India Shelter Finance Corporation Limited has a retail focused affordable housing finance company with an extensive distribution network comprising 203 branches as of September 30, 2023 and a scalable technology infrastructure across the business operations and throughout the loan life cycle. Between Financial Year 2021 and Financial Year 2023, they witnessed a two- year CAGR growth of 40.8% in terms of assets under management (“AUM”). The target segment is the self-employed customer with a focus on first time home loan takers in the low and middle income group in Tier II and Tier III cities in India, and affordable housing loans, the loans with ticket size lower than ?2.5 million as per RBI rules. This helps in generating relatively high yields on advances. For the Financial Year 2023, the yield to advances was 14.9%, which was the third highest in India for such period. The credit and risk management policies, backed by technology and data analytics throughout the business processes, help them maintain asset quality leading to the GNPA being 1.00% and 2.79% as of September 30, 2023 and September 30, 2022, respectively. Company have an extensive and well-established network of 203 branches spread across 15 states with a significant presence in the states of Rajasthan, Maharashtra, Madhya Pradesh, Karnataka and Gujarat wherein the branch vintage is five year and above, as of September 30, 2023. They have presence in states which cover 94% of the affordable housing finance market in India, as of March 31, 2023 (Source: CRISIL Report). They have increased the scale of the operations and grown the branches by adopting a strategy of deepening the penetration in regions with a substantial demand for affordable housing finance. Company has also adopted an end-to-end in-house approach to key aspects of the lending operations including customer acquisition, underwriting, collateral valuation, legal assessment, and collections. This allows them to directly connect with the customers, minimize turn around times, increases customer retention, and mitigate the risk of fraudulent activities. The underwriting processes are customized to assess creditworthiness of the low and middle-income segment and consequently, they have developed data centric and iterative processes. The debt financing requirements have been historically met from diverse and long-term sources, including public and private sector banks, refinancing from the NHB, external commercial borrowings and the issuance of nonconvertible debentures. As of September 30, 2023, they obtained long-term funding from a diversified lender base comprising over 37 counter parties, including 24 scheduled commercial banks. They have a healthy credit rating of ICRA A+ (stable) from ICRA Limited and CARE A+ (Positive) from CARE Limited, as of September 30, 2023. As per financial performance, India Shelter Finance Corporation Limited has posted total income / net profits of Rs 322.79 Cr / Rs 87.38 Cr (FY21), Rs 459.80 Cr / Rs 128.44 (FY22), Rs 606.23 Cr / Rs 155.34 Cr (FY23) and Rs 398.57 Cr / Rs 107.35 Cr (upto Q2 FY24). So as per previous financials data, company has shown good growth. Company has an average EPS of Rs 15.27 and average RoNW of 12.60% for last three fiscals. Issue is priced at a P/BV of 3.23 as per NAV of 152.7 as on 30.09.23. If we attribute latest earnings of FY22, FY23, TTM and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 41.09, 33.97, 26.30 and 24.58 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, four lead managers are associated with this IPO, and have handled around 107 IPOs in last three fiscals. ICICI Securities Limited : This is 49th IPO from this BRLM. From last 10 IPOs, one opened below issue price and remaining above issue price or at par on the day of listing. As of now, from last 10 IPOs, three are trading below issue price and remaining are trading above issue price or at par. (As on 08.12.2023) Citigroup Global Markets India Private Limited : This is 15th IPO from this BRLM. From last 10 IPOs, three opened below issue price and remaining above or at par on the day of listing. As of now, from last 10 IPOs, Six are trading below issue price and remaining are trading above or at par of issue price. (As on 08.12.2023) Kotak Mahindra Capital Company Limited : This is 40th IPO from this BRLM. From last 10 IPOs, all opened above issue price or at par on the day of listing. As of now, from last 10 IPOs, one is trading below issue price and remaining are trading above or at par of issue price. (As on 08.12.2023) Ambit Private Limited : This is 7th IPO from this BRLM. From last 6 IPOs, two opened below issue price and remaining above or at par on the day of listing. As of now, from last 6 IPOs, two are trading below issue price and remaining are trading above or at par of issue price. (As on 07.12.2023) As per financials, India Shelter Finance Corporation Limited has good growth, RoNW is 13.40% and P/E is respectively 41.09, 33.97, 26.30 and 24.58 as per FY22, FY23, TTM and annualised FY24 earnings. So, issue looks fully priced. Company is in business of retail focused affordable housing finance, which is highly competitive segment. Performance of BRLM is good. So, we give SUBSCRIBE rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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