CARE Ratings has revised the outlook on Aavas Financiers’ long-term credit ratings to Positive from Stable, reaffirming the CARE AA rating. This reflects expectations that Aavas will sustain healthy business growth and profitability while maintaining comfortable asset quality. The ratings factor in Aavas’ healthy margins and low credit costs.
Rating Outlook Upgrade
CARE Ratings revised the outlook on Aavas Financiers Limited’s long-term rating to Positive from Stable, reaffirming the CARE AA rating for all instruments. This revision reflects CareEdge Ratings’ expectations that Aavas will sustain healthy business growth and profitability while maintaining a comfortable asset quality. Aavas is expected to report 18% growth in its assets under management (AUM) in FY26 while keeping its credit costs under control.
Key Rating Drivers
The ratings continue to factor in Aavas’ healthy margins and low credit cost on account of consistently comfortable asset quality metrics. As of June 30, 2025, Aavas maintained a strong liquidity profile and positive mismatches in its asset liability management (ALM) statement. The rating also takes into account an adequate capitalization and gearing level, supported by healthy internal accruals.
Financial Performance and Ratios
Aavas reported a net profit of ₹574 crore in FY2025, translating into a return on average total assets (RoTA) of 3.3% and a return on average tangible net worth (RoNW) of 14.3%. As of June 30, 2025, gross stage 3 (GS3) stood at 1.2%, with net stage 3 (NS3) at 0.8%. The capital-to-risk weighted asset ratio (CRAR) was 44.3% with AUM/TNW at 4.7x.
Rating Sensitivities
Positive Factors:
Significant improvement in scale of operations while maintaining healthy profitability and asset quality with GNPA below 1.5% on a sustained basis.
Improvement in geographical diversification.
Negative Factors:
Weakening in profitability with return on total assets (RoTA) declining below 2.5% on a sustained basis.
Deterioration in asset quality metrics or capitalisation profile.
Weakening in capitalisation profile with managed gearing remaining above 7x on a sustained basis.
Source: BSE
