Home First Finance

IPO Size

`1153.72 Cr

Price Band

`517-518 Per Share

Minimum Lot Size

28 Share

Face Value

`2 Per Share

Employee Discount

NA

Retail Allocation

35%

Issue Open Date

21 Jan 21

Issue Close Date

25 Jan 21

Listing Date

03 Feb 21

About the Company:

Initially funded by Bessemer Venture Partners, Home First Finance was incorporated in 2010. The company started its operations from Gujarat and Tamil Nadu in 2012. Housing Finance lender approved its 1,000 loans in 2013 and since then it as not looked back. Currently, the major lender is having a customer base of 29,000 leads. The company has spread its network in PAN India through 60 branches. Asset under Management of the company has crossed $35 billion. With the inculcation of modern technology, the company offers quick and transparent loans through mobile app. The private lender primarily caters low and middle income groups by offering them housing loans to construct and buy homes. The lender offers other loans like loans against property, developer finance loans, and loans to buy commercial property.

Outstanding Litigation:

S.No. 1 - Company 2 - Directors 3 - Promoters
Entity Name By the Company Against the Company By the Director Against the Director By the Promoter Against the Promoter
Criminal cases 15.94 - - - - -
Material civil cases - - - - - -
Taxation matters - 5.38 - - - -
Regulatory Procedings - 0.02 - - - -
Amt. (In Million Rs.) 15.94 5.40 - - - -

Financial Statements:

Income Statement (In Millions.) Mar'20 Mar'19 Mar'18
Interest Earned 3,547.33 2,319.25 1,299.58
Other Operating Income 439.07 279.51 21.34
Other Income 210.17 110.45 21.45
Total Income 4,196.57 2,709.21 1,342.37
Interest Expended 1,938.28 1,265.44 659.64
Net Interest Income 2,048.12 1,333.32 661.28
Operating expenses 1,020.44 718.68 411.29
Total Expenses 2,958.72 1,984.12 1,070.93
Provisions and Contingencies 165.02 73.13 28.74
Operating Profit before Provisions and Contingencies 1,072.83 651.96 242.70
Taxes 280.34 199.91 82.74
Net Profit for the Year 792.49 452.05 159.96

Recommendation

As per CA Ajay Chouhan, SEBI Registered Research Analyst, recommendation is to ‘Subscribe’ for long term. Private housing-lender has reported a CAGR of 65.87% in their interest income. The company has reported an increase in net interest income by 53%. Cost to Income ratio of the company stands that 0.14x, which signals that operational efficiency of the firm is high. Net Interest Margins of the firm stands at 6.4%, which is higher than the listed peers. Capital Adequacy Ratio of the company stands at 48.9%, which is in line with the similar parameter of listed peers. Net Interest Margins as a %of Operating Income is 84.6%, which is a reason to worry. Net profits of the housing-lender are increasing at a CAGR of 122.5%. Considering the FY20 earnings and the upper price band, the equity diluters of the company is demanding a P/E multiple of 48.09x much higher than the Industry P/E of 21.63x but higher operational efficiency and Net Interest margins deserves high valuation.

Promoter of the Company

The promoters of the company are True North Fund V LLP and Aether (Mauritius) Limited.

Peer Comparison

In the listed space, the company will face tough competition from Aavas Financiers, Can Fin Homes Limited, GIC Housing Finance Limited, Gruh Finance, LIC Housing Finance and Repco Home Finance.

Objectives of the Issue

Offer for Sale

The object of the Offer for Sale is to allow the shareholders to sell an aggregate of up to 1,71,56,756 equity Shares held by them. The company will not receive any proceeds from the Offer for Sale. Offer for Sale Size is of 10.7 million equity Shares aggregating up to ₹888.72 Cr (at an upper price band of Rs. 518).

Fresh Issue

The company has planned to raise fresh capital comprising an aggregate of 51,15,830 equity shares having Face Value ₹2 aggregating up to Rs. 265 Cr at the upper price band of Rs. 518. The net proceeds will be utilized for increasing the capital base of the firm considering the future requirements.