My Best Pick 2019

Gautam Trivedi

Aavas Financiers is not exactly a cheap housing finance stock, but Nepean Capital's co-founder believes it's for a reason

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Published 2 years ago on Apr 26, 2019 6 minutes Read
Vishal Koul

The youngest NBFC on the banking street, Aavas Financiers, is today one of India’s fastest growing semi-urban and rural-focused housing finance companies. We believe that the Jaipur-based eight-year-old entity is the next Gruh Finance in the making, a stock that has not only created considerable shareholder value, having not only risen 70x over the past 10 years, but has also become the poster boy of semi-urban housing finance. 

We are not necessarily suggesting that the stock price of Aavas will have the same appreciation over the next 10 years but, over time, the company certainly has all the ingredients to become a successful housing finance company.

Initially promoted by AU Finance (now AU Small Finance Bank), the bank sold most of its stake to two large private equity funds — Kedaara Capital, one of India’s largest homegrown PE fund with $1.5 billion in assets under management (AUM), and the Partners Group, a large global PE fund with an AUM of $83 billion. Together these funds hold 58% and are, hence, the promoters of the company, with both having one board seat each. The company not only has a distinguished board but also a formidable leadership team. For example, Sandeep Tandon, one of the independent directors on the board of Aavas, is a very successful serial fintech entrepreneur. The senior leadership owns 7.5% of the equity, while AU Small Bank retains an equal stake. The CEO, Sushil Kumar, is a former ICICI Bank veteran who has over 17 years of retail finance experience. 

Underserved Market

Aavas is primarily engaged in the business of providing housing loans to customers bel

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