Aptus Value Housing Finance IPO - A hit or a miss?

What drives the housing market, you ask? The population of India was close to 1.2 billion according to the Census 2011, but you will be astounded to know that there were nearly 246 million households only! And now, when the population is estimated to touch an overwhelming peak of 1.5 billion by 2031, the number of households is expected to grow only to 376 million over the same period as projected by the CRISIL Research.

This has ultimately seeded a magnanimous difference in demand and supply of houses, making it an excellent opportunity to bet on.

What makes an IPO in the housing industry even more pleasing and appealing is the favorable demographics. Since India has the largest young population in the world with a median age of 28 years and 90% of the total population still below the age of 60 (as per the data from United Nations Economic and Social Affairs), the demand of households for owning or renting is bound for an incessant rise as soon as our fellow Indians get into the workforce. Some of the other luring factors is the speedy urbanization in India which is predicted to rise by 34% consistently, and a plethora of supportive government initiatives like enhanced liquidity, debt-serviceability and powered up credit growth.

Since the housing industry's growth is inevitable, it makes sense to go over this article with a fine-tooth comb, irrespective of whether you are or are not applying for the Aptus Value Housing Finance IPO.

Aptus Housing Finance - Company Info

Aptus Value Housing Finance India Limited is a Home Loan Company which primarily addresses the housing finance needs of self-employed individuals from low and middle income segments of the society habitating the semi-urban and rural areas.

As per the information mentioned on the company’s official website, it has 181 branches in 4 states namely, Andhra Pradesh, Telangana, Karnataka and Tamil Nadu. The housing finance company has 1844 employees who have helped them to build a loan book of Rs. 37875 millions with a credit rating of A+ (stable). The company also offers a wide range of products which consists of:

• Home loans for construction
• Home loans for purchase
• Home loans for renovation
• Loan Against Property for construction 
• Loan Against Property for purchase 
• Insurance Services

Founder details

The company was founded by a veteran in financial services, Mr. M Anandam who is a Member of the Institute of Chartered Accountants of India, has had a splendid career of over three decades in Murugappa Group (1976- 2008), has significantly contributed during the commencement and towards the growth of financial services at Cholamandalam, a company which operates in the financial services industry. Mr. Anandam has a rich experience in leadership positions as he was also the Executive Director (1997-2000) and Managing Director (2006-2008) of the Cholamandalam Investments and Finance, non-whole time Director in Equitas Micro Finance Ltd, Independent Director in Manappuram Finance Ltd and as a Chairman of Five Star Business Credits Ltd.

With all of these robust experiences in building successful businesses, Mr. Anandam is now leading the Aptus Value Housing Finance India Limited as its Chairman and Managing Director, which makes the IPO headed company a good option to bet on. 

Shareholding Pattern

(Source: Company’s DRHP)

Details of the IPO

Objectives of the IPO

1. The Net Proceeds from the Fresh Issue will be utilized towards amplifying its capital base to meet its future capital requirements. Moreover, the proceeds from the Fresh Issue will also be used to meet the expenses in relation to the Offer.
2. Furthermore, the company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges, including magnetism of the company’s brand name and creation of a public market for our Equity Shares in India.

Company financials

Strengths of the company

• It is one of the largest housing companies in south India. 
• A sound risk management system with superior asset quality.
• The company has shown robust revenue growth of 50.78% for the last 3 years.
• The company has a healthy cash conversion cycle of -9.33 days. 
• Viable and sustainable current ratio of 29.55.
• Healthy debt to equity ratio of 1.09. 
• Sustainable interest cover ratio of 2.22. 

Risk factors in the company

• The company has a negative cash flow from operations of -532.60
• Inability to maintain its capital adequacy ratio. 
• Impact of fluctuating interest rates.
• The risk of non-payment or default by borrowers may adversely affect the business, results of operations and financial condition.
• Any downgrade in credit ratings could increase the borrowing costs, affect the ability to obtain financing, and adversely affect the business, results of operations and financial condition.  
• 53.5% and 26.5% of AUM comes from Tamil Nadu and Andhra Pradesh respectively, therefore any disruption in these markets will adversely affect the company’s business.

Conclusion

There are umpteen number of growth-driving factors in this industry, and with the rural economy becoming structurally more resilient, it is bound to rise! But we would still suggest you scrutinize the situation well before placing your bet.

Now that you are pretty informed about Aptus’s offerings, do let us know about your thoughts on the IPO. Is it a hit or a miss?