Aadhar Housing Finance’s IPO, backed by Blackstone, commenced its subscription today, May 8, and will conclude on Friday, May 10. The IPO price band is fixed at ₹300 to ₹315 per share. Prior to the IPO, Aadhar Housing Finance raised ₹898 crore from anchor investors on May 7. Investors can place bids for multiples of 47 shares, with a minimum bid of 47 shares. This IPO presents an opportunity for investors to participate in the growth of Aadhar Housing Finance and potentially benefit from its future performance.
Aadhar Housing Finance’s IPO has allocated 35% of the issue size to retail investors, 15% to non-institutional investors (NIIs), and 50% to qualified institutional buyers (QIBs). Additionally, the company is offering a discount of ₹23 per share to its employees, providing them with an incentive to participate in the IPO. This allocation strategy aims to ensure broad participation from different investor categories and promote employee involvement in the company’s growth.
The firm had enlisted 12,221 Aadhar Mitras as of September 30, 2023. These Aadhar Mitras are compensated with referral fees for facilitating loans for their clients.
The organization provides various mortgage financing options tailored for building, renovating, and purchasing residential and commercial real estate properties.
As of September 30, 2023, the corporation boasts an extensive network comprising 471 branches, which include 91 sales offices. These branches and sales offices cater to approximately 10,926 pin codes across India and are spread across 20 states and union territories.
According to the Red Herring prospectus (RHP), Aadhar Housing Finance’s listed peers include:
1. Aptus Value Housing Finance India Ltd (with a P/E of 31.3)
2. Aavas Financiers Ltd (with a P/E of 28.1)
3. Home First Finance Company India Ltd (with a P/E of 34.9)
4. India Shelter Finance Corporation Ltd (with a P/E of 33.1)
During the period from March 31, 2022, to March 31, 2023, Aadhar Housing Finance Limited’s profit after tax (PAT) rose by 22.22%, while its revenue witnessed an 18.22% increase.
As of 15:15 IST, the subscription status of the Aadhar Housing Finance IPO stands at 30%, according to BSE data. Here’s the breakdown:
– The employee portion has been subscribed 1.50 times.
– Qualified Institutional Buyers (QIB) portion has been subscribed 32%.
– Non-Institutional Investors (NII) portion has been subscribed 28%.
– The retail portion has been booked at 29%.
The details of the Aadhar Housing Finance IPO are as follows:
– **Offer Size:** The IPO is valued at ₹3,000 crore.
– **Composition:** It comprises an Offer for Sale (OFS) by promoter BCP Topco VII Pte Ltd, an affiliate of the Blackstone Group, amounting to ₹2,000 crore. Additionally, there is a fresh issue of equity shares worth ₹1,000 crore.
– **OFS Details:** The promoter entity, BCP Topco VII Pte Ltd, will sell its stake through the OFS.
– **Promoter Ownership:** Currently, BCP Topco holds 98.7% of the pre-offer issued, subscribed, and paid-up equity share capital of Aadhar Housing Finance.
The company intends to utilize the net proceeds from the IPO for general corporate activities and to fulfill future capital needs for expanding lending operations.
The book running lead managers for the IPO include SBI Capital Markets Limited, Nomura Financial Advisory and Securities (India) Pvt Ltd, Kotak Mahindra Capital Company Limited, ICICI Securities Limited, and Citigroup Global Markets India Private Limited. Kfin Technologies Limited has been appointed as the registrar for this issuance.
BP Equities Pvt Ltd’s review of the Aadhar Housing Finance IPO highlights the company’s and management team’s capabilities, emphasizing their demonstrated growth, portfolio performance, asset quality, and sustained profitability. In FY23, Aadhar Housing Finance reported a return on equity of 15.9%, making it the third-highest among its peers. Additionally, the company had the third-lowest personnel cost at 2.10% in FY23. In terms of financial performance, Aadhar Housing Finance reported an annualized yield on advance and return on equity of 14.2% and 18.4%, respectively, for the nine months ending December 31, 2023.
BP Equities Pvt Ltd anticipates improved operational performance for Aadhar Housing Finance in the future, driven by the dominance of the low-income housing segment, low borrowing costs, and higher return ratios compared to peers. At a price of 3.1x P/BVPS on FY23 book value, which is considered reasonable in comparison to its rivals, the brokerage believes that the stock is attractively priced, especially at the higher price range of Rs. 315. Therefore, they suggest giving the issue a SUBSCRIBE rating.
Swastika Investmart Ltd highlights several significant obstacles that need to be carefully considered before investing in Aadhar Housing Finance. These include the creditworthiness of its low-income customers and the associated risk of non-performing assets (NPAs). Additionally, the firm faces volatility in loan rates and operates in a highly competitive market. These challenges suggest a cautious approach to investing in Aadhar Housing Finance.
Given Aadhar’s IPO valuation of 22.8x P/E and 3.36x P/BV, which appears reasonable, it’s important to exercise caution due to the company’s substantial reliance on borrowing. As a result, the brokerage recommends that only high-risk investors seeking sustained exposure to the affordable housing market should consider investing in this IPO.
Aadhar Housing Finance IPO GMP (Grey Market Premium) today stands at +70. This suggests that Aadhar Housing Finance shares are trading at a premium of ₹70 in the grey market, as reported by investorgain.com.
Considering the upper end of the IPO pricing range and the current premium in the grey market, it is estimated that Aadhar Housing Finance shares will debut at a price of ₹385 per share. This reflects a 22.22% increase over the IPO price of ₹315.
