Aadhar Housing Finance IPO - Valuations, Issue Details, Key Strategies, Financials And More: Anand Rathi

Anand Rathi Report

Aadhar Housing Finance Ltd. will launch its initial public offering today and the subscription closes on May 10. The housing finance company has fixed a price band in the range of Rs 300 - 315.

The Rs 3,000 crore IPO comprises of fresh issue of 3.17 crore equity shares, totaling to Rs 1,000 crore, and an offer for sale component of 6.35 crore shares, amounting to Rs 2,000 crore.

Object of the fresh issue

• To meet future capital requirements towards onward lending.

• General corporate purposes

Strengths:

• HFC focused on the low-income housing segment (ticket size less than Rs 1.5 million) in India with the highest AUM and net worth among their analyzed peers in Fiscal 2021, Fiscal 2022, Fiscal 2023 and nine months ended December 31, 2022, and December 31, 2023.

• Seasoned business model with strong resilience through business cycles.

• Extensive branch and sales office network, geographical penetration and sales channels which contribute significantly to loan sourcing and servicing.

• Robust, comprehensive systems and processes for underwriting, collections and monitoring asset quality.

• Access to diversified and cost-effective long-term financing with a disciplined approach to asset liability and liquidity management.

Valuation:

Aadhar Housing Finance company is a HFC focused on the low-income housing segment in India with the highest AUM and net worth among their analyzed peers with a seasoned business model with strong resilience through business cycles and robust, comprehensive systems and processes for underwriting, collections and monitoring asset quality and access to diversified and cost-effective long-term financing with a disciplined approach to asset liability and liquidity management.

At the upper price band company is valuing at price/earning of 19.45 times, with P/B of 2.85 and a market cap of Rs 1,34,347 million post issue of equity shares and return on net worth of 16.50%.

We believe that the IPO is fairly priced and recommend a “Subscribe-Long term” rating to the IPO.

Key Risk:

Erstwhile Promoters are subject to ongoing regulatory investigations by enforcement agencies including the Enforcement Directorate and the outcome of such investigations may adversely impact them and the Equity Shares held by their Promoter, BCP Topco and the market price of the Equity Shares of their company.

Company is party to certain legal proceedings and any adverse outcome in these, or other proceedings may adversely affect their business.

They depend on the accuracy and completeness of information provided by their potential borrowers and third-party service providers. Their reliance on any misleading information given by potential borrowers may affect their judgment of credit worthiness of potential borrowers, and the value of and title to the collateral, which may affect their business, results of operations, cash flows and financial condition.

Company have had negative net cash flows in the past and may continue to have negative cash flows in the future.

Any increase in the levels of non-performing assets in their AUM would adversely affect their business, results of operations, cash flows and financial condition.

If company fail to identify, monitor, and manage risks and effectively implement their risk management policies, it could have a material adverse effect on their business, financial condition, results of operations and cash flows.

Company is vulnerable to the volatility in interest rates, and they may face interest rate and maturity mismatches between their assets and liabilities in the future which may cause liquidity issues.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.