Home First Finance IPO opens today: Anand Rathi says Subscribe
Home First Finance Company India Ltd. is a technology driven affordable housing finance company that targets first time home buyers in low and middle-income groups. Home First Finance primarily offers customers housing loans for the purchase or construction of homes, which comprises 92.1% of its Gross Loan Assets, as of Sept 30, 2020.
Home First Finance IPO: Home First Finance Company India Ltd. is a technology driven affordable housing finance company that targets first time home buyers in low and middle-income groups. Home First Finance primarily offers customers housing loans for the purchase or construction of homes, which comprises 92.1% of its Gross Loan Assets, as of Sept 30, 2020. Its Gross Loan Assets have grown at a CAGR of 63.4% between the financial year 2018 and the financial year 2020 and increased from Rs 13559 mn as of March 31, 2018 to Rs 37300 mn, as of Sept 30, 2020.
Home First Finance serves salaried and self-employed customers. Salaried customers account for 73.1% of our Gross Loan Assets and self-employed customers account for 25% of Gross Loan Assets, as of Sept 30, 2020. It serviced 44796 active loan accounts, as of Sept 30, 2020.
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Home First Finance also offers other types of loans comprising loans against property, developer finance loans and loans for purchase of commercial property, which comprised 5.1%, 1.9% and 0.9% of its Gross Loan Assets, as of September 30, 2020, respectively. As of the same date, 32.8% of its Gross Loan Assets were from customers who were new to credit. The average ticket size of its housing loans was Rs 1.01 mn, with an average loan-to-value on Gross Loan Assets of 48.8%, as of Sept 30, 2020. As of Sept 30, 2020 and March 31, 2020, its Stage 3 Loan Assets expressed as a percentage of its Gross Loan Assets were 0.74% and 0.87%, respectively.
The Issue of Equity Shares of Home First Finance Company aggregating upto Rs 1153.72 Cr (Fresh Issue of Equity shares aggregating upto Rs 265 Cr and Offer for sale of Equity shares aggregating upto Rs 888.72 Cr). The number of shares to be issued is 22315639 – 22272556 and the Face value is Rs 2 per share. The Price band is Rs 517 - Rs 518 and the bid Lot is of 28 Shares and in multiple thereof. Post Issue Implied Market Cap of the Home First Finance Company would be Rs 4518 – Rs 4527 cr. Issue opens on Thursday, 21st Jan’2020 and Issue closes on Monday, 25th Jan2020 while the Anchor Investor Bidding date should be on 20th of Jan’ 2020. The Book Running Lead Managers are Axis Capital, Credit Suisse, ICICI Securities, Kotak Mahindra Capital and the Registrar is KFin Technologies. The grey market premium of Home First Finance Company is Rs 90 – Rs 100.
Home First Finance Valuation:
At the upper end of the Home First Finance IPO price band, it is offered at 4.5x P/B, with a market cap of Rs 4688 cr. On comparative basis, the company’s valuation is at a discount compared to Aavas Financiers Ltd. which is currently trading at 6.7x P/B however the valuation is at a premium compared to the other peers
Anand RFathi believes that Home First Finance is going to benefit from the overall growth in demand for affordable housing finance with the aid of technology. Improvement in operating leverage should drive the overall return ratios of the company, however considering current valuation, Anand Rathi recommends a "Subscribe (Long Term)" rating to this IPO.
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