The initial public offer of Home First Finance Company India, a technology- driven affordable housing finance player with over 44,000 customers and an AUM of over Rs 37,300 crore, was subscribed 2.2 times by noon on January 22, the second day of bidding.
The Rs 1,154-crore IPO has received bids for 3.46 crore equity shares against an offer size of 1.56 crore, the subscription data available on the exchanges showed. The offer size excluded the anchor book portion through which the company mopped up Rs 346 crore on January 20.
Qualified institutional investors have put in 1.35 times higher bids against their reserved portion, while the portion set aside for retail investors has been subscribed 3.4 times and that of non-institutional investors 61 percent.
The IPO, fully subscribed on January 21 itself, comprises a fresh issue of Rs 265 crore and an offer for sale of Rs 888.72 crore by promoters True North Fund V LLP and Aether (Mauritius), investor Bessemer India Capital Holdings II Ltd, and two individual shareholders - PS Jayakumar and Manoj Viswanathan.
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Home First will utilise the fresh issue proceeds for augmenting its capital base to meet future capital requirements arising out of the growth of business and assets. The price band for the issue, which will close on Monday, has been fixed at Rs 517-518 per share.
"The company is bringing the issue at P/B multiple of approximately 4.3x at a higher price band of Rs 518 per share on FY20 book value basis. Although valuations are looking expensive but we like the growth aspect of the company as the company being one among its close peers to post the highest CAGR in AUM from FY15-20. Also on asset quality front company has been able to manage its gross non-performing assets (NPA) & net NPA ratio below 1 percent in FY20," Hem Securities said.
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"What attract us more is its tech-led operating model, which delivers industry-leading productivity ratios along with an experienced management team, marquee investors and strong board members. Therefore we give subscribe rating to issue for both short and long term," the brokerage added.
The company provides loans to first-time homebuyers in low and middle-income groups. Loans for the purchase or construction of homes constituted 92 percent of the company's gross loan assets in September 2020.
Gross loan assets have grown at CAGR of 63 percent from FY18 to FY20. The company has shown the highest disbursements per branch of Rs 2.53 crore, while disbursements per employee stood at Rs 24 lakh. It had managed to keep gross NPAs below 1 percent and 30 DPS in 1-2 percent range.
Home First targets homebuyers with an average loan ticket size of Rs 10 lakh. It has 70 branches spread across 11 states, with Gujarat and Maharashtra accounting for 60 percent share in loans.
"With the government's focus on 'Housing for All' by 2022, affordable housing has seen strong growth over the last six years. Smaller players like Home First have created a niche in this space and are capitalising on this multi-year opportunity," Motilal Oswal said.
The brokerage likes Home First for leveraging digital technology, wide distribution network, high-quality housing finance portfolio, and robust expansion plans. "It showed resilience during COVID-19 with over 96 percent collection efficiency. The issue is valued at 4.8x FY20 P/BV which is comparable to peers. We recommend subscribe for the long term. Further, given the current buoyant market, the issue could see listing gains as well," Motilal Oswal said.