Blackstone backed Aadhar Housing Finance sees limited El Niño risk to loan book

NEW DELHI: As concerns mount over the potential impact of El Niño on rural incomes and borrowers' repayment capacity, Aadhar Housing Finance Ltd is counting on its limited exposure to vulnerable districts to cushion its loan book. Around 6% of its assets under management (AUM) is in districts identified as highly vulnerable to the weather phenomenon, managing director and chief executive officer Rishi Anand said in an interview with Mint.

Of the 80 districts identified as facing a potentially severe impact, the company has a presence in around 30, accounting for approximately 6% of its AUM, Anand said. It is closely monitoring collection trends and repayment behaviour in these regions but does not currently expect a significant impact on its portfolio.

“The good part is that out of the 80 districts which are said to be heavily impacted, we are present in only around 30. Our portfolio in these districts accounts for about 6% of our AUM,” Anand said.

Aadhar Housing Finance's assets under management stood at ₹32,643.3 crore as of 30 September, up 20% year-on-year. The lender serves around 348,000 live accounts through 632 branches in 23 states and Union territories.

The potential impact of El Niño is being watched particularly in Maharashtra, Gujarat, Rajasthan and Uttar Pradesh, where weather-related disruptions could affect agricultural activity and the incomes of borrowers dependent on seasonal earnings.

Aadhar Housing Finance's underwriting practices are designed to limit its exposure to such borrowers. Seasonal income is generally capped at 25-30% of a borrower's total income, with the remaining 70-75% expected to come from other sources, including shops and businesses.

The company also follows a fixed-obligation-to-income ratio of around 55%, which is intended to ensure that borrowers retain sufficient income to meet regular household expenses and loan repayments, Anand said.

"We ensure that if a consumer has seasonal income, it should account for only around 25-30% of the total income. The borrower should have 70-75% of income from other sources," he said.

Stable collections

Separately, the company has not seen any material deterioration in customer repayment behaviour amid global economic uncertainties and tariff-related disruptions. Its collection and bounce rates have remained stable over the past eight to 10 quarters, Anand said.

The company's gross non-performing assets (NPA) stood at 1.3% of AUM at the end of September, improving by eight basis points year-on-year, according to its investor presentation for the first half of fiscal year 2027 (FY27).

On interest rates, Anand said the company's borrowing structure and floating-rate loan portfolio provide it with flexibility to manage increases in funding costs.

Around 75% of its liabilities are floating-rate, while the remaining 25% are fixed-rate. On the asset side, approximately 75% of the portfolio is also floating-rate, he said.

Under its regulated retail prime lending rate model, changes in borrowing costs can be passed on to customers over time. However, the company does not currently see a need to raise lending rates and expects to absorb an estimated 8-9 basis points of cost pressure.

Assuming another 25-basis-point increase in the repo rate, the company's cost of funds could rise by around 20-22 basis points, Anand said.

Aadhar Housing Finance is maintaining its full-year growth guidance of 20% in AUM and profit and 18% in disbursements. It also expects to close the financial year with gross non-performing assets in the range of 1.1-1.15%, he said.

Aadhar Housing Finance reported a net profit of ₹590.7 crore in the first half of FY27, up 17% from ₹503.8 crore a year earlier. Adjusting for employee stock option expenses, profit growth stood at 22%, the company said.

Disbursements rose to ₹4,613.1 crore in the first half from ₹4,089 crore a year earlier. Adjusted for the change in reporting methodology from cheque issuance to cheque realisation in the first quarter of FY27, disbursement growth stood at 21%.