Aadhar Housing Finance IPO - Investment Rationale, Issue Details, Valuation, Key Risks And More: Systematix

Systematix Research 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.

Primary objective of the issue:

Augmenting equity capital base to meet future capital requirements towards onward lending and general corporate purpose.

Valuation:

Affordable Housing Finance players have managed to maintain/ improve their return profiles through higher yields, lower cost of funds and well managed asset quality.

Continued branch expansion in existing and newer geographies coupled with government focus would continue to support their growth. Aadhar Housing Finance is a bet on low ticket size affordable housing segment.

Given the current size of Aadhar Housing Finance, the company is well positioned to capture the huge untapped opportunity in <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.

At the upper end of the price band, the issue is valued at ~2.5 times December 2023 book value (including capital raise) with return on asset of ~4% and return on equity of ~18%, which looks attractive. Hence, we recommend investors to subscribe this issue.

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