Home First Finance IPO | 10 Things You Must Know

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Home First Finance IPO | 10 Things You Must Know

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It's raining IPOs, After IRFC & Indigo paints, Home First Finance Company India has come up with its Rs 1,154-crore public issue for subscription on January 21. Let's talk about 10 important points about this IPO you need to know before subscribing.

Also Read : How to Apply for IPO online (step by step guide)

1) About:

Founded in 2010, Home First Finance Company is an affordable housing finance company. Company offers home loan with 48 hours sanctions and hassle-free process. The company primarily caters to the low and middle income groups by offering them housing loans to construct and buy homes. It further offers other loans like loans against property, developer finance loans, and loans to buy commercial property.

The company has a diverse lead generation source channel including connectors, contractors, architects, affordable housing developers, and others. As on Sep 30, 2019, the business has a strong branch network of 65 branches across 60 districts in 11 different states and a union territory in India with key presence in market such as Maharashtra, Karnataka, Tamil Nadu, and Gujarat.

As on Sep 30, 2019, it has serviced a total of 37,086 active loans.

Also Read : Indigo Paints IPO | 10 Things You Must Know

2) IPO Details:

The company is looking to raise close to ₹ 1,170 crore from the primary market via the fresh issue and offer for sale.

IPO Date: Jan 21, 2021 - Jan 25, 2021
Face Value: ₹2 per equity share
IPO Price: ₹517 to ₹518 per equity share
Market Lot: 28 Shares
Listing At: BSE, NSE
Finalisation of Basis of Allotment: Jan 29, 2021
Initiation of Refunds: Feb 01, 2021
Credit of Shares to Demat Acct: Feb 02, 2021
IPO Shares Listing Date: Feb 03, 2021

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3) Financials:

Home First Finance Company disbursements quadrupled to Rs 15.7 bn over FY17-19, while it was stable in FY20. Home First Finance delivered a loan book CAGR of 56% over FY17- 20 and increased to Rs 37.3 bn by first half of FY21. Over this same period, the share of home loans declined from 97% to 92% while that of LAP rose from 3% to 5%. Home First Finance improved its spreads to 4.5% in FY20, driven by improvement in yield to 13.2%. With strong underwriting, Home First Finance experienced healthy asset quality with GNPL ratio at sub-1%. RoA of 2.7% (FY20) is healthy v/s peers.

Also read: Top 5 PSU Stocks with 30-50% Upside Potential in 2021

4) Shareholding Pattern:

The offer for sale consists of shares worth ₹435.61 crore by promoter True North Fund V LLP, ₹291.28 crore by promoter Aether (Mauritius) Ltd, ₹120.46 crore by investor Bessemer India Capital Holdings II Ltd and up to ₹41.3 crore by two individual shareholders -- PS Jayakumar and Manoj Viswanathan.

Post issue, the shareholding of promoters in Home First Finance will come down to 33.70% from 52.85%.

5) Peer Comparison

Also read: Decoding Technical Analysis for Traders & Investors.

6) Valuations & Key Ratios:

At higher price band ( ₹518), the stock valued at 4.1 (x) 2QFY21 P/ BVPS. Factoring the superlative return ratios, ROA/ROE of 11%/3%.

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7) Grey Market premium:

The current Grey Market Premium (GMP) price of Home First Finance Company India Limited IPO is ₹150-160.

8) Objects of the Issue:

The net proceed from the issue will be used towards following purposes.

  • To augment company's capital base to meet future capital requirement.
  • To achieve share listing benefits on the exchange.

9) Pros.

  • It is a technology-driven company with scalable operating model.
  • It is a customer-centric organization and has developed strong relationships with customers by addressing their key concerns in availing housing finance.
  • It has deep penetration in the largest housing finance markets, with diversified sourcing channels.
  • The company has centralized, data science backed underwriting process.
  • It has set up a robust collections management system wherein approximately 93% of collections for the financial year
  • 2020 were non-cash based, which eases stress on monitoring financial transactions and reduces cash management risk.
  • The company has well-diversified and cost-effective financing profile.
  • It has experienced management team with qualified operational personnel and marquee investors

10) Cons.

  • Availability of cost effective funding source. Historically it has sought funding from public and private banks, the National Housing Bank and through assignment transactions.
  • Volatility in borrowing and lending rates: Finance costs represented 64.4% of its total expenses in the six months through Sept. 30. Credit quality and provisioning: The net non-performing assets for the company stood at 0.5.
  • Credit quality and provisioning: The net non-performing assets for the company stood at 0.51% at the end of Sept. 30.

Suggestion: Apply for only 'one lot' and Subscribe this issue for big listing gains as well as for long term investment.

How to Apply for it?

This link will explain a step by step process to apply for the IPOs in India.

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Note: Bloombergquint, ET, financialexpress and BusinessLine

Akshay Seth
Research Analyst (SEBI Regd.)
Linkedin | akshay.equity@gmail.com

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