Aavas Financiers (Aavas) started operations in March 2012 as a retail affordable housing finance company. The company lends to the low-ticket, high yield segment and targets low-income rural and semi urban self-employed customers. Aavas operates from a network of 165 branches spread across eight states (Rajasthan, Gujarat, Maharashtra, MP, Haryana, Delhi, UP and Chhattisgarh) of which 46% loan book is from the state of Rajasthan. Aavas has a loan book (AUM) of `4,359cr as on June 2018 with average ticket size of ~`8.8 lakh.

On the valuation front, at the upper end of the IPO price band, Aavas demands price-book (PB) multiple of 4.3x on FY18 book value (considering Fresh Issue) and 69x FY18 EPS. Established listed peers are trading in the range of 2.5- 3.5x of FY18 PB and in terms of PE these players are trading at valuation of 14-35x of FY18 EPS. Thus, considering the higher valuation, intense competition, and regional concentration of its loan portfolio we recommend NEUTRAL rating to Aavas Financiers.

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