Aadhar Housing Finance Limited IPO Review

Aadhar Housing Finance Limited IPO Review

Aadhar Housing Finance Limited (AHFL) is an Indian housing finance company that is a leader in terms of financial empowerment. AHFL was founded in 2010 to ensure that homeownership was affordable to the low-income population of Indian society. The company was established based on the vision of giving the underserved millions of people a chance to become the owners of their first homes, which is crucial considering the fact that in a country, a big part of the population lives in rural regions or in slums.

The family of its promoters has been the key to the growth and orientation of AHFL. The company was first supported by the Wadhawan Global Capital (WGC) group. A major turn, however, was experienced in the company in recent years when Blackstone Group Inc. bought the majority of the stake via its affiliate, BCP Topco VII Pte Ltd, which makes it the promoter of AHFL. This shift was a fresh start to AHFL that brought with it financial prowess throughout the world and a renewed focus on its social mission.

With its base in the busy city of Mumbai in Maharashtra, AHFL has spread its tentacles way beyond the city in which it is located. It now has a huge network of branches in India to give it a pan-India presence, both in urban and semi-urban areas. Such a vast network is also an indication of what AHFL tries to do to cater to the housing finance requirements of a wide range of customers, who include not only employees with salaries but also self-employed citizens.

The company was founded when the economic environment in India was experiencing a rapid change, and the demand of affordable scheme of housing finance was becoming more pronounced. AHFL came to fill this gap with the aim of small ticket mortgage loans, which are especially applicable to the economically weaker and low-to-middle income customers. The products that the company deals in are loans to purchase and build residential property, loans to improve and extend homes and loans to build and buy a commercial building.

The reason why AHFL was set up was the desperate need to find a solution to the acute lack of affordable housing finance designs among the low-income section of the Indian population. As a large portion of the population of the country is self-employed or working in the informal sector, there is a tendency that the traditional banking and finance institutions do not cater to this particular segment of the population. AHFL realised the opportunity and the urgency to offer personalised financial options that would make homeownership feasible and therefore help in the economic empowerment and better living standards among its target customers.

In the course of years, AHFL has proven its reliable and steady financial results, and it has passed multiple external events in the Indian economy. The firm has been able to remain successful because of its emphasis on having strong and extensive underwriting, collections, and asset quality tracking systems and processes. Further, the implementation of technology-enabled services at AHFL has simplified the loan lifecycle, both in origination and end closure, and it has also increased the possibilities of reaching and distributing customers.

With AHFL ever expanding and fulfilling its mission, it will always be an important actor in the Indian quest to offer affordable housing finance of housing to people who need it most. The company has been on a mission that portrays its relentless effort to be financially inclusive and empower the low-income population of India.

Competitive Strengths

Aadhar Housing Finance Limited (AHFL) is an enterprise with a strong presence in the affordable housing finance market, with numerous competitive advantages that have established it as a leader in the category. Through its emphasis on using technology and innovation, AHFL has been able to make a niche for itself by making aspirations come true and turning them into realities for many households in India.

Revenue, Sales, and Profit

Aadhar Housing Finance Limited is a leading competitor in the housing finance industry, which has shown a strong financial performance. In the current financial year 2022-2023, the company had a net profit of [?]545.34 crore, which is large compared to the previous years. This profit has been realised on a revenue of [?]2,043.52 crore, which means a healthy profit margin and healthy operations. The sales of the company also recorded an upward trend and an increase of 8.81 per cent to [?]440.30 crore in the quarter ended March 2022 versus an increase of [?]404.66 crore in the quarter ended March 2021. These values indicate the high presence of the company in the market and its success in operation despite the adverse economic environment. The information on the annual reports and detailed financial results may be more informative about the financial health and strategy of the company.

Distribution Network and Geographical Reach

By the current reports, AHFL is running on an enormous system of 471 branches, nine of which are sales offices. These outlets are well dispersed in 20 states and in union territories to be well represented in urban as well as semi-urban regions. Geographical diversification of the company operations (more than 15,000 locations) provides the company with an opportunity to provide services to a large number of customers, in particular, Tier-2 and Tier-3 cities. The five leading states in terms of Assets Under Management (AUM) include Maharashtra, Uttar Pradesh, Rajasthan, Gujarat and Madhya Pradesh, which indicates the high penetration that the company has in these places. The distribution network of AHFL is not only an account of its aspiration to offer affordable solutions of housing finance but also its contribution to the economic growth and financial inclusion of the region. The strategic positioning of the company allows it to serve economically weak and the low-to-middle-income segment of society with its numerous products that include purchasing of residential property loans, constructing loans, extending and upgrading of house loans and commercial property loans. Such an holistic strategy will make AHFL a force to reckon with in the cheap housing finance business in India.

Unique Features

Aadhar Housing Finance Limited (AHFL) is a leading housing finance company in India and is involved in the provision of affordable housing loans to the poor population. AHFL provides small-ticket mortgage loans to its prospective customers, aiming to empower economically disadvantaged groups and low-to-middle income earners, and this type of loan is critical in changing the quality of life of individuals in the targeted market segment. Financial products offered by AHFL consist of residential property purchase and construction loans, home improvement and extension loans, as well as loans to construct and acquire commercial property. Such products are tailored to attractive interest rates and longer repayment terms of up to 30 years, allowing sponsors to pay lower monthly EMIs and making the ownership of the home more affordable to many.

In terms of technology and innovation, AHFL has implemented comprehensive systems and processes for underwriting, collections, and monitoring asset quality. These systems are technology-enabled, aiming to digitise the entire life cycle of a loan from origination to closure. The company has also developed an internal credit assessment model and digitized monthly collections to enhance processing and collection efficiency. Overall, Aadhar Housing Finance Limited stands out for its commitment to serving the underserved segment of the housing market and its expansive reach across India.

Investment in Research and Development

Aadhar Housing Finance Limited (AHFL) is a prominent player in the low-income housing finance sector in India, focusing on empowering the underserved population to own their first homes. While specific details on the company's investment in research and development (R&D) are not publicly disclosed, AHFL has demonstrated a commitment to innovation and sustainable development. The company's business model integrates social objectives, including promoting Sustainable Development Goals (SDGs), which likely involves R&D to some extent. AHFL's approach includes leveraging technology to digitise the loan lifecycle, from origination to closure, which suggests an ongoing investment in developing and improving digital infrastructure and services. Furthermore, AHFL's consistent financial performance and expansion across urban and semi-urban locations indicate a strategic investment in systems and processes that support its business model and social objectives.

Aadhar Housing Finance Limited IPO Details

• Issue Date: The issue date in an IPO, also known as the initial offering date, is when a company's stock is first made available for public purchase. This date is a significant milestone in the process of an initial public offering, marking the transition of a company from private to public status. (Issue Date: May 8, 2024 to May 10, 2024).

• Listing Date: The listing date refers to the day when the company's shares are officially listed and begin trading on a stock exchange. This is typically several business days (3-6 days) after the issue date, after processes like share allotment and finalisation are completed. On this date, investors who were allotted shares during the IPO can begin selling them, and new investors can start purchasing them on the exchange at the prevailing market price. (Listing Date: Wednesday, May 15, 2024).

• Face Value of Shares: The face value of shares in an IPO, also known as the nominal or par value, is a predetermined fixed price set by the company and mentioned in its memorandum of association. It represents the initial capital contributed by the founders and is used for accounting and regulatory purposes. During an IPO, shares are typically offered at a price higher than the face value, which includes a premium based on market demand and the company's performance indicators. (IPO Face Value: ₹10 per share).

• Price Band: A price band of an IPO is the range of prices within which the investors can bid for the shares of a company that is going public. The price band is set by the issuer and the lead managers of the IPO, based on various factors such as the demand and supply of the shares, the financial performance and valuation of the company, and the market conditions. (IPO Price: ₹300 to ₹315 per share).

• Lot Size: In an Initial Public Offering (IPO), the lot size refers to the minimum number of shares an investor can apply for. It is a pre-determined set of shares that investors must bid for, and applications must be in multiples of this lot size. The lot size ensures a standardised bidding process and helps in the fair allocation of shares among investors. (Lot Size: 47 Shares).

• Total Issue Size: The total issue size represents the total number of shares the company is offering to raise capital through the IPO. This number is determined by the company and its advisors, considering factors like their funding needs and the expected investor demand. The total issue size is then divided by the lot size to determine the total number of lots available for purchase by investors. (Total Issue Size: 95,238,095 shares (aggregating up to ₹3,000.00 Cr)).

• Offer for Sale: The offer for sale, which is the amount and type of shares that the company is selling to the public. The offer for sale can be either primary or secondary, or a combination of both. A primary offer for sale means that the company is issuing new shares and raising fresh capital. A secondary offer for sale means that the existing shareholders are selling their shares and receiving the proceeds. A combination offer for sale means that both new and existing shares are being sold. (Offers for Sale: 63,492,063 shares of ₹10 (aggregating up to ₹2,000.00 Cr) ).

• Fresh Issue: A Fresh Issue, in terms of an Initial Public Offering (IPO), is the issue of new shares which a company issues to the public. A Fresh Issue brings about the creation of capital to the company, unlike an Offer for Sale, where the existing shareholders sell their shares. It is generally used for growth projects like expansion, research and development, or debt repayment. (Fresh Issue: 31,746,032 shares (aggregating up to [?]1,000.00 Cr)).

  
  

• Issue Type: The kind of IPO may vary according to the market and regulatory environment. There are various categories of IPOs, namely, Fixed priced IPO, Auction IPO, Book Building IPO and Hybrid IPO. (Issue Type: Book Building IPO).

  
  

• Listing At: The listing of shares in an IPO can be defined as the process of introducing the shares of a company to the world of the stock market where people can sell and buy the stock in the stock exchange. After listing, shares of the company can be sold and bought by any person holding a brokerage account in the exchange. (Listing at: BSE, NSE).

  
  

• Retail Shares Offered: This is the amount of the total shares being offered to individual investors, and not the institutional investors, who include banks or hedge funds. The regulatory authorities usually insist on a certain percentage of shares to be allocated to the retail investors, which is an attempt to encourage larger masses of the population to invest in the capital markets. (Retail Shares Offered: not above 35% of the Net Issue).

• QIBs Shares Issued: QIBs are institutional investors, i.e. banks, mutual funds, insurance companies, pension funds, etc., who are knowledgeable and have funds to invest in the securities market. They are regarded as well-informed and knowledgeable investors who are capable of evaluating returns and risks of an IPO. QIBs may bid a maximum of 50 per cent of the total number of shares being issued in an IPO through the profitability route, or 75 per cent of the total shares being issued in an IPO through the QIB route. QIBs need to make payments of 10 per cent of the bid at the time of application and the remaining after the finalisation of the basis of allotment. (QIB Shares Offered: Not in excess of 50% of the Net Issue).

  
  

• NII (HNI) Shares Offered: NII is the Non-Institutional Investors, and this category constitutes the High Net-worth Individuals (HNIs) who place bids for shares valued at over [?]200,000. NII category is the one that is allocated to investors who do not qualify in either of the retail category or the Qualified Institutional Buyers (QIBs). In the case of NIIs, a specified percentage of the IPO is often distributed, i.e. 15 percent to make the shares more widely distributed. The probability of allotment by HNIs in the NII category is usually higher than that of retail investors, which would be a more appealing investment opportunity to an investor who would like to commit more substantial amounts of money to an IPO. (NII (HNI) Shares Issued: Not in excess of 15 per cent of the Net Issue).

  
  

Competitors of Aadhar Housing Finance Limited

Aadhar Housing Finance Limited is one of the leading housing finance companies in India, with strong competition among other market players. The Indian housing finance landscape is fairly dynamic, and there are a number of major players in the market fighting for market share. This is a detailed examination of some of the competitors of Aadhar Housing Finance Limited.

HDFC Ltd.

One of the most successful housing finance institutions in India is the Housing Development Finance Corporation Limited (HDFC). Founded in 1977, HDFC has a comprehensive network in the country and has a wide portfolio with respect to financial products and services. HDFC presents a great challenge to Aadhar Housing Finance Limited, considering its great experience and high market presence.

Reliance Home Finance

Reliance Home Finance is part of the Reliance Group, which provides a range of home loan products and services. The firm has developed a reputation for being customer-oriented and innovative in its financial solutions, which have made it a stiff competitor in the housing finance industry.

Agrim Housing Finance

Another competitor is Agrim Housing Finance, which is a competitor that focuses on offering housing loans to the underserved and unserved portions of the Indian population. They focus on affordable housing finance, and this makes them serve a niche market segment, unlike Aadhar Housing Finance Limited.

Other Notable Competitors

Besides these key players, other players such as Aadhar Housing Finance Limited compete with other players, both small and new to the housing finance industry. Other companies, such as Shubham Housing Development Finance Company and Mahindra Home Finance, have also made their own niche in the industry that will provide competitors with competitive rates and services.

To sum up, despite remaining a major player in the housing finance industry, Aadhar Housing Finance Limited is functioning in a very competitive market that has a number of established and new players. This innovation and dynamic nature to respond to the dynamic nature of the market will be instrumental in sustaining and enhancing the competitive edge of the company.

Conclusion

To recap it all, the Aadhar Housing Finance IPO is a great event in the Indian financial market, which is a substantive offering of [?]3,000 crores. At a price range of [?]300-[?]315 per share, the IPO is a chance for investors to be part of the growth narrative of a company that has already created a niche within the housing finance industry, and specifically in the low-income segment. Fresh issue and offer sale, combined with the detailed schedule, are synonymous with a well-organised attitude toward raising capital and involvement of investors. With the IPO gearing to launch its doors on May 8, 2024, it is going to be a worthy entry in the BSE and NSE, which could open the doors to strong investment opportunities in the housing finance sector.

Please Read the Detailed Review Here.

FAQs

Q: What is an IPO?

An Initial Public Offering (IPO) is a process through which a privately held company offers its shares to the public for the first time and becomes a publicly traded company.

Q: How can I apply for an IPO?

You can apply for an IPO through various methods:

ASBA (Application Supported by Blocked Amount): In this method, your application money remains in your bank account until the basis of allotment is finalized.

UPI (Unified Payment Interface): You can authorize the blocking of funds in your bank account using UPI while applying for an IPO.

Q: What is ASBA?

ASBA stands for Application Supported by Blocked Amount. It allows your application money to be blocked in your bank account during the IPO bidding process. You continue to receive interest on the blocked amount.

Q: What is the difference between book building and a normal public issue?

Book building is a process where demand for securities is elicited and the price is assessed based on investor bids. In a normal public issue, the price is fixed by the issuer.

Q: Can I make payments through UPI for IPOs?

Yes, you can use UPI as a payment method for IPOs. The UPI platform blocks the funds for IPO applications after you approve the fund block mandate request.

Q: What is the minimum order quantity for an IPO?

The minimum number of shares you can apply for in an IPO is known as the minimum order quantity. It varies for each IPO.

Q: What is the cut-off price in an IPO?

The cut-off price is the price at which you bid for shares without specifying a particular price. It allows you to participate in the IPO without specifying a specific bid price.

Q: Can I revise my bids during the IPO process?

Yes, you can revise your bids multiple times before the IPO bidding period ends.

Q: Which banks offer the ASBA facility for IPOs?

Several banks, known as Self Certified Syndicate Banks (SCSBs), offer the ASBA facility. Some examples include HDFC Bank, ICICI Bank, Axis Bank, and SBI.

Q: How do I find IPO mandates on UPI apps?

You can check the list of UPI handles supported for IPO payments on the National Payments Corporation of India (NPCI) website. These handles allow you to apply for IPOs using UPI.

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