Aavas Financiers Slides 5% Over IPO Price Stock Market Debut
Aavas Financiers Ltd. ended at a discount of 5.83 percent to Rs 773.15 apiece on the BSE Ltd., compared with its issue price of Rs 821. The housing finance company traded between Rs 710.05 and Rs 787 in its debut trade.
Aavas Financiers’ Rs 1,734-crore initial public offering subscribed 97 percent on its final day of bidding, led by the highest demand from qualified institutional buyers. The company received bids for 1.4 crore shares at the end of its IPO.
The firm raised Rs 520 crore from 34 anchor investors, including AU Small Finance Bank, Abu Dhabi Investment Authority-Behave, DSP Blackrock Tax Saver Fund, SBI Life, Bajaj Life Insurance and Morgan Stanley India Investment.
Business
Aavas Financiers, which started operations in March 2012 to fund affordable housing, is an erstwhile subsidiary of AU Small Finance Bank. The lender, now promoted by private equity firms Kedaara Capital and Partners Group, mainly offers low-ticket, high-yield loans to low-income rural and semi-urban self-employed borrowers.
The company’s portfolio comprises loans for purchase, construction, repair/renovation and extension of homes. It also offers loans against property. Aavas operates through a network of 165 branches covering 95 districts across eight states: Rajasthan, Gujarat, Maharashtra, Madhya Pradesh, Haryana, Delhi, Uttar Pradesh and Chhattisgarh. Rajasthan contributes 47 percent of its loan book.
Financials
- The company consistently delivered high profit growth in the last five years.
- It invested in creating capacity and increasing the number of branches, which helped its loan book grow at an annualised rate of 58.6 percent and profit at 71.3 percent.
- Gross non-performing loans were 0.34 per cent of total advances as of March, while its net interest margin is high at more than 7 percent.
- Aavas has a strong capital adequacy ratio of 61.55 percent, leading to lower return on equity of 11.2 percent in the year through March. (More details here)
CEO Sushil Kumar Agarwal said the company will create value for shareholders by sustaining the business model and asset quality. “We have given a 15-percent plus return on equity and there is no reason why we can’t sustain this in the future,” Agarwal told BloombergQuint after the listing ceremony.