Aadhar Housing Finance Limited IPO: Get Date, Price, Review and Details

Aadhar Housing Finance Limited: About the company

Aadhar Housing Finance Limited was incorporated on November 26, 1990, as ‘Vysya Bank Housing Finance Limited’ in Bengaluru, Karnataka. Later it was incorporated as ‘Aadhar Housing Finance Private Limited’ (“Pre-merger AHFPL”) in Mumbai, Maharashtra on May 3, 2010. It is a housing finance company and subsidiary of the Blackstone Group Inc. and provides a variety of mortgage loan products for residential and commercial property purchase and construction, home improvement, and extension.

It is mainly focusing on the low-income housing segment with a ticket size of less than 15 lakhs targeting primarily first-time home buyers in economically weaker and low-to-middle income segments. The company is focusing on targeting customers with tier 4, and tier 5 cities with a wide spread across 487 branches (including 109 sales offices) in 20 states and union territories in a country.

The top 3 state’s AUM (Asset under Management) is 40.3% which indicates the bank is well diverse across the states. It has the highest number of branches and low GNPA compared to its peers. Its AUM reached Rs 19,865 cr on 31^st March 2023.

As on March 31, 2023 Only 8% of all banking credit was given to rural areas as of, despite making up 47% of the GDP. This indicates the enormous market opportunity for banks and NBFCs to lend in these areas.

Aadhar Housing Finance Limited IPO Details:

Objects of Issue:

• To meet future capital requirements towards onward lending
• General corporate purposes

Key Strengths:

• Strong Geographical Distribution Network: The bank’s business is spread across 487 branches (including 109 sales offices) in 20 states and union territories in a country and strategically positioned in Tier II and Tier III
• Portfolio focused: The company is primarily focused on housing finance lending business from tier 4 & tier 5 cities with ticket size of less than 15 lakhs.
• Strong financials and Growth potential: It has the high AUM and its NPA (Non performing assets) are less than its peers. The current valuation of the company is comparatively low than its private sector peers.

Risks:

• Legal Proceedings: The company has ongoing legal criminal and tax proceedings pending, the adverse effect of which may impact the ongoing business.
• Default Risk: The company is focused on lending to customers with low income who may have less creditworthiness. Individuals in the low and middle-income category face potential defaults due to factors such as business failure, insolvency, lack of liquidity, unemployment, or personal emergencies, posing challenges to the company's loan portfolio.
• Financial risk: Currently, the bank has a negative cash flow and may continue for the next few years.
• Government Regulations: Over the past few years, the government has tightened its NBFC policies. The business of this industry may be impacted by the new regulations and rigorous policies.

Financial Snapshot:

Watch Our Video on Aadhar Housing Finance Limited

Conclusion:

The bank has experience in the housing finance segment for more than 33 years. It is among the top players in terms of AUM in the housing finance segment. The company is offering a fair valuation compared to its peers in the private sector in terms of price-to-earnings and price-to-book value.

The bank has a low NPA and it has a high return on equity compared to its peers. It is spread across 487 branches (including 109 sales offices) in 20 states and union territories in the country. Apart from negative cash flow and ongoing legal proceedings, other factors indicate that the company has the ability to scale up in the business. With the past experience and wide distribution network, it will likely expand the business easily.

Considering the company’s growth potential and low valuations, we suggest our investors subscribe to this IPO for the long term.