The issue received bids for 1,62,08,892 shares, which was 72.63 per cent of the issue size of 2,23,15,639 shares. The housing finance company (HFC) had on Wednesday raised a little over Rs 346 crore from 25 anchor investors.
On the block is an offer for sale (OFS) of shares worth Rs 888.72 crore and a fresh issue of shares worth Rs 265 crore. The price band for the issue is fixed at Rs 517-518 apiece. Investors can bid for a minimum of 28 equity shares and and in multiples thereafter.
Analysts said the HFC has reported a strong set of numbers over the last couple of years. Asset quality for the company that caters to first-time home buyers in low- and middle-income groups has remained strong so far despite the coronavirus crisis. Valuation-wise as well, the issue is available at modest price to book value (P/BV) multiples compared with the listed peer Aavas Financiers.
Angel Broking said that despite the Covid-19 crisis, the company’s asset quality has remained largely stable with gross non-performing assets (NPAs) and net NPAs largely stable staying at 0.7 per cent and 0.5 per cent, respectively, at the end of the first half of financial year 2021.
“The company had a CAR of 51.7 per cent at the end of H1FY2021, which provides comfort. At the higher end of the price band the stock would be trading at P/BV of 3.6 times fully diluted post issue book value of Rs 143.4 per share. We expect the company to post strong growth driven by strong demand for affordable housing. Given the growth prospects, we recommend a subscribe rating on the issue,” the brokerage said.
Over FY17-20, Home First registered loan and disbursements growth rates of 56.7 per cent and 56.2 per cent, respectively. It managed to tweak its housing loans’ share to 92 per cent in FY20, from 96.7 per cent in FY17, and share of loan against property (LAP) to 5.1 per cent from 2.1 per cent. Lending spread for the HFC has improved to 4.5 per cent in FY20, from 3.3 per cent in FY17.
Home First operates with an average housing loan ticket size of Rs 10 lakh and has a strong presence in economically healthier states like Gujarat (39 per cent of gross loan portfolio), Maharashtra (21 per cent), Tamil Nadu (10.5 per cent), Karnataka (9.3 per cent) and Rajasthan (5.1 per cent).
“Aided by its high growth momentum on a smaller base, superior underwriting standards, and efficient collections management, Home First Finance has delivered a healthy RoA of 2.7 per cent in FY20. RoE of 11 per cent looks modest owing to lower leverage at 4 times in FY20. The issue is priced at post-money P/BV of 3.4 times compared to its nearest competitor Aavas Financiers which trades at 6.8 times on September book value,” said YES Securities in a note. RoA stands for return on asset and RoE for return on equity.
Home First has posted strong growth in net interest income (NII) of 58.6 per cent compounded annually, over FY18-20, while its net profits have grown 122.6 per cent.
At higher price band, the stock is valued at 4.1 times its price to book value of the second quarter of FY21 , said LKP Securities. The brokerage said the IPO is worth subscribing, citing strong return ratios (11 per cent RoA and 3 per cent RoE).
