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Aadhar Housing Finance IPO: The Rs 3,000-crore initial public offer (IPO) of Blackstone-backed Aadhar Housing Finance, which will open for subscription on May 8, 2024, is best suited for "high-risk investors", according to analysts.
This is because the retail-focused housing finance company caters to the low-income housing segment, serving economically weaker and low-to-middle-income customers.
"Aadhar Housing Finance's high reliance on borrowing necessitates a cautious approach. Therefore, we recommend this IPO only for high-risk investors," said analysts at Swastika Investmart.
About Aaadhar Housing Finance
Aadhar Housing Finance is a financing company, which provides mortgage loans to economically weaker and low-to-middle income customers in India.
Its caters to individuals seeking small ticket sized loans of less than Rs 15 lakhs. The average loan size offered by the company is Rs 9 lakhs to Rs 10 lakhs, with an average loan-to-value ratio of 58.3 per cent as of December, 2023.
In the first nine months of the financial year 2023-24 (9MFY24), the company had the highest assets under management (AUM) and net worth among its peers. Aadhar Housing Finance has presence across 20 states and Union Territories which is the most extensive coverage among its peers.
About Aadhar Housing Finance IPO
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Price band: Aadhar Housing Finance IPO price band is set at Rs 300 to Rs 315 per share.
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Offer type: Aadhar Housing Finance IPO is a book built issue of Rs 3,000.00 crore. It consists of a fresh issue of 31.7 million shares aggregating to Rs 1,000 crore, and an offer for sale (OFS) of 63.5 million shares worth Rs 2,000 crore.
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Grey market premium (GMP): Aadhar Housing Finance IPO GMP was Rs 70 per share on May 7, 2024.
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Lot size: Investors can bid in lots of 47 shares, and in multiples thereof. 50 per cent of the offer is reserved for Qualified Institutional Buyers (QIBs), 15 per cent for Non-Institutional Investors (NIIs), and 35 per cent for retail investors.
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IPO date: Aadhar Housing Finance IPO will open for subscription on May 8, 2024 and close on May 10, 2024.
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IPO allotment: The allotment for the Aadhar Housing Finance IPO will likely finalise on Monday, May 13, 2024.
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Listing: Shares of Aadhar Housing Finance will list on both the exchanges -- the BSE, and the NSE. It is expected to get listed on May 15, 2024.
Aadhar Housing Finance Financials
For 9MFY24, Aadhar Housing Finance had net profit of Rs 548 crore, up from Rs 404-crore profit of 9MFY23.
For the whole FY23, Aadhar Housing Finance had profit of Rs 544.7 crore as against Rs 444.8 crore profit of FY22.
Net interest income (NII), meanwhile, was Rs 948.5 crore for 9MFY24 as against Rs 713.8 crore for 9MFY23.
Its NIM was 9 per cent for the nine months ending December 2023, relative to 8 per cent for 9MFY23. Net worth has risen to Rs 4,249.1 crore at the end of December 2023 from Rs 3,697.6 crore at the end of March 2023.
Aadhar Housing Finance IPO: Key risks
Given that Aadhar Housing Finance depends on accurate information from borrowers and third-party providers, any misleading information from them could affect the assessment of creditworthiness, the value of collateral, and impact the business, analysts warned.
That apart, if the HFC fails to identify, monitor and manage risks, and effectively implement risk management policies, it could have a material adverse effect on the business, they added.
Should you subscribe? Here's what analysts say:
SBI Securities | Note rated
SBI Securities values Aadhar Housing Finance at P/BV of 2.4x/2.5x of its 9MFY24 financial data at the lower and upper price band, respectively.
The company, it said, is well-placed to cater to the niche segment with strong origination skills, understanding of the customers' needs as well as focus on smaller cities. We expect these factors will help in garnering market share going ahead.
Swastika Investmart | Subscribe for long-term
Aadhar Housing Finance is a leading HFC with the highest AUM in its low-income segment. However, Aadhar Housing Finance faces inherent risks associated with the creditworthiness of its low-income clientele and increase in NPAs.
Additionally, the company operates in a highly competitive industry, and is susceptible to interest rate volatility. Aadhar Housing Finance IPO is for long-term investors.
SMC Securities | Suitable for long-term
The company has robust and comprehensive systems and processes for underwriting, collections and monitoring asset quality. It has migrated to a digital IT infrastructure with a view to reducing costs, carrying on real time analysis of customer data, improving its control and underwriting functions, while increasing customer reach and distribution capability. A long-term investor may opt the issue.
Systematix Institutional Equities | Subscribe
Given the current size of AHFL, the company is well positioned to capture the huge untapped opportunity in less than Rs 1.5 million ticket size segment, via deeper penetration in new geographies. In addition, experienced management team with strong track record along with backing of Blackstone boost confidence. We recommend investors to subscribe this issue.
BP Wealth | Subscribe
The company's financial performance has remained consistent and resilient through various cycles in the Indian economy. The overall growth, portfolio performance, asset quality, and continued profitability during these periods demonstrate the strengths of the business and management team.
On the financial front, Aadhar Housing Finance reported the second-highest return on equity in FY23 at 15.9 per cent, followed by Aavas Financiers (14.1 per cent) and Home First Finance (13.5 per cent). During the same period, it also reported the third lowest employee cost at 2.10 per cent in FY23 among the peers compared.
At a higher price band of Rs 315, the stock is valued at 3.1x P/BVPS on FY23 book value, which we feel is fair compared to its peers. We, therefore, recommend a SUBSCRIBE rating for the issue.
