Our target price of Rs2,490 for Aavas Financiers is based on a two-stage Gordon Growth model. Key assumptions include: cost of equity of 13.4%, normalized RoE of 15.6%, growth during stage one 23%, and steady-state growth 4%. These give us a target multiple of 3.5x +2Y BVPS.

Key downside risks to monitor include difficulty in tech integration project thus impacting operations, lower growth, higher opex, and lower return ratios. Any of these risk factors could impede the shares from reaching our target price.