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Please refer to important disclosures at the end of this report
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Incorporated in 2010, Home First Finance Company India Limited is a Housing
Finance Company. It is primarily engaged in the business of lending of
housing loans to first time home buyers in low and middle-income groups,
loans for the purpose of purchasing commercial property, loan against
property and construction finance.
Positives: (a) A technology driven affordable housing finance company that
provides housing loan to first time home buyers in low and middle-income
groups (b) The company has a strong network of 70 branches covering over
60 districts in 11 states and is strategically placed in geographies with high
economic growth and substantial demand for affordable housing finance (c)
Capital adequacy ratio of 51.7% at the end of 1HFY2021 which will allow the
company to maintain high growth rates high growth rates given untapped
potential in the affordable housing segment.
Investment concerns: (a) Given that the company primarily caters to customers
in the low and middle income group there is a probability that customers may
default in their repayment obligations due to various reasons (b) Any disruption
in the sources of funding could have an adverse effect on the business, results
of operations and financial condition (c) Any downgrade in credit ratings could
increase our borrowing costs, and affect the company’s ability to obtain
financing, and have an adverse impact on the business.
Outlook & Valuation: Home First has posted strong growth in NII of 58.6%
CAGR between FY18-20 while net profits have grown at a CAGR of 122.6%
during the same period. Despite the Covid-19 crisis the company’s asset
quality has remained largely stable with GNPA and NNPA largely stable at
0.7% and 0.5% respectively at the end of 1HFY2021. The company had a
CAR of 51.7% at the end of 1HFY2021which provides comfort. At the higher
end of the price band the stock would be trading at P/BV of 3.6x fully diluted
post issue book value of `143.4 per share. We expect the company to post
strong growth driven by strong demand for affordable housing. Given the
growth prospects, we recommend a SUBSCRIBE rating on the issue.
Y/E March (` cr)
FY18
FY19
FY20
NII
64
105
161
% chg
65%
53%
Net profit
16
45
79
% chg
183%
75%
NIM (%)
4.9%
5.9%
5.9%
EPS (`)
3.1
7.1
10.1
P/E (x)
167
73
51
P/ABV (x)
8.3
6.3
4.4
RoA (%)
1.2%
2.4%
2.73%
RoE (%)
4.9%
10.7%
10.9%
Subscribe
Issue Open: January 21, 2021
Issue Close: January 25, 2021
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 33.7%
Others 66.3%
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: ` 17.5cr
Issue size (amount): ` 1154cr
Price Band: ` 517-518
Lot Size: 28 shares and in multiple thereafter
Post-issue implied mkt. cap: * ` 4518cr - **` 4527cr
Promoters holding Pre-Issue: 52.9%
Promoters holding Post-Issue: 49.2%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Fresh issue: ` 265cr
Issue Details
Face Value: ` 2
Present Eq. Paid up Capital: ` 15.7cr
Offer for Sale: ` 889 cr.
Jyoti Roy
+022 39357600, Extn: 6842
Home First Finance Company India Ltd
IPO Note | NBFC
January 20, 2021
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Company background
Home First Finance Company India Limited is a Housing Finance Company
founded on 3 February 2010 with corporate office located in Andheri, Mumbai as
well as other offices located across various cities in India. The Company obtained
its license to carry on the business of a housing finance institution from National
Housing Bank (‘NHB’) on 11 August 2010. The Company was converted to a
public limited Company with effect from 14 March 2018.
The Company is primarily engaged in the business of lending of housing loans,
loans for the purpose of purchasing commercial property, loan against property
and construction finance.
Manoj Viswanathan is a Managing Director and the Chief Executive Officer of the
Company. He holds a bachelors degree in electrical and electronics engineering
from the Birla Institute of Technology and Science, Pilani and a post graduate
diploma in business management from XLRI, Jamshedpur. He has over 24 years of
experience in consumer lending. Previously, he was associated with Computer
Garage Private Limited, Asian Paints India Limited, Citibank and CitiFinancial
Consumer Finance India Limited as vice president of personal loans.
Issue details
IPO is a mix of OFS & issue of Fresh Equity Shares. The issue would constitute fresh
issue worth `265 crore & OFS worth `888.7 crore in the price band of `517-518
per share.
Exhibit 1: Pre and post IPO shareholding pattern
No of shares (Pre-issue)
%
No of shares (Post-issue)
%
Promoter
43,480,894
52.9
29,448,114
33.7
Public
38,790,067
47.1
57,938,677
66.3
Total
82,270,961
100
87,386,791
100
Source: Company, Angel Research
Note: Calculated at upper price band
Objectives of the Offer
Augmenting company equity capital base to meet their future capital
requirements arising out of growth in their business
To receive the benefits of listing of the Equity Shares on the Stock
Exchanges.
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Exhibit 2: Profit & Loss Statement
Y/E March (` Cr)
FY2018
FY2019
FY2020
H1FY21
Net Interest Income
64
105
161
96
- YoY Growth (%)
-
65%
53%
-
Other Income
4
39
65
36
- YoY Growth (%)
-
811%
66%
-
Operating Income
68
144
226
132
- YoY Growth (%)
-
111%
56%
-
Operating Expenses
41
72
102
45
- YoY Growth (%)
-
75%
42%
-
Pre - Provision Profit
27
73
124
87
- YoY Growth (%)
-
167%
71%
-
Prov. & Cont.
3
7
17
16
- YoY Growth (%)
-
154%
126%
-
Profit Before Tax
24
65
107
70
- YoY Growth (%)
-
169%
65%
-
Prov. for Taxation
8
20
28
17
- as a % of PBT
-
31%
26%
25%
PAT
16
45
79
53
- YoY Growth (%)
-
183%
75%
-
Source: Company, Angel Research
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Exhibit 3: Balance Sheet
Y/E March (` Cr)
FY18
FY19
FY20
H1FY21
Equity
10
13
16
16
Reserve & Surplus
315
510
918
973
Networth
325
523
934
988
Deposits
-
-
-
-
- Growth (%)
Borrowings
1,020
1,927
2,494
2,637
Other Liab. & Prov.
19
32
52
97
Total Liabilities
1,365
2,482
3,480
3,722
Cash Balances
23
186
148
217
Bank Balances
7
6
74
204
Investments
-
103
146
219
Advances
1,309
2,135
3,014
2,972
- Growth (%)
63%
41%
-1%
Fixed Assets
11
17
21
17
Other Assets
15
35
77
93
Total Assets
1,365
2,482
3,480
3,722
- Growth (%)
82%
40%
-
Source: Company, Angel Research
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Exhibit 4: Key Ratios
Y/E March
FY2018
FY2019
FY2020
Profitability ratios (%)
NIMs
4.9%
5.9%
5.9%
Cost to Income Ratio
60.2%
49.8%
45.2%
RoA
1.2%
2.4%
2.7%
RoE
4.9%
10.7%
10.9%
B/S ratios (%)
CASA Ratio
-
-
-
Credit/Borrowings Ratio
128.3%
110.8%
120.8%
CAR
43.0%
38.5%
49.0%
Tier I
42.6%
37.7%
47.7%
Asset Quality (%)
Gross NPAs
0.6%
0.7%
0.9%
Net NPAs
0.5%
0.5%
0.7%
Slippages
0.5%
0.6%
0.7%
Loan Loss Prov. /Avg. Assets
0.2%
0.4%
0.6%
Provision Coverage
22%
24%
25%
Per Share Data (`)
EPS
3.1
7.1
10.1
BVPS
63.0
82.6
119.2
ABVPS (70% cover.)
62.4
82.0
118.3
DPS
-
-
-
Valuation Ratios
PER (x)
167.1
72.6
51.2
P/ABVPS (x)
8.3
6.3
4.4
Angel Research; Note: Valuation ratios based on pre-issue outstanding shares and at upper end of
the price band
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