Aptus Value Housing target Rs 405: 27% upside

Why Aptus Value Housing is back in focus

Axis Securities has maintained a BUY call on Aptus Value Housing Finance India Ltd with a target price of Rs 405 per share. The brokerage’s target implies a 27% upside from the stock’s then current market price (CMP) of Rs 318 (as of 31 October 2025). The note flags a near-term growth hiccup after a policy change that impacted disbursements, but argues the same change can improve borrower quality and portfolio resilience over time.

The key debate for investors is whether the short-term slowdown in disbursements is a temporary adjustment, or a more durable reset to growth. Axis Securities’ stance is that growth should improve after the near-term disruption, supported by branch expansion, ticket-size improvement and a largely fixed-rate loan book. The brokerage also expects Aptus to continue delivering strong AUM and earnings growth over the next few years, even as credit costs settle higher than earlier guidance due to the policy adjustment.

The near-term “hiccup”: what policy changed

Aptus altered its product approach by discontinuing loans below Rs 7 lakh, a decision that affected disbursements in Q2. Axis Securities said the move had a visible near-term impact, but also described it as a step that can enhance borrower quality. The rationale is straightforward: moving up the customer pyramid and improving borrower profiles can strengthen the loan book’s durability, even if it temporarily lowers the addressable flow of smaller-ticket loans.

There were early signs of improvement after the disruption. The note said disbursements in October 2025 improved, and management expected momentum to continue. For housing finance lenders, month-on-month traction after policy changes matters because it helps investors judge whether execution is stabilising quickly or taking longer than expected.

Q2FY26 scorecard: misses and in-lines

Axis Securities’ Q2FY26 summary flagged a miss on net interest income (NII), while pre-provision operating profit (PPOP) and profit after tax (PAT) were broadly in line with estimates. It also published changes to its estimates after Q2FY26.

For FY26E/FY27E/FY28E, Axis Securities cut NII estimates by 7.7%/8.1%/8.6%. PPOP estimates were revised by +2.4%/+1.2%/0.0%, while PAT estimates changed by +0.9%/-0.2%/-0.9%. These estimate movements reflect how the brokerage is balancing slower near-term growth versus operating levers such as funding costs, yields and operating expenses.

Growth plan: branch-led expansion and better borrower mix

Aptus has articulated an ambition to sustain high growth, with guidance and brokerage expectations clustering around a mid-20s pace. Axis Securities expects Aptus to deliver about 24% CAGR AUM growth over FY26 to FY28E. Separately, the management has guided for 24% to 25% disbursement growth for FY26, translating into AUM growth of about 28% to 30% in that year.

The growth plan rests on several levers that are operational rather than purely macro-driven. These include expanding the branch network, improving productivity of loan officers, increasing contribution from digital marketing, and lifting the average ticket size. The company’s stated goal of moving up the customer pyramid also fits into this framework, as larger ticket sizes can support growth even with tighter filters on smaller loans.

Footprint expansion: new states plus deeper penetration

Geographic diversification is a central theme in the note. Aptus’ core states include Tamil Nadu (TN), Andhra Pradesh (AP), Karnataka (KA) and Telangana (TL). The company has also been building presence in Maharashtra (MH) and Odisha (OD), and the note said credit behaviour and portfolio quality in newer geographies have held up well.

On branch rollout, Aptus planned to add around 20 branches in H2 across geographies. The company also planned expansion in MH and OD, including 10 new branches there alongside additions to deepen presence in existing states. The excerpt also notes that Aptus added two new branches in one quarter, taking the total branch count to 300, with 38 new branches added in FY25 (including 10 in Maharashtra and Odisha).

Margins and yields: steady mix, rate-cycle support

Axis Securities expects net interest margins to remain healthy, citing Aptus’ pricing power, customer segment and product mix. Yields mentioned in the note include home loan yields at 15.5%, small business loan (SBL) yields at 21% (optimised from 22% earlier) and loan against property (LAP) yields at 17.5%.

A key structural factor is that about 80% of Aptus’ loan portfolio is fixed rate, so the repricing of the floating-rate portion is expected to be limited. On the liability side, about 56% of borrowings are floating rate, including around 30% linked to the repo rate. The note said management expected the benefit on cost of funds (CoF) to be visible in Q1FY26, with additional benefit on MCLR-linked borrowings from July 2025 onwards. Importantly, management indicated it does not intend to pass on rate-cut benefits to borrowers, which Axis Securities expects to be margin accretive.

Asset quality: steady trend, but credit costs to be higher

Aptus’ asset quality was described as steady, supported by a strengthened collection framework at the state and head office level. However, Axis Securities expects credit costs to settle higher than earlier guidance due to the policy change. The brokerage pencilled in credit costs of 50 bps (plus or minus 5 bps) over FY26 to FY28E.

The note’s forecast range for return on assets (RoA) stays high for the sector, with Axis Securities expecting RoA to remain best in class at 7.1% to 7.5% over FY26 to FY28E. It also cited NNPA forecasts of 1.2%/1.1%/1.1% for FY26E/FY27E/FY28E.

Key numbers Axis Securities highlighted

Valuation and target prices: what changed

Axis Securities reiterated BUY and valued Aptus at 3.6x FY27E ABV to arrive at a target price of Rs 405 per share, versus a cited trading multiple of 2.8x FY27E ABV at the time. The note also referenced an earlier target price of Rs 425 per share, indicating a reduction alongside the post-Q2 estimate adjustments.

The excerpt also includes a later update dated 05 February 2026 that maintained a BUY rating but reduced the target price to Rs 350 per share (from Rs 405 per share). That later note cited a different valuation anchor, stating the stock traded at 2.2x Sep’27E ABV and was valued at 2.9x Sep’27E ABV for the Rs 350 target.

Market impact: what investors are likely to track

For the market, the immediate marker is the pace at which disbursements normalise after the removal of sub-Rs 7 lakh loans. If the October 2025 improvement sustains, it supports the brokerage view that the disruption is tactical rather than structural. Investors will also track whether ticket sizes rise in line with management’s stated goal, because that is central to maintaining growth while tightening borrower filters.

Beyond growth, the focus will be on the balance between margins and asset quality. The combination of a largely fixed-rate loan book and falling cost of funds can support spreads, especially if the company does not pass on borrowing-rate cuts to customers, as indicated. At the same time, higher credit costs (around 50 bps) and elevated operating expenses from branch expansion are the offsets investors will watch.

Analysis: why the policy trade-off matters

Discontinuing very small-ticket loans is a meaningful strategy shift for a lender positioned in affordable housing and adjacent segments. The trade-off is between volume and quality: a tighter loan filter may temporarily slow growth but can improve the risk profile, reduce long-tail delinquencies and support resilience through cycles. Axis Securities’ revisions reflect this balancing act, with NII estimates cut while profitability assumptions remain relatively stable.

The other important context is that Aptus is pursuing geographic diversification beyond its southern stronghold. This is operationally demanding, so execution quality on branch productivity and collection infrastructure becomes crucial. The brokerage’s emphasis on strengthened collections suggests it sees the company investing ahead of growth, which can be supportive for asset quality as the footprint expands.

Conclusion: near-term adjustment, medium-term growth roadmap

Axis Securities has kept a constructive stance on Aptus Value Housing Finance, anchored on expectations of strong AUM growth, healthy margins and best-in-class RoA, even as credit costs are expected to settle higher. The headline target price in the note is Rs 405 per share, implying 27% upside from the Rs 318 CMP cited for 31 October 2025, with a later update in February 2026 showing a reduced target of Rs 350.

The next set of datapoints to monitor are disbursement momentum after the policy change, branch ramp-up in new and existing states, and whether credit costs track the 50 bps assumption over FY26 to FY28E. These will determine how quickly the near-term hiccup gives way to the growth trajectory highlighted in the brokerage note.