Home First Finance Company IPO opens today: Should you subscribe?

Updated : January 21, 2021 10:17 AM IST

Home First Finance has set a price band of Rs 517-518 per equity share, with a face value of Rs 2 each.

The Rs 1,153 crore-initial public offering (IPO) of mortgage lender Home First Finance Company India Limited opens for subscription today. This is the third public offering of 2021, after IRFC and Indigo Paints.

Home First Finance has set a price band of Rs 517-518 per equity share, with a face value of Rs 2 each. The issue closes on January 25. Investors can bid in lots of 28 shares and multiples thereof. After the issue, Home First Finance's implied market capitalisation could rise between Rs 4,518 crore and Rs 4,527 crore.

The public issue comprises a fresh issue of Rs 265 crore and an offer for sale of Rs 888.71 crore by promoters True North Fund V LLP and Aether (Mauritius), investor Bessemer India Capital Holdings II Ltd, and two individual shareholders - PS Jayakumar and Manoj Viswanathan.

The company already raised Rs 346 crore from anchor investors on January 20.

Read Here: Home First IPO to open on January 21: Here are key things to know

Incorporated on February 3, 2010, Home First Finance is an affordable housing finance company that targets first-time homebuyers in low- and mid-income groups. It primarily offers customers housing loans for the purchase or construction of homes, which comprised 92.1 percent of gross loan assets, as of September 30, 2020. Gross loan assets have grown at a CAGR of 63.4 percent between FY18-20 and increased to Rs 3,730.01 crore as of September 30, 2020.

Home First has posted strong growth in NII of 58.6 percent CAGR between FY18-20 while net profits have grown at a CAGR of 122.6 percent during the same period.

Brokerage houses have assigned a ‘subscribe’ rating to the issue on the back of the company's strong financials, stable asset quality, comfortable capital adequacy ratio and healthy return ratios.

Angel Broking

“Despite the Covid-19 crisis, the company’s asset quality has remained largely stable with GNPA and NNPA largely stable at 0.7% and 0.5% respectively at the end of 1HFY2021. The company had a CAR of 51.7% at the end of 1HFY2021which provides comfort. At the higher end of the price band the stock would be trading at P/BV of 3.6x fully diluted post issue book value of Rs 143.4 per share,” Angel Broking said.

The brokerage firm expects the company to post strong growth driven by strong demand for affordable housing. Given the growth prospects, it recommends a 'Subscribe' rating on the issue.

Yes Securities

“Aided by its high growth momentum on a smaller base, superior underwriting standards, and efficient collections management (GNPAs at <1% and modest credit costs), HFF delivered healthy RoA of 2.7% in FY20. RoE of 11% looks modest owing to lower leverage at 4x in FY20. The issue is priced at post-money P/BV of 3.4x compared to its nearest competitor Aavas Financiers which trades at 6.8x on September BV,” said Yes Securities which advised subscribing to the issue.

Sharekhan

"Home First has been notable with a fast pace of growth, and its gross loan assets have clocked a CAGR of 63.4 percent between FY2018 and FY2020. Its business profile (salaried customers account for 73.1 percent of its gross loan assets and self-employed customers account for 25 percent of gross loan assets, as of September 2020) is structurally sound, which all explains the company's low gross NPAs," Sharekhan said.

A granular business with an average ticket size of its housing loans of Rs 10.1 lakh, with an average loan-to-value on gross loan assets of 48.8 percent, as on September 2020 places it at lower competition intensity from banks and other peers, it added.

(Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.)

Home First Finance Company IPO opens today: Should you subscribe?

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