Aadhar Housing Finance IPO sees strong interest; should you subscribe?

Aadhar Housing Finance IPO: Aadhar Housing Finance's initial public offering (IPO) has garnered substantial attention from investors, with a notable 88% subscription rate by mid-day on the second day of the subscription period. Large investors, including qualified institutional buyers (QIBs) and non-institutional investors, have displayed keen interest in the IPO, leading to full subscription of the portions reserved for them.

The IPO, priced in the range of Rs 300-315 per share, aims to raise Rs 3,000 crore which is a combination of offer for sale (OFS) and fresh issue of shares. Retail investors have the opportunity to bid for a minimum of one lot of 47 shares up to a maximum of 13 lots. At the upper end of the price band, one lot of Aadhar Housing Finance shares will cost Rs 14,805.

Established originally as Vysya Bank Housing Finance Limited in Bengaluru in 1990, Aadhar Housing Finance focusses on the low-income housing segment in India. Their clientele includes economically weaker and low-to-middle-income individuals in need of small-ticket mortgage loans, with an average ticket size ranging from Rs 9 lakh to 10 lakh.

With a network of 487 branches and 109 sales offices as of December 31, 2023, Aadhar Housing Finance boasts a geographically diversified presence, ensuring tailored services across various urban and semi-urban locations. Importantly, no single state exceeds 14.0% of its Gross Assets Under Management (AUM), enhancing its risk diversification.

The company's business model demonstrates resilience through business cycles, supported by robust underwriting, collections, and asset quality monitoring processes. Additionally, Aadhar Housing Finance maintains access to diversified and cost-effective long-term financing, coupled with disciplined asset-liability and liquidity management practices.

At the upper price band, the company is valued at a Price-to-Earnings (P/E) ratio of 19.4 timesx, with a Price-to-Book (P/B) ratio of 2.85, and a post-issue market capitalisation of Rs 13,434 crore. Notably, the company boasts a return on net worth of 16.50 per cent.

Analysts at brokerage firm Prabhudas Lilladher suggest that the IPO is fairly priced and recommend a "Subscribe-Long term" rating to investors, citing Aadhar Housing Finance's seasoned business model and strong fundamentals within the low-income housing finance segment.