Aadhar Housing Finance IPO sails through on Day 2 so far; QIB and NII portions fully booked

The initial public offering (IPO) of Aadhar Housing Finance saw a decent response from the investors during the second day of the bidding process. The issue, which has kicked-off for bidding on Wednesday, May 8, was overall subscribed 47 per cent on day one, thanks to institutional and HNI investors.
 

The Bengaluru-based Aadhar Housing Finance is selling its shares in the price band of Rs 300-315 apiece. Investors can apply for a minimum of 47 shares and its multiples thereafter. It is looking to raise Rs 3,000 crore via IPO, which includes a fresh share sale of Rs 1,000 crore and an offer-for-sale (OFS) of 6,34,92,063 equity shares.
 

According to the data, the investors made bids for 8,49,80,982 equity shares, or 1.21 times, compared to the 7,00,89,373 equity shares offered for the subscription by 2.40 pm on Thursday, May 09. The three-day bidding for the issue will conclude on Friday, May 10.
 

The allocation for retail investors was subscribed 76 per cent, while the portion reserved for non-institutional investors saw a subscription of 1.26 times. However, the quota set aside for qualified institutional bidders (QIBs) attracted bids for 1.95 times of their reservation, while employee quota was booked 3.02 times as of the same time.
 

Incorporated in 2010, Aadhar Housing Finance is a housing finance company targeting the lower income segment. The deep impact branches' sales offices aim to serve customers in India's tier 4 and tier 5 towns. It provides a variety of mortgage loan products for residential and commercial property purchase and construction, home improvement and extension.
 

The grey market premium of Aadhar Housing Finance has dropped sharply amid the mixed trends of the bidding. Last heard, the company was commanding a premium of Rs 55-60 in the unofficial market, suggesting a listing pop of about 18-20 per cent for the investors. However, the premium in the grey market stood around Rs 70, before the bidding opened for the issue.
 

"We believe Aadhar deserves to trade at some minor discount to peer averages on the back of a comparatively larger base and lower growth profile," said Nirmal Bang Securities. "This leaves some modest scope for listing gains and thus we recommend subscribing to the issue."
 

The company, in consultation with managers of the issue, has reserved shares worth Rs 7 crore for the eligible employees of the company, who will get a discount of Rs 23 apiece during the bidding. Of the net offer, 50 per cent shares are reserved for qualified institutional bidders, while non-institutional and retail investors will get 15 per cent and 35 per cent of the net offer.
 

Aadhar Housing Finance is a HFC focused on the low-income housing segment in India and it has the highest AUM and net worth among its peers.  It has an internally developed credit assessment model and has digitized monthly collections from customers to the extent possible to reduce processing and improve its collection efficiency, said Aditya Gaggar Director of Progressive Shares.
 

"If we attribute annualized FY24 earnings to post-IPO fully diluted equity capital, then the asking price is at a P/E of 18.39 times. Thus, the issue appears reasonably priced. Being a leader in the segment with pan India presence; the company has been reporting decent and steady growth over the past few years. One can look at investing in the IPO from a long-term perspective," he added.
 

Aadhar Housing Finance reported a net profit of Rs 547.88 crore with a revenue of Rs 1,895.17 crore for the nine months ended on March 31, 2023. The company's bottomline came in at Rs 545.34 crore with a revenue of Rs 2,043.52 crore for the entire financial year ending on March 31, 2023.
 

Aadhar Housing Finance’s IPO might appear to be a compelling investment due to its robust financial health and potential for growth in the Indian mortgage loan sector. However, potential investors are advised to thoroughly analyse each Offer for Sale (OFS)-dominant structures, said Tarun Singh, Founder and Managing Director of Highbrow Securities.
 

ICICI Securities, Citigroup Global Markets India, Kotak Mahindra Capital, Nomura Financial Advisory and SBI Capital Markets are the book running lead managers of the Aadhar Housing Finance IPO, while Kfin Technologies is the registrar. Shares of the company shall be listed on both NSE and BSE on May 15.