Home First Finance Company offers loans for purchase or construction of homes. The company targets first time home buyers in the low and middle-income category. Company’s gross loan product has witnessed strong growth and has expanded from Rs 1,356 Crs as of March 2018 to Rs 3,730 Crs as of September 2020. The company serves both salaried and self-employed customers.
The company has 70 branches covering 60 districts in 11 states and one union territory in India. It has a high presence in Gujarat, Maharashtra, Karnataka, and Tamil Nadu that cover close to 80% of India’s affordable housing market.
Distribution of network and loan assets:
|State||# of branches||% of Gross Loan Assets|
|Haryana & NCR||1||1.0%|
- Plays in the affordable housing market in India that has significant growth potential
- 73% of the gross loan assets is lend to a salaried class
- Presence in most urbanized states across India
- Stable cost of borrowings across years
- Experienced management team
Amount in Rs Cr
- Rapidly growing revenues
- Significantly robust margins and return ratios
- Reducing expense to income ratios over the years
Offer and Deployment of Net Proceeds
|Particulars||Amount (Rs Cr)|
|Fresh Issue||Rs 265 Cr|
|Offer for Sale||Rs 889 Cr|
|Total issue size||Rs 1,154 Cr*|
*Offer related expenses concerning the fresh issue are yet to be determined
Deployment of funds
- Increasing the company’s Tier I capital base to maintain the capital adequacy ratio as per the regulations
- Meet future capital requirements
- Home First Finance operates in the affordable housing space in India – a country that has the second-largest population, favorable demographics, increasing per capita GDP and increasing financial penetration driven by improving literacy rate and better availability of resources
- Significant thrust on affordable housing by the government through various initiatives and schemes is an advantage
- Mortgage penetration in India is lower compared to many economies; highly skewed state-wise penetration levels provide further opportunities
- The company compares itself with Aavas Financiers amongst listed peers [Total income of Rs 903 Crs for the year ending March 2020 (Rs 711 Crs for the year ending March 2019) and a market price of Rs 1,903 (face value of Rs 10 per share) as on Jan 19th, 2021 close]. Other peers include Bandhan Bank, Aadhar Housing Finance, Aspire Home Finance and Aptus Value Housing Finance
- The biggest challenge the company faces is ensuring continued collection efficiency and manage the cost of borrowings, much like any company operating in this space
- Strong revenue growth and robust margins
The information provided in red herring prospectus filed with the Securities and Exchange Board of India (www.sebi.gov.in) is the basis for this note. However, I recommend the reader to validate the data before making any financial decision. Also, investment in an initial public offering (IPO) is subject to market risks and should be evaluated, keeping your risk profile and investment objective in mind. The author will not be responsible for any financial loss or otherwise resulting from any action taken based on the above.
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