Blackstone starts talks to launch IPO by Aadhar Housing Finance

Blackstone, the world’s largest alternative asset manager and the largest owner of commercial real estate in India, has launched early-stage discussions to evaluate an initial public offering (IPO) by its portfolio company Aadhar Housing Finance, people familiar with the matter told Moneycontrol.

The last IPO in the domestic housing finance segment happened more than two years back when Jaipur-based Aavas Financiers launched a Rs 1,640-crore issue on October 25, 2018.

The listing of Aadhar Housing Finance would be the first IPO of an Indian portfolio company backed by the US private equity giant in the past five years. In October 2015, fragrance maker SH Kelkar backed by Blackstone launched a Rs 500-crore IPO.

Preliminary discussions have been held in this regard and as of now, the plan is to raise between $300 million and $400 million via the proposed IPO, though the quantum may vary later. Merchant bankers should be finalised within the next 3-4 weeks,” said one of the persons cited above.  A second person confirmed the IPO plans.

“Blackstone is looking to make a partial exit through the proposed IPO. These are early days and the deal is six months away and a launch is likely in the second quarter of CY2021. At a sensible price, NBFCs backed by good quality, well-capitalised, institutionally owned names will see interest from investors,” said a third person.

The three persons above spoke to Moneycontrol on the condition of anonymity. When contacted, Blackstone declined to comment.

In June 2019, Blackstone purchased a majority stake in Aadhar Housing Finance from Diwan Housing Finance and the Wadhawan group for around Rs 2,200 crore. It holds around 98.7 percent stake in the firm.

Home First Finance, backed by private equity players True North, Warburg Pincus and Bessemer Venture Partners, is another player in the affordable housing space eyeing a listing. In March 2020, the firm got a nod from market regulator Sebi for a Rs 1,500-crore IPO.

“While there may have been initial challenges regarding payments and recoveries due to COVID-19, latent housing demand will pick up due to the ‘work from home’ culture. And hence asset prices will hold up and delinquencies on existing moratorium book in the affordable housing segment is likely to be minimal,” said Abizer Diwanji, Leader (Financial Services), EY.

Know more about Aadhar Housing Finance

Aadhar Housing is one of the largest affordable housing finance companies focusing on the lower and middle-income segment. It manages assets of Rs 11,432 crore as on March 31, 2020.

The housing loan portfolio constituted around 85.3 percent of the total portfolio, non-housing around 14.3 percent and project loan of around 0.4 percent.

The firm’s network, spanning 294 branches was spread across 20 states as per March 2020 figures. In fiscal 2020, its net profit was Rs 189 crore on total income (net of interest expenses) of Rs 595 crore, against Rs 162 crore and Rs 509 crore, respectively, in the previous fiscal.

Based on a report on Aadhar Housing Finance dated June 30t, 2020 by rating agency Crisil, of the total portfolio, loans to salaried segment constituted around 66 percent, of which the formal sector employed accounted for 84 percent (43 percent in government jobs and remaining in private jobs) and 16 percent were from the informal sector.  Aadhar Housing (formerly, DHFL Vysya Housing Finance (DHFL Vysya)) was set up in 1990, by the erstwhile Vysya Bank (as Vysya Housing Finance), with equity support from other banks and institutions, to provide rural housing loan finance.