Warburg Pincus-backed Home First Finance’s ₹1,153 crore IPO has opened as markets hope budget will push for affordable housing

Warburg Pincus-backed Home First Finance’s ₹1,153 crore IPO has opened as markets hope budget will push for affordable housing
BCCL
  • The IPO will remain open for subscription until January 25, making it the third IPO of 2021 after IRFC and Indigo Paints.
  • The shares were commanding a premium of ₹90-100 in the grey market, over the set price band of ₹517-₹ 518 per share.
  • The company owned by a clutch of private equity investors had a network of 70 branches covering over 60 districts in 11 states in India on September 30— and its profit has grown nearly 5 times in the past three years.
The ₹1,153 crore IPO of private equity funds Warburg Pincus-backed, Home First Finance Company (HFFC) is now open for public subscription. The IPO has opened days before the annual budget where Finance Minister Nirmala Sitharaman is expected to give added thrust for affordable housing while residential remains clogged with oversupply, at least in the big cities.

The expected government support for the nearly ₹12 lakh crore affordable housing industry is only one of the many factors making Home First Finance’s IPO quite attractive. The lender has managed to grow its profit five times over in just the last three years.

Warburg Pincus-backed Home First Finance’s ₹1,153 crore IPO has opened as markets hope budget will push for affordable housing
BI India

The grey market is already paying a hefty premium for the shares

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The public issue of the mortgage financier garnered a decent response in the grey market — the shares were commanding a premium of ₹90-100 over the set price band of ₹517-₹ 518 per share. However, the grey market is not an official measure of the market premium. But it is a fair indicator of demand for the shares in the market.

Nearly all the analysts' reports have given a 'subscribe' rating for the IPO, citing its resilient performance during the pandemic and increasing market share in home loans.

Streets View: Home First Finance Company IPO

BrokerageRecommendation
Ventura SecuritiesSubscribe
Angel BrokingSubscribe
Yes SecuritiesSubscribe
ICICI SecuritiesNot Rated
Axis SecuritiesNot Rated

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The company owned by a clutch of private equity investors raised a little over ₹346 crore from anchor investors, ahead of its initial share-sale from 25 anchor investors including Nomura, Fidelity International, Morgan Stanley India Investment Fund, Goldman Sachs (Singapore), ICICI Prudential Mutual Fund, Nippon India MF and Tata AIA Life Insurance, among others.

Warburg Pincus-backed Home First Finance’s ₹1,153 crore IPO has opened as markets hope budget will push for affordable housing

Justified valuation, healthy financials, strong network, substantial demand for affordable housing finance and much more — here’s what analysts have to say about the IPO

GrowthProfit has more than doubled every year since financial year 2018
Network70 branches across 60 districts in 11 states and union territories
ManagementManoj Viswanathan⁠— He has over 24 years of experience in the consumer lending
ValuationAngel Broking says IPO is priced at 3.6 times the book value, nearly half that of its peer, Aavas Financiers, which is trading at 6.72 times. Lower multiple indicates more headroom for the stock to gain.
Quality of loansGross non-performing assets, simply put loans unlikely to be repaid, are at 0.7% as of Sep-end. Angel Broking calls it ‘stable’.

The latest housing sales data has been exciting

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Even home sales, which have been sluggish for a few years, saw a sharp spike of 78% between September and December 2020, according to PropEquity. “Today stars are aligned for real estate activity in work from home. All of us here are one room short of our houses. I'm staying in a four-bedroom house. I want a fifth bedroom so that I can do my work properly. So there is customer demand. Real estate prices since 2016 have stagnated, or they have come down actually, so it has become more affordable to buy a house,” Nilesh Shah, Managing Director at Kotak Mahindra Asset Management⁠— and a part-time member of the Prime Minister’s Economic Advisory Council⁠— told Business Insider in a recent interview.


"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," Angel Broking said in its report on Home First Finance.

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