Aadhar Housing Finance IPO: Should You Buy Or Drop?

With their IPO, India’s leading private player in the fastest-growing subsegment of affordable housing is about to enter the stock markets. According to the latest filing with SEBI, the company intends to raise an aggregate of Rs. 3000 crores through its Initial Share Sale.

Aadhar Housing Finance Ltd, with the motto “Ghar Banega Toh Desh Banega,” is a leading provider of affordable housing solutions across India. With a robust technological edge and lofty goals, the Company has decided to foray into the bourses with an upcoming IPO.

As in the previous two years, the IPO market is expected to be hot in 2023. Rising business interest, rapid digitalization, strong listing performance, or a steady increase in investor participation can account for the buoyancy in the market.

Several companies, from unicorns to tech startups and healthcare to finance banks, have announced plans to go public this year. One such company is Aadhar Housing Finance Ltd, which is all set to raise Rs. 3000 crores by combining a fresh issue and an offer for sale.

Let us glance at the Last 3 Years’ IPO Performance-

In FY 20, the large IPOs (with issue size > 15 billion) have been the best performers with the highest average listing gains-

This article will provide a comprehensive overview of the Aadhar Housing Finance IPO, allowing you to make an investment decision.

Aadhar Housing Finance Ltd IPO Details

Aadhar Housing Finance Ltd filed its Draft Red Herring Prospectus (DRHP) on 24th Jan 21 with the market regulator SEBI to launch a mega IPO of Rs. 7300 Crores. The Company targets to raise this aggregate corpus through a combination of Fresh issues worth Rs. 1500 Crores and the secondary issue of shares worth Rs. 5800 Crores from existing shareholders.

The Aadhar Housing Finance IPO is the first in the last five years of an Indian portfolio company backed by Blackstone, a US-based private equity behemoth.

IPO Status	Approved
IPO Date	8th to10th May, 2024
Total IPO Size	₹3,000.00 Cr ( Fresh issue – Rs. 1000 and OFS – Rs. 2000 cr)
No. of Shares for IPO	47 shares
Issue Price Band	₹300 to ₹315 per share
IPO listing at	BSE and NSE
Face Value per Equity Share	8th to10th May 2024
Issue Type	Book Built Issue IPO

About Aadhar Housing Finance Ltd Company

Aadhar Housing Finance Ltd is an unlisted public limited company owned by U.S. investment giant Blackstone. This Company, headquartered in Bangalore, has an Authorized share capital of Rs. 500 Crore and a Paid-up capital of Rs. 395  Crore.

Company	Shareholding %
BCE Topco VII Pte Ltd	98.72
ICICI Bank Ltd	1.18
IEPF Authority	0.03
Other Resident Shareholders	0.07

Aadhar Housing Finance Ltd employs over 2700 people and operates through a network of 341 branches and offices across India. The housing finance company has expanded to 20 states and union territories and has been titled “The Best Brand 2021” by The Economic Times.

Aadhar Housing Finance Ltd is the largest Housing finance company serving the low-income housing market, with an AUM of Rs. 14778 (as of March 31, 2022). The Company boasts best-in-class metrics, with a 10.9% increase in gross AUM and a 12.6% increase in loan disbursements.

Key Business Offerings of Aadhar Housing Finance Ltd

The Company offers a broad array of mortgage-related products that include-

• Home Loan For Self-Employed/ Business Class/ Salaried Employees
• Loans for Improvement/ Construction/ Extension
• Loans against Property (LAP)
• Loans for Purchase of Residential/ Non-Residential Property

Financial Analysis of Aadhar Housing Finance Ltd

• Due to lower penetration and less competition in this small ticket size ( <15 Lacs) home finance, the Company focused on low-income growth and recorded an increase in AUM of Rs. 14778 Crore in FY 22.
• Due to a drop in incremental cost of funds from 8.15% to 7.23%, a sharp rise in Net Profit Margins (NIM) can be seen.

• Net Worth/ Total Equity and ROE % have improved over the last three years.

• Aadhar Housing Finance Ltd. has shown a robust growth of 30.8 % over the last financial year in Profit After Tax (PAT).

• Increasing trends in key financial metrics such as earnings per share (EPS), revenue from operations, and ROE percentage suggest the Company’s good health.

• In FY 2022, the Company delivered a strong Return on Assets (ROA) of 3.18% and a Return on Equity (ROE) of 15.23%, compared to 2.62% and 13.49% in FY 2021.

	31st Mar 20 (in Crores)	31st Mar 21(in Crores)	31st Mar 22 (in Crores)
AUM	11,432	13327	14778
Income	1372	1550	1693
PAT	189	340	445
Net Worth/Total Equity	2347	2693	3145
ROE%	11.81%	13.49%	15.23%

The Strengths and Weaknesses of Aadhar Housing Finance Ltd

Strengths

• Because of the wide geographical presence, there is a low concentration of risk exposure, and no single state adds more than 15% AUM value.

• With an average ticket size of Rs. 8.75 Lacs, 100% secured retail advances are available. Meets the RBI/priority NHB’s sector lending requirements.

• Significant growth in collection efficiency over the last year, from 91% in April to 104% on March 22, is testimony to well-integrated and efficient systems for underwriting, collections, and asset quality monitoring.

• The high share of loans to salaried employees—61.5% of the Company’s AUM—demonstrates that salaried employees are more economically resilient and contribute to the Company’s stability.

Risks

• Housing Finance Companies are sensitive to changes in interest rates and prudential norms laid down by RBI/NHB. Other risks surrounding HFCs are Credit Risk, Liquidity Risk, Cash Management Risk, and Collateral Risk.

• The percentage of Retail NPA on AUM has increased over the years. If not checked, it may adversely affect the Company’s financial health.

• The continuous impact of the pandemic led to an increase in customer delinquency.

	31st Mar 20	31st Mar 21	31st Mar 22
RETAIL NPA(%)	0.82	1.07	1.45

Objectives of Aadhar Housing Ltd IPO

Through IPO, Aadhar Housing Finance Ltd aims to access cheaper funds to sustain cost-efficient long-term financing. This will also help the Company reduce its overall borrowing costs, thereby increasing profit margins.

Aadhar Housing Finance Ltd.’s debt-to-equity ratio has been reduced from 3.85% in 2021 to 3.39% in 2022, indicating the Company’s intention to expand its capital base.

Should You Buy Aadhar Housing Finance IPO or Let it Pass?

Though financial ratios enhance positive sentiment for purchasing Aadhar Housing Finance IPO, they do not eliminate financial companies’ susceptibility to potential risks. Increasing NPA levels can potentially dent the Company’s revenue and PAT.

Any potential downgrade in Aadhar Housing Finance Ltd. can increase the lending rates for new debt, damaging its net profit margins.

The strong parentage of Aadhar Housing Finance Ltd from Blackstone Inc. and government policies supporting affordable housing loans could aid the company’s growth after capital infusion. However, given geopolitical tensions, frequent rate revisions by the RBI, and high inflation, it may be challenging to make reliable predictions about the IPO’s performance.

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