Ali Hasan
Home First Finance Company India opened its Rs 1,154-crore public issue for subscription on January 21. The price band for the IPO has been fixed at Rs 517-518 per share.
The company already raised Rs 346 crore from anchor investors on January 20. The public issue comprises a fresh issue of Rs 265 crore and an offer for sale of Rs 888.71 crore by promoters True North Fund V LLP and Aether (Mauritius), investor Bessemer India Capital Holdings II Ltd, and two individual shareholders – PS Jayakumar and Manoj Viswanathan.
More IPOs will launch in 2021
The company is going to use the net fresh issue funds for augmenting its capital base to meet future capital requirements, arising out of the growth of business and assets.
Founder of Home First – Jaithirth Rao
“Aided by its high growth momentum on a smaller base, superior underwriting standards, and efficient collections management (GNPAs at less than 1% and modest credit costs), Home First delivered a healthy return on assets (RoA) of 2.7% in FY20.
Return on equity (RoE) of 11% looks modest owing to lower leverage at 4x in FY20. The issue is priced at post-money P/BV of 3.4x compared to its nearest competitor Aavas Financiers which trades at 6.8x on September book value (BV),” said Yes Securities which advised subscribing the issue.
Home First, founded in 2010 by PS Jayakumar, Jaithirth Rao and Manoj Viswanathan, is a technology-driven affordable housing finance company. It focuses on first-time home buyers in low and middle-income groups, offering housing loans for purchase/construction of homes. Over the last 10 years, the company has sanctioned home loans to more than 50,000 customers in 60 districts, across 11 states and 1 union territory.
As of September 2020, the company had an AUM of Rs 3,730 crore and net worth of Rs 980 crore. It is backed by marque private equity players like:-
- True North (30.22%)
- Warburg Pincus (29.15%)
- Aether Mauritius (20.09%)
- Bessemer India (10.57%)
Home First has posted strong growth in net interest income (NII) of 58.6% CAGR between FY18-20 while net profits have grown at a CAGR of 122.6% during the same period. Despite the COVID-19 crisis the company’s asset quality has remained largely stable with gross non-performing assets (NPA) and net NPA largely stable at 0.7% and 0.5% respectively at the end of September 2020.
Home First has been notable with a fast pace of growth, and its gross loan assets have clocked a CAGR of 63.4% between FY2018 and FY2020. Its business profile (salaried customers account for 73.1% of its gross loan assets and self-employed customers account for 25% of gross loan assets, as of September 2020) is structurally sound, which all explains the company’s low gross NPAs, Sharekhan feels.
A granular business with average ticket size of its housing loans of Rs 10.1 lakh, with an average loan-to-value on gross loan assets of 48.8%, as on September 2020 places it at lower competition intensity from banks and other peers, Sharekhan feels.
It has a strong presence in economically healthier states like Gujarat (39% of gross loan assets), Maharashtra (21% of GLA), Tamil Nadu (10.5% of GLA), Karnataka (9.3% of GLA) and Rajasthan (5.1% of GLA).
The company had a capital adequacy ratio (CAR) of 51.7% at the end of September 2020 which provides comfort, said Angel Broking which expects the company to post strong growth driven by strong demand for affordable housing. Given the growth prospects, the brokerage recommended a subscribe rating on the issue.
Qualified institutional investors have put in 1.35 times higher bids against their reserved portion, while the portion set aside for retail investors has been subscribed 3.2 times and that of non-institutional investors 54%.
The IPO, fully subscribed on January 21 itself, comprises a fresh issue of Rs 265 crore and an offer for sale of Rs 888.72 crore by promoters True North Fund V LLP and Aether (Mauritius), investor Bessemer India Capital Holdings II Ltd, and two individual shareholders – PS Jayakumar and Manoj Viswanathan.
To stay updated on IPOs stay tuned and keep visiting IPO alerts on a regular basis where we will be keep posting about all the latest IPOs. Will you invest in this IPO? Do tell us in the comments.
