Our target price of Rs2,350 for Aavas Financiers is based on a two-stage Gordon Growth model. Key assumptions include: cost of equity of 12.7%, normalized RoE of 15%, growth during stage one 21%, and steady-state growth 4%. These give us a target multiple of 3.2x 9MFY27E 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.