unavailed Cascaded limit of rupees 19.55 billion Documented unavailed sanction of rupees 24.54 billion Profitability and capital Position Our net total income in absolute terms grew by 18% year on year in quarter three FY26. Net interest margin as a percentage of total assets expanded by 27 basis point year on year to 8.01% in quarter three FY26.
We remain well capitalized with a net worth of 48.6 billion and a capital to risk weighted assets ratio of 46.4% significantly above the regulatory requirement. Now I would hand over the line to our CRO Ashutosh Ji ADRI to discuss the asset quality Ashutosh over to you.
Ashutosh Atre — President & Chief Risk Officer
Yeah, thank you. Good evening everyone. I am pleased to share the key portfolio risk parameters with you. Asset Quality and Provisioning AWAS is strongly positioned to continue delivering industry leading asset quality. Our asset quality remains within the guided range with one day past due well below 5% at 3.80% in Q3 FY26 and gross stage 3 and net stage 3 under 1.25% stood at one point and 0.79% respectively during the quarter. Not only in terms of percentage as mentioned by Sister Ji, our principal outstanding of 1 DPD and stage 3 principal outstanding has also reduced in absolute value.
From geographic perspective, asset quality in our vintage states continue to remain healthy. The average 1 DPD and GNPA stood well below 4% and 1.25% of AUM’s AUM. Similarly, in our emerging markets we are observing healthy credit performance with 1 bpd and GNPA level remaining comfortably within 4% and 1% of AUM respectively. Our total ECM provision including for COVID 19 impact as well as the Resolution Framework 2.0 stood at Rupees 1.27 billion as of 31st of December 2025. Our disciplined underwriting standards coupled with proactive risk management framework have enabled us to stay ahead of emerging macroeconomic challenges.
We continue to follow a rigorous credit assessment process, stress tested across multiple economic scenarios and remain selectively calibrated in our exposure to higher risk sectors. This approach has helped us prevent asset quality which continues to rank among the best in the industry. With this I open the floor for question and answer Session.
Questions and Answers:
operator
Thank you so much, sir. Ladies and gentlemen, we’ll begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Ladies and gentlemen, we request you to use handsets while asking a question. Wait for the moment while the question assembles. Our first question comes from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Yeah, hi. Thanks for taking the question. So the first question is on growth. When we look at maybe the first nine months growth it clearly suggests maybe the guidance which was given of closer to like 18 odd percentage that appears to be quite stretched and it might settle at less than 15 odd percent. So maybe in terms of the indicators as to how do we plan to get towards 18 to 20 odd percent growth in the coming years? And the related question is on the branches. Last time you indicated that you will add 2025 odd branches. But we had seen some consolidation of branches in Rajasthan and Maharashtra so maybe the addition of branches has also been not very high.
So what’s happening on that front in terms of the franchise expansion?
Sachinder Bhinder
Thanks Kunal. During H1 we undertook a significant transformation. In our business and accounting processes with a calibrated tightening of credit in a relatively subdued macro and credit environment. As communicated earlier, our priority has been. To protect portfolio quality and not to pursue just the headline growth. Accordingly, the final AUM growth outcome continues. To be influenced by how the macro and credit environment has evolved even as we remain committed to a long term growth aspiration encouraging. Post Diwali we started seeing a pickup. In the business momentum and we expect this trend to continue through our quarter four.
FY26 quarter four last year was a strong quarter with disbursement crossing rupees twenty. Billion and we are confident of exceeding. That level comfortably this year as well. On the AUM front, H1 created a. Meaningful drag on the overall growth run. Rate which has led to AUM growth. Moderating to around 15%. Given this backdrop, our focus for the remainder of the year is to maintain the current growth trajectory while continuing to. Safeguard asset quality rather than pushing for aggressive growth. The second question on the growth for the next year looking ahead, FY27 should be year of strong recovery with no from transformation initiatives, a number of initiatives which we have taken and incremental investments.
Being made in branch expansion to drive growth. With a stable operating environment and a stronger platform in place, we are targeting around 25 percentage growth in disbursement in FY27 while continue to build a resilient high quality franchise. And this is how it is standard that we are planning to have around 25 percentage of disbursement growth solving for. An additional 2000 crores that we are looking at for the next year. We already are ahead by 500 crores. In our monthly average run rate. That will add on to the total cumulative sum. The branches open in the last 24 months will give another 200 to 250. Crores of additional business. Whereas we are opening additional 50 branches in the next year which will contribute about 100 crore or of business. And really the digital channels like the CAC, Emitra and allied channels will give. Us another 500 crore additional business.
And plus the inflation led growth we. Are factoring around 6% which is about. 400 crores would really improve the numbers. As I speak over and above, as. I spoke about the lot of initiatives which we have taken which have given the green shoots in quarter three where. Our visits, the customer visit related from the direct channels have actually increased by improved by 30%. And we are confident that productivity enhancement really will come through all of this. As management, we are confident with these. Measures which I really spoke about contributing to robust 25 percentage growth in the coming year.
Kunal Shah
Sure. And with respect to branch expansion, it was quite slow during the quarter and there was some rationalization as well.
Sachinder Bhinder
So there was multiple branches which we had done. So it was not about consolidation. And so as we speak Kunal, on the current date we are at 410. Branches as of today. And in addition to that, this quarter. We’Ll add another 20 to 25 branches in quarter four.
Kunal Shah
Okay. So that trajectory maybe that guidance still continues in terms of adding 20, 25 branches in the second half.
Sachinder Bhinder
Yeah. And next year we are going to add another around 50 branches. Next year we will add on. So what we are doing is we are going deeper in the. In the regions where we are there in tier 2, tier 3 towns by that RRO model which is already there. So I think that deepens our market. As far as that is concerned. Open a lot of where we’ve stabilized RROs and we find that there is a good potential. We convert looking at converting into the. Model branches, what we call the model branches which are like self sustained branches at a lower infra cost which really helps us to build that. So we continue our guidance and our trajectory of geographic expansion by going deeper and opening physical branches.
Kunal Shah
Got it. That helps. Yeah. That’s all from my side. Thank you.
Sachinder Bhinder
Thanks Kunal.
operator
Thank you. Our next question come from the line of Abhijit Tibrival from Motilal Oswal Square.
Abhijit Tibrewal
Yeah. Good evening everyone. Thank you for taking my question. Again, just maybe repeating what you’ve already said, right. But again I think while we have managed to get some handle on the BTout and the portfolio attrition this quarter, which I’m sure was driven by all the actions that you would have taken because from what we hear from other housing finance companies, the competitive intensity continues to still remain very high. So but I think disbursement momentum kind of still leaves a lot to be desired. What we usually know, right, 40, 60, kind of a disbursement mix between one and even if we were to do that, right, I think we still fall a little short of what maybe you would have targeted on disbursements for this year.
So I mean while you’ve already partly answered it in the previous question, but what were the growth headwinds this year and what will change next year for us to start accelerating on growth except for this branch addition of branches that you just explained.
Sachinder Bhinder
So Kunal, sorry Abhijit, thanks for joining the call and see if you place. It in the two ones on the growth. As we said that because we had. The transformation on the accounting process of disbursement recognition, the quarter one cover up, whatever was there, I think that actually delayed and lagged our entire stuff for the current financial year. So I think that is one which was there. Secondly, at a conscious call of some of the states which we had taken. In Karnataka and other places, as we start seeing in quarter two and quarter three, we started stepping up and that. More to sort of really look at. It from a perspective of the credit environment and the overall environment based on the Katas and E. Katha and stuff which was there. So I think there were a couple. Of those stuff which actually had mutated.
On the second question of how do. You really span out the growth for the next year. So as we highlighted the projects which. We highlighted on specifics, the digital channels. Which really have started contributing to us. Like CSE Emitra incrementally would contribute more. Than 500 crores on a monthly average run rate which is there for us. Currently we are at a 500 crore. Monthly average run rate. But additional CSE and Emitra would contribute. To an extent of another 500 crores next year.
So we are confident of the digital channels, we are confident of the branches which have opened in the last 24 months really contributing, including the new branches, additional about 300 crores really coming across from there plus an inflationary small bit of 6 percentage growth coming across from the inflationary led growth plus the initiatives, whatever we spoke about on the productivity. Enhancement and as I spoke that visit. To customer ratios actually have improved by 30% is finally really helping us improve the productivity. So primarily the input really is getting refined and crystallized and we’ve seen that. Green shoots in quarter three so so. We are confident that we’ll be able. To carry forward in quarter four and build that in the next financial year.
Abhijit Tibrewal
Got it sir. So then on the disbursements again if I look at the disbursement makes very clearly right until last year the non HL in the disbursements typically used to be around a 35% world path. Now if I look at this year it is consistently the non HLP is consistently above 40% in the mix. So I mean how is the demand landscape today purely in individual home loans? And the related question here also is that I mean recently, right I mean at least some of the larger HFCs who reported they have all been talking about kind of moving towards near prime affordable.
So do you think that, I mean until now we very often used to say what if there is a competition from the banks but now if the larger HFCs also start looking at the affordable side, is it going to kind of meaningfully increase the competitive intensity in the affordable housing sector?
Sachinder Bhinder
I think your first question on the HL NHL part, I think it is more about the recognition of that that pushed the HL to a little drag as far as recognition was concerned because as you know the home loan transactions are operated through a check disbursement mode and NHL and those portions are more by the RDGS mode which was there. So that differentially had a drag on the kind of HL which is there. So unlike the normal one we’ve not seen any of the drop which is there. It is, it is just what I would say, movement which is moved quarter on quarter to the subsequent quarter.
That’s 1. So even with our PMA 2.0 where. We disperse more than 2,800 plus customers in the ISS scheme is also reflective of the strong home loan growth what we really see. So the logins and those from the home loan really continue to build on. And we will continue to build in. The markets where we operate on that franchise. That’s one.
Secondly, on the competitive intensity I think. We stand out as far as our understanding of self assessment based strong SENP direct model is Concerned and our inroads. Into Tier 2, Tier 3 markets both from a perspective of understanding the customer. And understanding the property and buying in the two or both with the quality which is there I think stands good at awards which is there. And as you highlighted that on the. Btout we continue to be at 4.5 percentage for quarter three which is only. 60 which is 60 bits lower than. The same period last year. So I think we are confident with.
Our kind of underwriting practice, our kind of customer segment, our deeper reach which. We continue to further build and expand. Will actually also help us to thwart the normal competition. What you are referring to and again. From a perspective of if you look. At the average ticket size Avast continues to be in the average ticket size of 12 and a half lakhs whereas affordable for some of the peers on the you are talking about the ticket size is more than double what typically we service on an average spy. So I think from that still it is far away as far as reaching that customer segment. So to say.
Ghanshyam Rawat
Yeah Abhijit what Sachinji said I think apart very important to see like in ours Today we have 65 to sell 75 to 70% self employed customer basically Whereas all large HFCS banks has 80 to 90% salaried customer. So in the same market, in the same geography even we are present both. Then we have a different we target different customer class. They target different customer class. We target 12 to average ticket size. 13, 14, 15 lakhs rupees they target 25 lakhs and above ticket size customer in same market basically. So that make a huge difference. Thirdly I think as we are very deep rooted in those market we are almost today source the customers around 2000 plus towns basically where they are remain still in the large market in the city or district headquarters. They remain up to that level. We go at a subtown level subtown level basically. So that I think that is continue to be I think in the same market all we make a separate road for us there is enough opportunity in the market.
So even despite large SFC focus for the affordable housing.
Abhijit Tibrewal
Thank you Vanshan Chinda sir, just one last question on the borrowing mix. If I look at the NHB refinance from its peak of 22 23% declined to 20% then to maybe 16% same time last year and now 14 to 12 rather 12 now. So I’m just trying to understand was it because NHV was not giving a sanction because of the ongoing CVC transaction but now that the transaction has also been concluded. Have you received any new sanctions from NHV and what are the plans to draw them down?
Ghanshyam Rawat
Yeah, you are right. Our contribution of NHV refinance in overall borrowing has fallen because as you appreciated that CVC transaction was in process and it got now completed everything. Now we applied for our refinance limit also which is under consideration at their end. Basically we are hopeful that in the coming quarters we will start. We will start the positive. We will listen to positive from their side. Otherwise that I think company has done very fantastic work in even NHP borrowing was less than let’s say what ratio was there a year back? Basically all banks, institutions, multi led institutions and was borrowing as almost 56 basis point reductions which is a.
Which is far better than peer group. Far better than the peer group. Basically even sequentially our overall interest cost is lesser than the lesser than the quarter two basically which shows the strength of liability franchise of awas. Now we are already double A plus a positive outlook and so that is also helping us basically to exclude the new market of a borrowing at a competitive price.
Abhijit Tibrewal
Got it. Thank you so much for answering your question and I wish you and your team the very best.
Sachinder Bhinder
Thanks.
operator
Thank you sir. Our next question comes from the line of Varun from Kotak securities. Please go ahead.
Unidentified Participant
My question was regarding to disbursements and how we see disbursement going up. What will drive us so in light. Of that I would want to ask. What is the login to sanction ratio for us? How has it trended over the last 2 3/4 when you’ve tightened the screen and is there leeway over here that as the field staff get normalized these. New credit screens that the ratio might change. The second question is with regard to the disbursement I think you’ve mentioned that the new channel partners currently contribute about 7%. So how much do DSAs or connectors contribute? Because those channels can scale up faster than the other. If you can give that.
Sachinder Bhinder
Yeah, thanks Varun. I think as you rightly pointed out the screens on the on the credit quality and we had called out so there has been a sequential improvement where we saw improvement in the credit environment, in the credit quality and our sanction ratios also improved from around 3032 percentage in the quarter one leading to around trending at around 3840 percentage in the last quarter. So to say I think that’s the positive side for looking at the credit quality. And AWAAS has always been looking at the risk adjusted returns and really underwriting what we feel right at that period of time which is suitably from a credit environment perspective.
So I think that’s the positive trajectory which is there. The most important point is our sanction to disbursement ratios also improved sequentially from the earlier period of time. That also gives us confidence. That’s number two, number three on the channels. What you rightly elicited the scaling up 5 year confident. Because as a couple of digital channels like CSE Mitras and Mitras is the ones where we’ve actually put in efforts. And those efforts have really shown traction. In the current financial year. And as we entered the quarter, as we are in quarter four and entering.
The FY new fy, it gives us confidence of an incremental scope of expanding at a faster pace which I elicited that it is going to contribute an extra around 500 to 600 crores from those channels. And the other part which we said that on a muted expansion of the graph branches the last two years branch opening the new financial branch only further adding and impeded about 200 to 300 crores. Plus the retail inflationary led growth which. We have taken at a very very conservative level about 6 percentage further contributing to another 200 to 300 crores for the next financial year. Plus the productivity improvement as I spoke. About in my call about the various projects and the branch excellence which we. Have taken and therein also we’ve seen the green shoots about improvement in the quality of logging.
The customer Visit increasing by 30% is really improving. The quality input also will continue to contribute to our expansion of the scalability in a right format. Plus earlier part as I said that we had a little muted geographical growth. On certain parts of Karnataka. Knowing the credit environment and the part of the KATA related stuff which we had hold on to our disbursement. So we’ve seen that acceleration also happening in that pace. So that also will start contributing. Plus we’ve opened Tamil Nadu in the. Last couple of quarters. I think that also slowly and steadily. Will also start contributing to our numbers as we effectively go in the next financial year.
So we are pretty confident with all the measures. Rightly we will be able to scale up in a more modular, sustainable and rightful quality growth manner.
Unidentified Participant
I just had one more question on the incremental yields. So after the PLR cut, what is the gap between the incremental yields and the book yields? Where will it trend towards?
Ghanshyam Rawat
I think incremental yield is already even without 15% reduction it already got transmitted because by spread corrections which keep on happening when we source the customers, the new business will not much impact. But by 15 basis point reduction we will have almost overall AUM will be reduced by 9 to 10 basis point oral impact on the book. Because we have almost 37, 38% fixed rate book. So it will have a 9, 10 basis point impact. And I think. Let’s say I further update you on that piece. It will another. We see few basis point cost of borrowing reduction in this quarter.
Overall we are comfortable or we are confident our spread will remain around 5.25% for the year ending. A few basis point two basis points here and there. But roughly we are confident to have 5.2%. 5.25% is correct by the year.
Sachinder Bhinder
Currently we are at 5.34 as we speak on the for the current quarter.
operator
Thank you. Our next question comes from the line of Raghu from Ambit Capital. Please go ahead. Hi.
Raghav Garg
Am I audible?
Sachinder Bhinder
Yeah, thanks. Yeah, yeah.
Raghav Garg
Okay. Sir, I just had two questions. Actually two clarifications before I ask my question. One, did you say that you are targeting 35% disbursal growth in FY27? Did I hear that correct?
Sachinder Bhinder
25% is 35.
Raghav Garg
Is it 4? 25. Okay. And then a new branch addition will be 50, right?
Sachinder Bhinder
Yeah.
Raghav Garg
Okay. Sir, my question is, you know, without the PLR reduction, you know that we’ve, I mean you haven’t produced your PLR so far. You know, it’s only effective March. Despite that the yields have come down by about 16 basis points because of competition and that continues to intensify. An effective March, you’re taking a 15 bits PLR cut. On the liability side, it seems that the cost of funds has likely bottomed out at 7.7%. So for FY27, what is your expectation in terms of how much your spreads can normalize lower? I think you just mentioned 5.2 or 5.25.
But are you confident that the spread decline from here will not be more than say 15, 20 basis points given the kind of competition that we are seeing out there?
Sachinder Bhinder
See Raghav, we’ve always guided that we’ll. Remain the range bound of 5%. And if you look at our trajectory, we hovered around, we came down to around 4.8 now and further jumped back. I think looking at the overall environment, the cost of funds and rights fully passing on the cost of reduction and the cost of borrowings to the customer is a fair and right thing for an institution to really do. And that with continued softening as what Ganchamji highlighted about the softening of expected cost of borrowing. We’ll be able to balance that on the entire portfolio and even on the.
Portfolio we have 70 percentage floating. As far as this the passing on the PLR reduction is concerned so we. Are pretty confident as we’ve guided so. We’Re well above the guided level of 5 percentage. So we are currently at 5.34 and. We are confident of 5 percentage plus at 5 point ranging between at around 5.20 to 5.25 in the coming quarters.
Raghav Garg
Understood? Understood. Second question is on your branch and workforce count that has been more or less same since last few quarters. I think you may have mentioned another participant may have mentioned that there has been some consolidation. So I actually wanted to ask that you know what is your plan for next year But I think you’ve already answered that around 50 branches. Can you give some color on employee attrition Because I noticed that that you know workforce count has not been increasing as such and your employee productivity has also been coming down. I’m guessing that’s partly impacted because of the high attrition that’s there in the industry in general.
So your thoughts on this will be very helpful. Thanks
Sachinder Bhinder
Raghav. As we speak we are at 410. Branches so I think from a branch perspective we continue to go and expand in more deeper in the geographies which we are and we have an IRO model which is a resident relationship officer model which is without a branch that is what we cover to. So I think that is one we will further strengthen in the coming quarters. And again developing and building those model.
Branches as I spoke earlier also will help us from a branch expansion perspective. Secondly, I think a lot of further parts on the rise kind of program which we have done I think which has resulted into holding on to our attrition rates at constant compared to the industry standards which are there. I think that two, three things which. Actually help us to have stability which. Is there and some of that doesn’t. Really fortify initially in the immediate months on the productivity but as you proceed.
And the vintage of the RO really. Or the first mile relationship officer starts you start delivering and getting the productivity over a period of the next quarter. So from that perspective we’re confident of getting that productivity rise which is there. Again this is also backed up by how we’ve done scientifically and analytically right. To get that and help that in the right perspective. So I think from that perspective we are very clear that this will also help us in building across in the current quarter as well as the next quarter.
This is as a part of the branch Excellence program which I spoke across. Which is for Project rise which strengthens. The employee engagement to structured recognition and clear pathway. So there is a right mechanism put in place institutionally to help that to build in a stronger and enduring way.
operator
Raghav, are you there?
Raghav Garg
Yeah, yeah, I’m all done. Thank you.
operator
Thank you so much. Our next question come from the line of Sheepal Doshi from Aquarius. Please go ahead.
Shreepal Doshi
Hi sir, thank you for giving me the opportunity. My question was on the asset quality front. So there undoubtedly we’ve done decent performance with trends improving so incrementally. Is that also likely to help us on seeing better business momentum as we can now relax some of the underwriting related norms in the coming quarters, Would we look at doing that in order to let’s say revive business momentum and our disbursements?
Sachinder Bhinder
So Sripal, we’ve always looked at risk. Adjusted return looking at the credit environment and whenever we felt that it is conducive as far as our standards, I think we accelerate. So having seen it is not about. That having achieved a particular goal, you really step up, you look at the environment and then you really find that it is suitable credit conducive and it gives us risk adjusted returns in the format which as AWAAS as an institution has worked across over a period of so many years. We actually then try to look at the market and accelerate our growth pedal. So we continue to build that.
And I think what you see now. Is our earlier credit cautious approach considering the environment which is resulting into such numbers. As far as we always focused on our input quality whenever there is a credit conducive environment from a perspective both customer side and the property side, we’ve always pushed the pedal and accelerated the pedal as it comes and as this environment really helps us.
Shreepal Doshi
So in that case are you feeling that you are in a position wherein you would want to accelerate the disbursement or business momentum for us?
Sachinder Bhinder
Yeah, as I spoke so we had couple of states as we had called out earlier which have seen a positive credit environment really playing out typically states of commercial both from a perspective of the credit behaviors and the microfin outlay and overhang which was there followed by the registration which was actually now getting streamlined because of the kata related challenges which had posed. So I think as that really pushes. Out we put the acceleration on the right kind of credit growth actually.
Shreepal Doshi
But sir, apart from that also because Karnataka is just 4% so I mean are you Seeing the similar trends in some of our key geographies, which is Rajasthan, Maharashtra, Gujarat, mp. So are you seeing this north central belt also giving you signs of business momentum improving at customer levels? Yeah.
Sachinder Bhinder
So in our base state, it is such a high base level. We continue to grow in Rajasthan at a compounded rate of more than around 20% or so and with 111 branches. And at AUM, which is touching about 7,400 crores for us in Rajasthan at that base we continue to grow with a supreme and pristine quality. UP is one of the areas on. The expansion spree for us in the coming years to really get into much deeper. We’ve had five years plus of an experience in there and that’s what the quality has been pristine from our rich metric perspective. And that that’s one area which will be go deeper further to expand the Uttar Pradesh belt, so to say.
So yeah, Uttar Pradesh belt. The states, the cohort of our states. Which are a 10 year kind, which is Rajasthan, Gujarat, Maharashtra and MP really contributing to the ones. The other cohort which is the likes of Haryana, Delhi and specifically UP where. We have been only with about 39. Branches in UP, that’s one state where we want to really push the pedal and accelerate given that we’ve had an experience of more than five years in that state. And plus as we said that called. Out earlier on the southern states, we are still having Tamil Nadu, Andhra Pradesh and Telanga, three states actually available to us for our growth opportunities. We just entered Tamil Nadu, but the.
Three states along with Karnataka, the southern states, the cohort of the old states. Which are vintage states and the existing ones like the UP where we like to expand will really help us go much deeper and accelerate growth.
Shreepal Doshi
Got it sir. So the second question was while you highlighted that we’ll have 25% disbursement growth as target for 27 FY27. What would be the loan growth aspiration for 27 in that case?
Sachinder Bhinder
So as I spoke that we have. A 25 percentage growth on the disbursement. See we’ve actually again to put that in metrics in a very simplistic manner. We said that we are doing around approximately 1.4 crores per branch per month on an average basis. Just a bump up of 1.6 to 1.7 crores really helps us to move the needle much faster. Plus an additional as 25 to 30 lakhs of business per branch really moves that.
And why I’m saying so is based. On the lot of management initiatives which we’ve been taken by the the branch Excellence Program which really help us to. Granularly move the needle in all of. This and incrementally that actually helps us to project that kind of forecast that kind of growth in a very, very secular and a granular manner.
Shreepal Doshi
Got it. But in the loan growth guidance for 2017.
Sachinder Bhinder
Yeah. That would be in the range of. 17 to 18 percentage
Ghanshyam Rawat
which is almost around 300 basis were better than the FY26.
Shreepal Doshi
Got it. Got it sir. Got it. Thank you. Thank you sir. Thank you so much for answering my question and good luck for the next one.
Sachinder Bhinder
Thanks.
operator
Thank you. Next question come from the line of Chintan Shah from ICICI Securities. Please go ahead.
Chintan Shah
Yeah, thank you for the opportunity. So yeah, on the disbursements again basically. We are guiding that it would be. 25% are under it driven by the branch expansion and a couple of projects which we have implemented which are. Which is a kind of transformation project and due to inflation. But so just on asking in a different way what could be the risk which could lead us to not achieve this? Do you envisage any risk or what could be the probable risk which could lead to miss on this number if any which you could think of right now? Yeah, thanks.
Sachinder Bhinder
I think it is only about the. Macroeconomic stability has to continue. There has not to be any of the typical headwinds which really should blow us out or any black swan event which is very difficult to underwrite or. To predict other than that on the. Basis of what we are currently doing and whatever we’ve seen in quarter three and, and what we’ve seen in quarter. Four I think that gives us confidence. To really project and forecast with the granular and secular growth Chintan.
Chintan Shah
So nothing related to the competition or asset probably interest rate movement probably that. Could be a deterrent to this growth, right?
Sachinder Bhinder
No, nothing of that sort that we envisaged. See if you look at a couple of things which you would try to. Really if I were to highlight is the BT out. I think that that’s one indicator which you look at it for the quarter three we are at 4.5 percentage which is 60bps lower than the same period last year.
And again from a ticket size perspective. If you look at it, whatever competition or what people are envisaging on the affordable housing finance companies as you step up, I think the ticket size is very very different range. That’s point number two. Point number three, we have focused very. Much on self assessment based self employed non professional professionals as one of our Key segments which are around 15 percentage. New to credit, 92% of them remain.
To be new to mortgage which is for the first dwelling house that they are taking and raising the finance which is very different from underwriting something which has a different connotation from a profitable which is in excess of 25 lakhs as what people really classify. So our segment we are very clear. That our reach tier 2, tier 3. Towns deep impact one understanding of having. Underwritten more than half a million customers at this period of time as we speak that’s one which we already underwritten. Plus the kind of logins which you do every month.
We have a proper data history of the customers, what we have sourced, what we have underwritten, how they have performed. I think there’s a lot of data. And science available to us to understand much more granularly secularly region wise customer segment wise. I think that really helps us and stands out in the market actually.
Chintan Shah
Sure. So that is quite helpful. And just one last thing on the Tamil on Tamil Nadu. So we have recently entered Tamil nadu with around 10 branches. So but given that this is a very highly competitive market which is what we hear from peers as well. So how are we placing ourselves to gain to get our share market share in this markets and any numbers you could throw on the disbursements or AUM targets for Tamil Nadu for FY27. Yeah.
Sachinder Bhinder
So Chindan, if you look at the. AWAs philosophy of doing credit right and once we enter a new state we give good enough time to understand the credit environment, the local environment and then really step up so unlike and we never chase market shares really so to say. And the market share chase is typically. When you go out in the market and try to do the BTNs and stuff for that I think we. We never believed in that philosophy.
And even if you look at from a perspective of entry into Tamil Nadu. That is where we started osu. We were there in Karnataka and we entered the piece which is nearing the Karnataka belt. So understanding of the market, doing the credit right and giving enough time for the market to mature to understand for. The segments which we serve for I think and then typically we step up. And as we’ve guided we will continue. To do that in near term period.
And we are confident in the next year having opened 10 and another seven. Branches we have 17 branches that will additionally have about 75 to 100 crores next year to our city. But as I again reiterate, we never chase market share. I think when you start chasing market Share. I think it’s very important to get the foundation right in the new state which you do. So like for example, the last state which we entered was Karnataka. So we’ve been very conscious about what.
We underwrite, what we put the fundamentals in place and then really accelerate which. Is there and to your point of competition, I think from the perspective of the market segments which we serve, we. Are very, very sure about the kind of potential which is available there. As we are clear on SCMP focus, unserved, underserved, plus the new to credit and new to mortgage. I think that gives us confidence getting into those markets and building that.
And I think I look at from. An opportunity perspective ours because if you. Look at we have three wide open. Spaces available, three states are actually available for us to really build on which is Tamil Nadu, Andhra Pradesh and Telangana.
Chintan Shah
Sure. So this is quite helpful. Thank you and all the best.
Sachinder Bhinder
Thanks.
operator
Thank you. Next question comes from the line of Rajiv Mehta from yes, securities. Please go ahead.
Rajiv Mehta
Yeah, hi. Congrats on good performance and asset on asset quality and spreads. I just have two, three things. First is you know, for having a better productivity, any changes planned in incentivization for employees and channels. That’s first question. Second is on this oneplus GPD improvement, did the bounce improve or did we made a better effort on collections and hence we were able to correct, you. Know, the same larger volume of bond.
And third is on asset quality generally. Traditionally we see a large pullback in buckets and sizable infill recoveries in Q4. It did not happen last year because it was a difficult income liquidity environment for customers. But this quarter in Q4 can we revert back to that traditional movement in asset quality which we generally see in Q4?
Sachinder Bhinder
I think you have three questions. I answered the second question. I think the input quality of credit underwriting is the ones which really define on risk adjusted returns and doing the robust risk management practices has always helped AWA right from day one and foundationally our risk architecture really contributes towards sound sourcing, sound underwriting and sound risk management. And coupled with state of our digital and analytical bad collection mechanism and as we say that we have our August one on predictive descriptive and descriptive analytics to really forecast the probability of the bounce much before the customer really bounces.
So I think all those have been perfected. I think all of that really put. Together really helps us to deliver for what we are. What numbers you see on board? That’s the answer to your question number two. Question one was on the employee productivity as I spoke that the branch excellence. Programs under the part of where we focus on really helping the channel and helping the last mile frontline salesperson to know where to go, how to go.
And how to approach aided by a. Digital mechanism that’s led by the PIN code identification, the market identification and coupled. With lot of CSV or emitralet kind. Of sourcing which is also helping to really increase the one. So what is important there is that how do you increase the throughput when. Your input increases by the visits which are set? I’m again reiterating that we’ve seen a. 30 percentage increase in the sales visits. By the front line which has resulted into the good quality really coming in and finally resulting into a good stable growth. And again we will really look at Genai Bot implementation in quarter three, which.
Will actually help in collection at advanced state from our analytics perspective which will also help in the quality which is there. And as we move on this, we. Will enhance digitally aided and to the. Frontline staff to increase their productivity in a right manner. So I think we are incentivizing the right kind of effort by digitally aiding. Them to perform and helping them to really source. Right, source well and source it in quality manner.
Rajiv Mehta
And the third question was on the traditional pullback that we see which is very significant in Q4 asset quality. Would we see that kind of a pullback in this quarter as well.
Ghanshyam Rawat
By seeing a January number, I think we are at a good trajectory. Our pullback in oneplus or oneplus always have. I think after a quarter we start to see a good bounce back in the 90 plus and stage two, basically. So we are quite hopeful our number will be much better on the on the quality front because across the state we have seen the improvement across the states. Across the states.
Rajiv Mehta
Got it. Thank you. Best of luck.
Ghanshyam Rawat
Okay, thank you.
operator
Thank you. Our next question comes from the line of Sonal Gandhi from AM Securities. Please go ahead.
Sonal Gandhi
Yeah, thank you for the opportunity. So when I look at, you know, a UMP branch for Gujarat, Madhya Pradesh and Uttar Pradesh, the three states have been showing growth of less than 10%. Probably NP being somewhere closer to 4%. Now if you look at the data, even the branches have not been really added over last seven, eight quarters in this case. So anything that has happened in the states or are the acquisitions high or is the competitive intensity high or did you kind of tighten your credit figures? This almost contributes almost about 30% of your UN.
So if you could talk about it.
Sachinder Bhinder
So I think MP we had Called out earlier on certain part of which is there. I think the other we really look at AWAJ from an opportunity perspective both from Gujarat and Uttar Pradesh. I think as we speak we focused on as I spoke earlier on Uttar Pradesh going really deeper into the. The geographies and the districts of Uttar Pradesh. And that’s what our plan is for the next financial year. But that will actually help us to really scale that operations in Uttar and specifically on Gujarat. We are going quite deep because we’ve realized and recognized that we are there in the state for last 10 years.
And we’ve had a lot of implementation programs of going deeper by the RRO mechanism which is resident representative offices which we are officers which we are looking. At it coupled by model branches. I think that spread out for us. In Gujarat will also which will contribute and help us to build the right mechanism and scale up rightfully in that state. So this is what for the three states for awas which would be really helpful in the coming quarters.
Sonal Gandhi
My second question was on OPEX to assets. So we are planning to add 25 branches this quarter probably 6, 7 already added 50 branches, you know next year. So that’s. That’s a big chunk. So how do we see our OPEX 2 assets moving and second related would be on ROE. So our ROEs are still at 14.3%. So you know on stable basis where do you see roes you know reaching in say next two to three years.
Ghanshyam Rawat
Yeah, we appreciate your question. I think when we open the branch. So I think 25 branches just make out to three, four roughly 5% of your total branch strength basically. And all these branches are now we are opening the deep market. So per branch opening infra cost is not that much high. Generally they now these small branches has a main power four plus one. We are more going deeper through RRO as sachinity mentioned where it hardly had any OPEX cost. So it makes all these things. We are confident that our OPEX is more or less on downward trajectory.
Yes, because of CVC came they announced ESO plan for long term management growth management performance driven. So that is extra cost came in this quarter three Basically if. If you remove that one so you will find it is not much change in quarter two to quarter three or year basis. So excluding ESOP cost we are at a similar level. Yeah. With the digital all infra tech invitation we are looking Forward next year another 25 basis point opex saving in the next year. And with this, with this 25% dispersant growth 18% in AUM growth will give us a 25 basis point opex saving.
In the next year.
Sonal Gandhi
The ROE part.
Ghanshyam Rawat
ROE again you, you know our, you see overall ROE basically we are now close to 5% plus spread after I think 6, 6 to 8 quarters after that basically which is now more or less sustainable despite 15 basis point reductions. OPEX as I mentioned we are in that credit cost, we are not seeing much change. We are confident 20 basis point credit cost across the I think in next couple of years every year we don’t see. So all these lead to sustainable better ROE and ultimately our growth is coming to back. So that will increase our leverage.
Obviously right now we are almost 16% on net worth growing annually without bringing new capital on the table. Because of all these India’s adjustment on PNL basis you find ROE around less than 15% but at network growth level without taking any new capital it is 16% around consistently basically. So, so we are in that trajectory of let’s say AUM grow network growth 16% to 18% in next couple of years.
Sonal Gandhi
Okay sir, thank you.
operator
Thank you so much sir. Ladies and gentlemen, that was the last question for today. I would like to hand the conference over to the management for the closing comments. Thank you. And over to you team.
Sachinder Bhinder
Thanks everybody for joining the call. As we conclude today’s earning call, I would like to extend my sincere gratitude. To each of you for your time. Engagement and continued support. The progress we’ve made is a testament of our unwavering dedication of our team. The trust placed by us in our shareholders and the enduring loyalty of our customers. Looking ahead, we remain optimistic about the. Opportunities that lie before us.
We are confident that our strategic initiatives underpinned by product risk management and a customer centric approach will continue to deliver. Sustainable growth and long term value for all our stakeholders. Should you have any further questions or require additional information, please feel free to. Reach out to Rakesh Shinde, our head of investor relations. Thank you once again and we wish. You all the best, all the best for the days ahead. God bless.
operator
Thank you so much sir. Ladies and gentlemen, on behalf of AWAS Financers limited that concludes this conference, thank you for joining us and you may now disconnect your line. Thank you team.
Ghanshyam Rawat
Thank you.