Subscribe to Aavas Financiers: Emkay Global

The other IPO which also received huge responses were Happiest Minds Technologies and Chemcon Speciality Chemicals, which was subscribed 150.98 times and 149.3 times respectively. Interestingly, both these stocks have seen bumper listing gained over 100 percent. Let's see how the IPO subscription and listing happened in 2020 so far, considered only IPOs issue size over Rs 100 crore.

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The company management has stringent ALM maturity norms whereby average liability maturity is 136 months (11 years) whereas assets are being matured at an average duration of 8 years which provides consistency to spreads of the company. Also being exposed to bottom end of the customer profile, the company is able to command price which further safeguards margins. The company has loans at fixed rates of Rs15bn against fixed rate liabilities of Rs 10 bn which again safeguards margins.

Valuation and Outlook

AAVAS has announced an IPO price band of Rs818-821. At an
upper price band of Rs821, the stock is available at ~3.5x P/FY18 Book (post money) &~56x P/FY18 earnings with ~10.2% FY18 ROEs (pre-dilution). As the company accelerates its overall leverage, the likely probability of achieving superior RoEs of ~20%remains fairly high. Also with sufficient capital already in place, further risk of dilution is also quite limited. We recommend SUBSCRIBE to the IPO.

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