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Aptus Value Housing Finance: All You Need To Know

The initial public offering of Aptus Value Housing Finance opens on Aug. 10.

A construction crane is seen between buildings. (Photographer: Keith Bedford/Bloomberg)
A construction crane is seen between buildings. (Photographer: Keith Bedford/Bloomberg)

The initial public offering of Aptus Value Housing Finance India Ltd. opens on Tuesday as the South India-focused home financier is looking to raise up to Rs 2,780 crore from the primary market.

The offering includes a fresh issue of shares worth up to Rs 500 crore and an offer for sale of 6.46 crore shares, according to its IPO prospectus.

Who’s Selling

Existing shareholders who are selling include:

  • Padma Anandan

  • Westbridge Crossover Fund

  • Aravali Investment Holdings

  • JIH II, LLC

  • GIOF Mauritius

  • Madison India Opportunities

Issue Details

  • Opens: Aug. 10

  • Closes: Aug. 12

  • Price band: Rs 346-353

  • Post-issue market cap: Rs 17,157-17,494 crore, according to ICICI Securities

Objective

The company intends to use the proceeds of the issue to strengthen its capital base.

Business

Aptus Value Housing Finance focuses on low- and middle-income customers in rural and semi-urban areas. It offers loans for purchase and self-construction of residential property and home improvement. It also offers loans against property and business loans.

The company’s assets under management have grown at a compounded annual rate of 34.5% to Rs 4,068 crore. As much as 99.5% of the assets come from customers belonging to low and middle-income groups earning less than Rs 50,000 a month.

The average ticket size of loans disbursed by the company is Rs 5-15 lakh. It currently operates in Tamil Nadu, Andhra Pradesh, Karnataka, Telangana and Puducherry. And intends to expand to Odisha, Maharashtra and Chhattisgarh. As of March 31, 2021, the company had a network of 190 branches covering 75 districts.

It has a large share of self-employed customers in its portfolio. 73% of its borrowers are self-employed, 66% fall in the low-income group category and 41% are new to credit. Over 60% of its portfolio is rural.

Financials

The company reported a net profit of Rs 266.9 crore in FY21. According to ICICI Securities, the company's net profit has grown at a compounded annual rate of 148.7% over the FY18-FY21 period.

Net interest income stood at Rs 448.7 crore in FY21, having seen compounded annual growth of 144.5% over the last four years.

More than half of the housing financier's borrowings come from banks, which accounted for 52% of liabilities. However, the company has been attempting to diversify its borrowings and reduce its cost of funds.

The average cost of borrowing for FY21 was at 10.17%. The average incremental cost of borrowing declined from 10.11% in FY19 to 7.7% in FY21 with a reduction of 241 basis points. The company has a A+ credit rating by CARE Ratings Ltd. and ICRA Ltd.

The company's gross non-performing assets ratio were at 2% and net NPA ratio was at 1.69% as of July 2021.

Return on assets stands at 6.5%. The stock is available at a price-to-book value of about 8.6 times on FY21 post-issue book value.

Peers

Aptus competes with other housing finance companies which operate in the low and mid-income segments. These include Aadhar Housing Finance Ltd., Aavas Financiers Ltd., and Repco Housing Finance Ltd., among others.

Risks

A large part of the lender's loan book is to self-employed borrowers, who have seen higher defaults during the pandemic. Equally, the high share of new-to-credit borrowers could raise the risk in Aptus' portfolio.

The company has also high geographical concentration in Tamil Nadu and Andhra Pradesh. As on March 31, 2021, 55.8% of its assets under management were from Tamil Nadu and 24.5% from Andhra Pradesh.

Watch a conversation with the management of Aptus Housing Finance below: