Credit Rating

Ref No: AAVAS/SEC/2026-27/2850 Date: July 01, 2026 To, To, The National Stock Exchange of India Limited BSE Limited Exchange Plaza, C-1, Block G Phiroze Jeejeebhoy Bandra Kurla Complex Dalal Street Bandra (E) Mumbai – 400001 Mumbai – 400051 Scrip Symbol: AAVAS Scrip Code: 541988 Dear Sir/Madam, Subject: Intimation of Rating Action by CARE Ratings Limited. Pursuant to Regulation 30(6) and 51 read with Schedule III of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, we wish to inform you that CARE Ratings Limited vide its letter dated July 01, 2026, has taken the following rating actions: Instrument Current Rated Amount Rating Rating Action (Rs. In Cr.) Long term fund 12,262.00 CARE AA(RWD) Placed on Rating Watch Bank Facilities with Developing Implications Non-Convertible 1,259.92 CARE AA(RWD) Placed on Rating Watch Debenture (reduced from 1,274.92) with Developing Implications Total 13,521.92 - A copy of the rating rationale issued by CARE Ratings Limited is attached herewith. The above information will also be made available on the website of the Company and can be accessed at www.aavas.in You are requested to take the same on record. Date and time of occurrence of event/information: July 01, 2026 and 07:39 P.M. Thanking You, For AAVAS FINANCIERS LIMITED SAURABH SHARMA COMPANY SECRETARY & COMPLIANCE OFFICER (ACS-60350) INTERNAL Press Release Aavas Financiers Limited July 01, 2026 Facilities/Instruments Amount (₹ crore) Rating1 Rating Action Placed on Rating watch with Long Term Bank Facilities 12,262.00 CARE AA; (RWD) Developing Implications CARE AA; (RWD) Placed on Rating watch with Non Convertible Debentures 170.92 Developing Implications 119.00 CARE AA; (RWD) Placed on Rating watch with Non Convertible Debentures (Reduced from 124.00) Developing Implications CARE AA; (RWD) Placed on Rating watch with Non Convertible Debentures 500.00 Developing Implications 470.00 CARE AA; (RWD) Placed on Rating watch with Non Convertible Debentures (Reduced from 480.00) Developing Implications Details of instruments/facilities in Annexure-1. Rationale and key rating drivers CARE Ratings Limited (CareEdge Ratings) has placed rating of CARE AA on bank borrowings and NCDs of Aavas Financiers Limited (Aavas) on rating watch with developing implications following multiple changes in the senior leadership team with the recent resignations of Chief Finance Officer and Chief Risk Officer and earlier resignation of the MD and CEO in April 2026 and Chief Business Officer in May 2026. Aavas Financiers Limited (Aavas) vide its stock exchange notification dated June 21, 2026 informed that Mr. Ghanshyam Rawat (President and Chief Finance Officer (CFO) at Aavas) and Mr. Ashutosh Atre (President and Chief Risk Officer (CRO) at Aavas) have tendered their resignation. The Board of the company, basis recommendation of its Nomination and Remuneration Committee, has appointed Mr. Ghanshyam Gupta as interim CFO and Mr. Punit Purushottam Agarwal as interim CRO of the company. Earlier during the financial year, Managing Director (MD) and Chief Executive Officer (CEO) of the company resigned on April 20, 2026 followed Chief Business Officer resigning on May 01 2026, both citing personal and professional commitments. The company had appointed Mr. Manu Yashpal Singh as MD & CEO with effect from April 21, 2026 and Mr. Ripudaman Bandral, who was previously the Chief Credit Officer of Aavas, was appointed as Chief Business Officer with effect from May 02, 2026. CareEdge Ratings notes that post the induction of new senior management personnel, stability and sustenance of business growth will be a key monitorable. Furthermore, on June 22, 2026, vide a stock exchange clarification dated June 22, 2026 and during the discussions with CareEdge Ratings, Aavas management has strongly refuted the assertions and insinuations contained in the media articles regarding the ongoing refinance audit of National Housing Bank (NHB) and clarified that the contents of the articles are not an accurate characterisation of the Company’s engagement with NHB. CareEdge Ratings will continue to engage with the management of Aavas and closely monitor the progress related to the aforesaid developments. The rating watch shall be resolved once there is more clarity on these matters. The current rating of Aavas continues to factor in its healthy profitability, comfortable asset quality metrics, competitive pricing on debt mobilisation, while maintaining a strong liquidity profile. The rating also takes into consideration an adequate capitalisation and gearing level, supported by healthy internal accruals. The rating, however, is constrained by Aavas’ geographically concentrated operations and target borrower profile which is relatively vulnerable to economic downturns. CareEdge Ratings has reduced the outstanding amount of ISIN INE216P07225 and INE216P07290 on request of the company, owing to reduction on account of scheduled payment in the rated amount of the NCD. Rating sensitivities: Factors likely to lead to rating actions 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 1Complete definition of ratings assigned are available at www.careratings.com and other CARE Ratings Limited’s publications. 1 CARE Ratings Ltd. Press Release Negative factors • Weakening in its profitability with return on total assets (RoTA) declining below 2.5% on a sustained basis • Deterioration in its asset quality metrics or capitalisation profile • Weakening in capitalisation profile with managed gearing remaining above 7x on a sustained basis. Analytical approach: Standalone Outlook: Not Applicable Detailed description of key rating drivers: Key strengths Healthy profitability supported by comfortable asset quality Aavas’ profitability metrics remained healthy as it reported a net profit of ₹655 crore in FY26, translating into return on average total assets (RoTA) of 3.3% (annualised) and return on average tangible net worth (RoNW) of 14.1% (annualised) as compared to ₹574 crore, 3.3% and 14.3%, respectively, in FY2025. Its profitability is supported by adequate margins, declining operating expenses and contained credit costs so far. CareEdge Ratings expects the profitability to remain healthy with RoTA of more than 3% on a steady state basis supported by stable margins, improving opex and contained credit cost. Its asset quality metrics also remained comfortable with gross stage 3 (GS3) of 1.05% as on March 31, 2026 (1.08% as on March 31, 2025) and net stage 3 (NS3) of 0.68% (0.73% in March 2025). Aavas’ GS3 has remained below 2% steadily over past few years. Further, it carries adequate provision on its GS3 of 35.96% as on March 31, 2026. Even in terms of softer bucket delinquencies, it has been able to maintain the same at comfortable level; its 1+ days past due (dpd) stood at 3.2% in March 2026 (3.4% in March 2025). Nonetheless, the asset quality remains susceptible to stress due to the company’s exposure to low- income borrowers, who are more vulnerable to income disruptions, particularly in economic downturns. Based on its static pool analysis, while the delinquencies in the early buckets have shown signs of some moderation, the same will remain a monitorable going forward. However, the risk is mitigated to some extent through adequate underwriting systems along with low loan-to- value ratio (LTV) on portfolio of 55-60%. Aavas’ lifetime write offs of less than ₹41 crore (up till March 2026) also reflect entity’s ability to make recoveries and keep overall asset quality under control. CareEdge Ratings expects its overall asset quality to remain comfortable going forward. Diversified resource profile Aavas’ funding profile remains diversified with 35+ lending relations as on March 31, 2026 including public & priva [Showing first 8,000 characters — download PDF for full document]