Wed. Dec 25th, 2024
AADHAR HOUSING FINANCE LIMITEDAADHAR HOUSING FINANCE LIMITED

AADHAR HOUSING FINANCE LIMITED IPO Poised for Growth in Booming Housing Finance Market

Industry Overview:

  • Macroeconomic scenario 
    • India witnesses stronger than expected growth in Fiscal 2024
    • India’s economy expected to grow at 6.8% in Fiscal 2025 
    • India is one of the fastest-growing major economies (GDP growth, % year-on-year) 
    • Indian economy to be a major part of world trade 
    • Repo rate remains unchanged, with phase of aggressive rate hikes behind
    • Consumer Price Index (“CPI”) inflation to average at 4.5% in Fiscal 2025
  • Key growth drivers
    • India has the world’s largest population 
      • India’s population was approximately 1.25 billion, and comprised nearly 245 million households, is expected by CRISIL MI&A to increase to 1.52 billion by 2031, and number of households are expected to reach approximately 376 million over the same period.
    • Favorable demographics 
      • India has one of the largest young populations in the world, with a median age of 28 years. CRISIL MI&A estimated that approximately 90% of Indians were still below the age of 60 in calendar year 202
    • Urbanization
      • It was estimated at 34.9% for India & increase to 37.4% by 2025. 
    • Increasing per capita GDP to support economic growth
    • Rising Middle India population to help sustain growth for the country
      • Households with annual income of between ₹ 0.2 to 1 million has been on a rise over the last decade
      • A large number of these households, which have entered the Middle-Income bracket in the last few years, are likely to be from semi-urban and rural areas
    • Financial penetration to rise with increase in awareness of financial products
    • Rural India – Under penetration and untapped market presents a huge opportunity for growth for financiers
    • NBFC credit to grow faster than systemic credit between Fiscals 2023 and 2025
      • NBFC credit to grow at CAGR 16-18% between Fiscals 2023 and 2025
      • Retail segment to support NBFCs overall credit growth
  • Retail credit market continue to remain profitable in the coming years
    • Formalizat ion of economy
    • Growing working population
    • Increasing urbanizati on
    • Increasing digital adoption
    • Financial Inclusion
    • Increasing Disposabl e Income
  • Housing loans accounts for 46% of overall retail loans as of March 31, 2023 
    • Housing, 46%
    • Auto, 17%
    • Personal Loan, 17%
    • Gold Loan, 12%
    • Microfinance, 6%
    • Consumer Durable, 1% 
  • Housing and Autos to lead NBFC credit growth
  • Housing scenario in India
    • Indian household investment in real estate
      • The average Indian household holds 77% of its total asset in real estate which includes residential buildings, buildings used for farm and non-farm activities, constructions such as recreational facilities, and rural and urban land
      • India’s mortgage penetration is lower than other economies
        • UK 64.0%
        • USA 60.0%
        • Europe 45.70%
        • Malaysia 35.4%
        • China 28.0%
        • South Africa 21.4%
        • India 12.3%
  • Rise in per capita income to drive the growth of mortgage penetration in India 
    • Between 2017 and 2022, the per capital income of India has increased to USD 8,379
  • Favorable Demographic
    • Shift towards younger age profile for home loan borrowings
    • Continuous increase in share of urban population to boost demand for housing in urban areas
    • Continuous increase in share of urban population to boost demand for housing in urban areas
    • Rise in number of nuclear families leads to formation of new houses
    • Rising demand for independent houses
    • Higher affordability
  • Indian housing finance market
    • Housing Finance to log a CAGR of 13-15% in the long term between fiscal 2023 and 2026
    • Majority of the market dominated by lower ticket size loans in volume terms
  • Majority of the market dominated by lower ticket size loans in volume terms 

AADHAR HOUSING FINANCE LIMITED Background:

  • Company was originally incorporated as ‘Vysya Bank Housing Finance Limited’ at Bengaluru, Karnataka Subsequently, 
  • The name of our Company was changed to ‘DHFL Vysya Housing Finance Limited’ and a fresh certificate of incorporation dated October 15, 2003, 
  • The use of the word “Bank” was discontinued upon the change in ownership and management pursuant to the share purchase agreement entered into by ING Vysya Bank Limited, Dewan Housing Finance Corporation Limited and the Company. 
  • Separately, an entity named ‘Aadhar Housing Finance Private Limited’ (“Pre-merger AHFPL”) was incorporated as a private limited company under the Companies Act, 1956, at Mumbai, Maharashtra pursuant to a certificate of incorporation dated May 3, 2010

Main objects of the AADHAR HOUSING FINANCE LIMITED:

The main objects contained in the Memorandum of Association are as follows: 

  • To carry on the business of providing long term financial assistance to any person, individual, companies, corporations, firms, societies or associations for purposes of construction, purchase, acquisition of residential houses or flats on such terms and conditions as the Company may deem fit.
  • To solicit and procure Insurance Business as Corporate Agent in respect of all classes of insurance and to undertake such other activities as are incidental or ancillary thereto.
  • To carry on the business of retail and institutional distribution of the units of mutual funds or other trusts, funds or pooled investment vehicles or any other financial products issued by banks, mutual funds, non-banking financial companies, asset reconstruction companies or any financial intermediary.

BUSINESS STRATEGY AADHAR HOUSING FINANCE LIMITED:

  • Expand our Distribution Network to Achieve Deeper Penetration in key states
  • Continue to focus on our target customers and grow our customer base
  • Continue to invest in and roll out digital and technology enabled solutions across our business to improve customer experience and improve cost efficiency 
  • Optimize our borrowing costs and reduce operating expenses further

Overview of AADHAR HOUSING FINANCE LIMITED:

  • AADHAR HFC focused on the low income housing segment (ticket size less than ₹1.5 million) in India and we had the highest AUM and net worth among our analyzed peers in FY2021, FY2022, FY2023
  • A retail-focused HFC focused on the low income housing segment, serving economically weaker and low-to-middle income customers, who require small ticket mortgage loans. The average ticket size of our loans was ₹0.9 million and ₹1.0 million with an average loan-to-value of 57.7% and 58.3%, as of December 31, 2022 and December 31, 2023,

Gross AUM of  AADHAR HOUSING FINANCE LIMITED:

(₹ in million)

 FY 2021FY 2022FY 2023Nine months ended December 31, 2022Nine months ended December 31, 2023
Gross AUM133,271.0147,777.9172,228.3165,664.6198,651.6

Company have an extensive network of 487 branches* including 109 sales offices, as of December 31, 2023. Our branches and sales offices spread across 20 states and union territories, operating in approximately 10,926 pin codes across India, as of December 31, 2023

Products of AADHAR HOUSING FINANCE LIMITED:

We provide the following categories of loans to our customers:

  • Loans for purchase and self construction of residential properties 
  • Loans for home improvement/extension
  • Loans against residential/commercial property
  • Loans for purchase/construction of non- residential property
  • Utkarsh loans

Our Branch and Sales Office Network compared to peers

Nine months ended December 31, 2023Total number of branchesNumber of employees
Aadhar Housing Finance4983,885
Aavas Financiers351NA
Home First Finance Company1231,236
SMFG India Home Finance1492,675
Aptus Value Housing Finance2622,923
Poonawalla Housing Finance LimitedNANA
Motilal Oswal Home Finance111NA
Vastu Housing FinanceNANA
India Shelter Finance2153,139
Shubham Housing147NA
Muthoot HomeFin122569
Muthoot Housing FinanceNANA
Simple average of peers2292,405

State wise percentage of sales

As of March 31, 2023As of December 31, 2023
StatePercentage of Total Branches*Percentage of Gross AUMPercentage of Total Branches*Percentage of Gross AUM
Uttar Pradesh13.4%14.2%13.3%13.6%
Maharashtra10.0%14.1%9.9%14.0%
Madhya Pradesh8.3%10.2%8.0%9.8%
Gujarat13.4%11.0%12.9%11.1%
Rajasthan10.2%12.5%9.4%12.7%
Tamil Nadu9.2%8.2%10.3%8.4%
Telangana7.7%6.5%7.6%6.7%
Karnataka5.1%3.9%4.9%3.7%
Andhra Pradesh7.2%3.9%8.2%4.2%
Others15.4%15.6%15.4%15.8%
Total100.0%100.0%100.0%100.0%

Other Business Initiatives 

Distribution of Insurance Products

Enter into arrangements with insurers for the distribution of  life, general and health insurance products. Currently act as corporate agents for three general insurance companies and one life insurance company. We provide our customers with multiple insurance products linked to their life, health and property. Under life insurance, we provide mortgage reducing term insurance linked to the loan facility. Under general insurance we provide property insurance, personal accident, critical illness and health insurance. These products are optional to the customer.

RISKS AADHAR HOUSING FINANCE LIMITED:

  • Liquidity Risk
  • Credit Risk 
    • Credit risk is the risk of loss that may occur from the default by our customers under our loan agreements. Customer defaults and inadequate collateral may lead to higher NPAs. The following table shows details of our Gross NPAs as of the period ends indicated:

      (₹ in million, except percentages)

      As of

      March 31,2021March 31, 2022March 31, 2023December 31, 2022December 31, 2023
      Gross NPA1,430.32,154.5*1,997.72,920.82,778.5
      Gross NPA to Retail AUM (%)1.1%1.5%*1.2%1.8%1.4%
  • Operational Risk 
      • .Operational risks arise from a variety of factors, including failure to obtain proper internal authorizations, improperly documented transactions, failure of operational and information security procedures, failure of computer systems, software or equipment, cyber risk, fraud, inadequate training or employee errors
  • Interest Rate Risk
    •  We are subject to interest rate risk, primarily since we lend to customers at rates and for maturity periods that may differ from our funding sources. Interest rates are highly sensitive to many factors beyond our control, including the monetary policies of the RBI
  • Collateral Risk 
    • Collateral risks arise due to the decrease in the value of collateral over time

Market share of HFC groups, based on disbursements in overall housing finance industry

HFC player group-wise disbursement (₹ billion)HFC player group-wise disbursement mix
FY19FY20FY21FY22FY239MFY 24FY19FY20FY21FY22FY239MFY 24
Large HFCs80552852279688065266%62%67%65%55%66%
Medium HFCs1501359219928124212%16%12%16%20%12%
Small HFCs1791289912419013815%15%13%10%12%15%
Mini HFCs7955631011751637%7%8%8%14%7%
Total1,2138477761,2211,5261,195100%100%100%100%100%100%

HFCs in top 15 states contribute to 95% of credit outstanding of HFCs as of March 2023 – housing finance focused on low income housing segment

  • Maharashtra 17% 
  • Tamil Nadu 12%
  • Rajasthan 10%
  • Uttar Pradesh 9% 
  • Gujarat 9%

Aadhar had the highest AUM and net worth among peers analyzed

Nine months ended December 31, 2023AUM (₹ billion)YoY AUM growthDisbursements (₹ billion)YoY Disbursement growthTotal income (₹ billion)Profit after tax (₹ billion)Total Net Worth (₹ billion)
Aadhar                        Housing Finance198.720%49.024%18.955.4842.5
Aavas Financiers160.823%36.97%14.73.5NA
Home    First              Finance Company90.134%28.633%8.42.220.3
SMFG     India               Home Finance80.330%28.927%7.00.49.1
Aptus Value Housing Finance80.728%21.625%10.24.537.0
Poonawalla                        Housing Finance LimitedNANANANA7.60.918.4
Motilal Oswal Home Finance37.82%5.4-16%4.31.012.2
Vastu Housing Finance*NANANANA7.02.126.1
India Shelter Finance56.142%19.040%6.21.722.1
Shubham Housing40.844%17.456%NANA13.4
Muthoot HomeFin17.826%4.9256%1.50.14.7
Muthoot                        Housing FinanceNANANANANANANA
Simple                average            of peers90.326%24.350%8.62.221.4

Financial Ratios (FY23)

FY23Yield on advancesCost of borrowingsNIMOpexEmployee expensesCredit CostRoATotal Borrowings to

Equity Ratio

RoE
Aadhar Housing Finance13.0%7.0%6.3%3.1%2.1%0.3%3.5%3.315.9%
Aavas Financiers12.6%6.6%6.5%3.8%2.5%0.1%3.5%3.014.1%
Home       First                Finance Company13.3%7.3%7.1%2.9%1.8%0.4%3.9%2.613.5%
SMFG India Home Finance12.6%8.2%5.2%4.5%2.7%0.6%0.7%6.25.4%
Aptus     Value               Housing Finance17.7%8.5%12.2%2.6%1.9%0.5%7.8%1.116.1%
Poonawalla                             Housing Finance Limited12.9%7.2%6.9%4.7%3.3%0.7%2.2%3.810.1%
Motilal      Oswal                 Home Finance14.2%8.0%7.5%3.0%2.3%0.5%3.4%2.512.7%
Vastu Housing Finance14.4%6.8%8.5%4.1%3.2%0.4%5.4%1.412.6%
India Shelter Finance14.9%8.3%7.8%4.8%3.6%0.4%4.1%2.413.4%
Shubham Housing15.6%9.0%8.6%6.0%4.4%0.1%3.2%1.510.3%
Muthoot HomeFin12.8%8.3%6.1%4.8%2.9%1.8%0.8%1.42.3%
Muthoot Housing Finance15.7%9.3%6.8%5.2%3.6%-0.2%1.7%4.810.3%
Simple average of peers14.1%7.9%7.5%4.1%2.8%0.5%3.4%2.811.4%

Highest branch count for Aadhar Housing Finance amongst peers compared in Fiscal 2023 and nine months ended December 31, 2023

AADHAR HOUSING FINANCE LIMITED’s Subsidiary Companies

One wholly owned subsidiary, namely, Aadhar Sales and Services Private Limited (“ASSPL”).

ASSPL is engaged in the business of providing manpower services, recruitment, training, assignment of staff for specific or general purposes, selling, dealing, trading of financial products, arranging all types of loans, dealing in moveable and immovable properties, mutual fund products, financial instruments and providing various other financial services.

Competitive Strengths 

We believe that our position as a leading HFC focused on the low income housing segment is founded on the following competitive strengths: 

  • HFC focused on the low income housing segment (ticket size less than ₹1.5 million) in India with the highest AUM and net worth among our analyzed peers in Fiscal 2021, Fiscal 2022, Fiscal 2023 and nine months ended December 31, 2022 and December 31, 2023
  • Seasoned business model with strong resilience through business cycles Extensive branch and sales office network, geographical penetration and sales channels which contribute significantly to loan sourcing and servicing
  • Robust, comprehensive systems and processes for underwriting, collections and monitoring asset quality
  • Access to diversified and cost-effective long-term financing with a disciplined approach to asset liability and liquidity management
  • Social objectives are one of the core components of our business model; and 
  • Experienced, cycle-tested and professional management team with strong corporate governance.

Promoters of the company

BCP Topco is the Promoter of the Company. Promoter currently holds an aggregate of 389,683,420 Equity Shares, aggregating to 98.72% of the pre-Offer issued,

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Promoters of Promoters

  • The promoters of BCP Topco are:
    • 1) BCP Asia (SG) Holdings Co. Pte. Ltd.; and
    • 2) Singapore VII Holding Co. Pte. Ltd

Financial Performance of AADHAR HOUSING FINANCE LIMITED:

Financial Ratios

 

FY 2021FY 2022

FY 2023

Nine months ended December 31, 2022

Nine months ended December 31, 2023
AUM133,271.0147,777.9172,228.3165,664.6

198,651.6

AUM Growth (%)16.6%10.9%16.5%16.1%

20.5%

Loan Book

107,802.3120,480.9139,410.4135,042.9

160,036.7

Retail AUM

133,252.2147,766.9172,228.3165,664.6

198,651.6

Disbursements35,447.139,919.359,026.139,453.6

49,040.6

Live Accounts (including assigned loans)

182,471204,135233,228222,346255,683
Revenue From Operations15,753.317,282.720,432.314,878.0

18,950.2

Other Income

2.22.92.94.11.5
Total Income15,755.517,285.620,435.214,882.1

18,951.7

Finance Cost

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8,159.77,612.07,991.95,857.3

7,248.1

% GROSS NPA TO AUM

(₹ in million)

As of

March 31,2021

March 31,2022March 31,2023December 31,2022December 31,2023

Gross NPA

1,430.32,154.51,997.72,920.8

2,778.5

 The following table sets forth certain key financial ratios for our Company as at/for the periods indicated:

(₹ in million, except percentages and numbers)

MetricsFinancial Year ended March 31, 2021Financial Year ended March 31,2022Financial Year ended March 31,2023Nine Months ended December  31, 2022

Nine Months ended December  31, 2023

Live Accounts (including assigned and co-lent loans)182,471204,135233,228222,346

255,683

Number of branches and sales offices

310332469415

487

Average ticket size

0.90.90.90.9

1.0

Retail AUM)

133.252.2147,766.9172,228.3165,664.6

1,98,651.6

Gross NPA to Retail AUM (%)1.1%1.5%**1.2%1.8%

1.4%

Net Retail NPA to Retail AUM (%)

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0.7%1.1%0.8%1.3%1.0%
Net Worth26,927.631,466.336,976.035,556.8

42,491.0

Profit after tax before exceptional item

3,401.34,448.55,643.34,040.65,478.8
Profit after tax3,401.34,448.55,447.64,040.6

5,478.8

Return before exceptional item on Average Total Assets (%)(9)

2.6%3.2%3.6%3.6%*

4.2%*

Return before exceptional item on Equity(%)13.5%15.2%16.5%16.1*%

18.4%*

Debt to Total Equity ratio

3.93.43.33.33.1
CRWAR (%) (12)44.1%45.4%42.7%44.9%

39.7%

Average yield on Gross Loan Book (%)(13)

13.2%12.8%12.8%12.8%*14.0%*
Average cost of Borrowing (%)(14)8.2%7.2%7.0%7.0%*

7.6%*

Net Interest Margin (%)(15)

5.8%6.9%8.0%8.0%*

9.0%*

Cost to Income Ratio (%)(16)35.8%36.3%38.1%36.7%

36.2%

CAPITALISATION STATEMENT

(₹ in million)

ParticularsPre-Offer as at December 31, 2023
Total Borrowings 
Current borrowings (Maturity within 12 months)23,057.9
Non-current borrowings (Maturity after 12 months) (A)108,218.0
Total Borrowings (B)131,275.9
Total Equity 
Equity share capital3,947.6
Other equity*38,543.4
Total Equity/ Total shareholders’ fund (net worth)** (C)42,491.0
Ratio: Non-current Borrowings (A) / Total Equity (C)2.5
Ratio: Total Borrowings (B) / Total Equity (C)3.1

FINANCIAL INDEBTEDNESS 

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(₹ in million)

FacilitySanctioned AmountOutstanding Amount
Term loans from banks1,29,600.076,289.6
Term loans from NHB61,989.435,310.4
Secured NCDs*29,008.427,388.0
Unsecured NCDs*600.0596.0
Fixed Deposits12.312.3
Total2,21,210.11,39,596.3

AADHAR HOUSING FINANCE LIMITED: IPO Details:

Aadhar Housing Finance Limited recently concluded its IPO on May 10th, 2024. Here’s a summary of the details:

  • Open On:May 8, 2024
  • Close on: May 10, 2024
  • Issue Size: ₹3,000 Crore
  • Fresh Issue: ₹1,000 Crore
  • Offer for Sale (OFS): ₹2,000 Crore
  • Price Band: ₹300 – ₹315 per share
  • Lot Size: 47 Shares
  • Listing Date: May 15th, 2024 (Tentative)

 AADHAR HOUSING FINANCE LIMITED is looking to raise capital through their IPO for a couple of reasons:

  • Increase Capital for Lending: The main objective was to meet their future capital needs for onward lending. This means they intended to use a part of the funds raised (fresh issue of ₹1,000 crore) to provide more loans to their customers. This could help them grow their business and reach more people. [Several sources mention this, you can find more details on financial news websites]
  • Strengthen Financial Position: Aadhar Housing Finance also aimed to strengthen their Tier 1 capital by using another portion of the IPO proceeds (around ₹750 crore). Having a strong Tier 1 capital ratio helps a company maintain a healthy financial position and stay competitive in the market.

Risks and Considerations of AADHAR HOUSING FINANCE LIMITED:

Refer page no.s of 363-371

Important: Clearly state this is not financial advice and readers should do their own research before investing.

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