Aadhar Housing Finance IPO: Strong Investor Interest, 62% Subscription On Day 2; GMP Hints Premium Listing

Investor interest surged on the second day of bidding for the initial public offering (IPO) of Aadhar Housing Finance, backed by Blackstone, as subscription rates hit 62%. With bids pouring in for 4.32 crore equity shares against the offering of 7 crore.

Leading the charge were non-institutional investors, seizing 81% of the shares allocated to them. Retail investors followed closely behind, subscribing to 57% of their quota, while qualified institutional buyers (QIBs) secured 53% of their portion.

The IPO comprises a fresh issue of shares valued at Rs 1,000 crore and an offer-for-sale (OFS) worth Rs 2,000 crore by promoter BCP Topco VII Pte, an affiliate of the Blackstone Group. At the upper end of the price range, the company's valuation exceeds Rs 13,000 crore. Investors can participate in the offering within the price band of Rs 300-315 per share, with bidding set to close on May 10.

Aadhar Housing Finance specializes in extending mortgage loans to the low-income housing sector, with a focus on small-ticket loans. As of December 2023, the company's average loan size stood at Rs 10 lakh, boasting an average loan-to-value ratio of 58.3%. In the fiscal year 2024's first nine months, salaried individuals contributed 57.2% of the company's Assets Under Management (AUM), with the self-employed segment accounting for the remaining 42.8%.

The response to the IPO shows investor confidence in Aadhar Housing Finance's business model and growth prospects. Despite economic uncertainties, particularly in the wake of the COVID-19 pandemic, the company's niche focus on affordable housing loans appears to resonate well with investors seeking exposure to India's housing finance sector.

Aadhar Housing Finance's IPO comes amid a buoyant market environment, with several companies tapping into the capital markets to fuel expansion plans and bolster balance sheets. The housing finance sector, in particular, has witnessed heightened activity, driven by the government's push for affordable housing and increased credit penetration in semi-urban and rural areas.

Blackstone's backing adds further credibility to Aadhar Housing Finance's IPO, given the private equity giant's track record of successful investments and strategic guidance. With Blackstone's support, Aadhar Housing Finance aims to leverage its IPO proceeds to capitalize on growth opportunities, expand its loan portfolio, and enhance its technological capabilities.

In fiscal year 2023, Aadhar Housing Finance witnessed an 18.2% increase in revenue from operations, reaching Rs 2,043 crore compared to Rs 1,728 crore in FY22. Profits after tax also saw a notable uptick, rising by 22.4% to Rs 545 crore during the same period.

One of the highlights of Aadhar Housing Finance's IPO is its attractive valuation. With a price-to-earnings (P/E) ratio of 19.45 times, the company's shares are perceived as relatively cheaper compared to peers like Aptus Value Housing Finance, Aavas Financiers, Home First Finance Company India, and India Shelter Finance Corporation, which boast higher P/E ratios.

Before the IPO, the promoter and promoter group collectively held a 98.7% stake in Aadhar Housing Finance, leaving only a 1.3% stake in public hands. However, post-IPO, the promoter's stake will decrease to 76.5%, allowing public ownership to rise to 23.5%.

The number of live accounts, including assigned and co-lent loans, surged to 2.33 lakh in FY23 from 2.04 lakh in FY22. Additionally, the company expanded its footprint, increasing its branch network from 332 to 469 during the same period. Despite this expansion, the company's debt-to-equity ratio remained healthy at 3.3x as of FY23, indicating prudent financial management.

As the bidding continues, market observers await the final subscription figures and the subsequent listing of Aadhar Housing Finance on the stock exchanges. The company's debut in the public markets is expected to be closely monitored, providing insights into investor sentiment and appetite for housing finance companies in India.