The company’s prepayment rates have been at 8, 7.5 and 6 per cent in FY19, FY20 and FY21 respectively. Besides, 60-70 per cent of the prepayments witnessed by the company in the last three years have been from own source funds of their borrowers (rest being balance transfers to other lenders), which vouches for the quality of customers. Its retail only, fully secured loan book with average loan to value at less than 40 per cent across product segments, and underwriting skills (focused on the savings habit of borrowers, etc) are other positives. However, post issue, the RoE will drop to 11 per cent, which is lower than that of Aavas at 12.9 per cent.Ĭompany’s business prospects look sanguine. Its return on equity (RoE) too was at a healthy 12 per cent in FY21. Consequently, its return on average AUM at 5.73 per cent in FY21 has been better than peers. The company’s strong underwriting capabilities have also helped contain the credit costs (at 0.1 per cent of FY21 AUM) and bad loans (GNPA at 0.7 per cent in FY21).ĭespite having set up 190 branches in 75 districts in the four southern states, the company has contained its operating expenses at 2.4 per cent of the AUM, in FY21. Aavas and Home First posted NIMs to tune of 7.8 and 6.7 per cent respectively, in FY21. With an average ticket size of 5 to 15 lakhs, the company has scaled its loan book to ₹4,068 crore in FY21 (up 28 per cent y-o-y).īesides healthy yields, its strong capital base (CRAR of 73 per cent pre-issue) and low leverage (just 1.1 times) have helped bolster the net interest margin (NIM), which was at 9.7 per cent in FY21. The company offers home loans (52 per cent of FY21 AUM), Quasi home loans (13 per cent), business loans (27 per cent), top-up loans (5 per cent) and insurance loans (covers insurance premium for borrowers, forming 3 per cent of AUM). Currently, it is present in 4 states in the South – Tamil Nadu (comprising 52 per cent of AUM in FY21), Karnataka (10 per cent), Andhra Pradesh and Telangana (together constitute 38 per cent). The target segments of Aptus include low to middle income borrowers from the rural and semi urban areas of the country. Repco Home Finance, another larger peer trades at just 0.99 times its FY21 book, given its below par metrics. While Aptus is better than Aavas on several financial metrics (GNPA, return ratios, etc), its current AUM is almost half of that of Aavas Financiers. Aptus’s premium valuations over Home First, can be attributed to its better operating metrics over Home First.Īavas Financiers, another listed player in the affordable housing space, with reliance on self-employed customers, currently trades at 8.5 times its FY21 book. Its similar sized (AUM) peer Home First Finance, that was recently listed, currently trades at 3.5 times its FY21 book value. Considering the valuations, investors can avoid the issue. At ₹346-353 apiece, the company is valued at 6.9-7 times its FY21 book value (post-issue), leaving very little head room for appreciation for long term investors. While it has demonstrated healthy performance in the past, has good revenue visibility and strong return ratios, the asking price for the IPO seems to have factored in all the positives for the stock. However, other parameters imbibed in their business model do lend some comfort – such as its fully secured, retail focused loan book, low Loan to value (LTV less than 40 per cent), and quality underwriting. Having said that, in the fast-growing affordable housing space the sustainability of the company’s best in class metrics is uncertain. It has strong fundamentals driven by healthy return rations. Its profits after tax grew at CAGR of 54.7 per cent over the same period, to ₹266.9 crore. Amidst the current buoyancy in the affordable housing space, the company has grown its AUM at a compounded annual growth rate (CAGR) of 34.5 per cent for the two years into FY21, to ₹4,068 crore. The company lends to low and middle income customers (predominantly self-employed) in the rural and semi urban areas, who lack access to formal credit. Post issue promoter stake would be around 72 per cent. Stake sale of 13 per cent (pre-issue holding) by one of the promoters and a few PE investors (including Aravali Investment Holdings, JIH II, GHIOF Mauritius, and Madison India Opportunities IV). The offer totaling to ₹2,735 to ₹2,780 crore includes a fresh issue of ₹500 crore and a secondary Aptus Value Housing Finance India (Aptus), a Chennai based non-banking finance company into affordable housing is coming with an IPO on August 10, 2021.
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