Aadhar Housing Finance IPO booked over 10x on Day 3; QIBs portion subscribed over 22.5 times

The initial public offering (IPO) of Aadhar Housing Finance continued to see a decent response from the investors during the third and final day of the bidding process. The issue was overall subscribed 47 per cent on day one and ended day two with more than 1.5 times subscription.
 

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 70,87,72,079 equity shares, or 10.11 times, compared to the 7,00,89,373 equity shares offered for the subscription by 2.45 pm on Friday, May 10. The three-day bidding, which opened on Wednesday, May 8, concludes today.
 

The allocation for qualified institutional bidders (QIBs) was subscribed 22.49 times, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 12.60 times. However, the quota set aside for attracting bids for 2.01 times of their reservation, while the employee quota was booked 5.57 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 has seen a decent correction after a muted response for the issue. Last heard, the company was commanding a premium of Rs 55-60 in the unofficial market, suggesting a listing pop of about 18 per cent for the investors. However, the premium in the grey market stood around Rs 70-levels, a day earlier.
 

Aadhar Housing exhibits a superior cost-to-income ratio compared to its industry counterparts, attributed to its strategic initiatives, which in turn bolster its net interest margin. Furthermore, the company has consistently upheld strong asset quality since 2021, said Canara Bank Securities, with a recommendation to 'subscribe' the issue for listing gains.
 

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.
 

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

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 is the largest affordable HFC amongst peers as per AUM and net worth focused on the low-income housing segment. The company has a presence in 20 states and UTs which is highest among the peers as of FY23 thus reducing concentration risk. AHF's cost of borrowing declined from FY21 to FY22 and increased at a slower pace, said SMIFS.
 

"The company has availed international sources of funding in the past to reduce its overall cost of borrowings and diversify the funding mix for FY25. The company’s NIMs have been improving largely due to reduction in cost of borrowing and AUM mix change," it added subscribe rating on the back of healthy growth prospects, strong asset quality and reasonable valuations.
 

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.