Aadhar Housing Finance Limited IPO Summary

About the Company:

Aadhar Housing Finance Ltd (Aadhar) is one of the largest low-income housing finance companies in India servicing the home financing needs of the low income sections of the society, who require small ticket mortgage loans. The average ticket size of their loans was ₹0.9 million and ₹1.0 million with an average loan-to-value of 57.7% and 58.3%, as of December 31, 2022 and December 31, 2023, respectively.

The Company has a pan-India branch and sales office network and offers a range of mortgage-related loan products, including loans for residential property purchase and construction; home improvement and extension loans; and loans for commercial property construction and acquisition. They have an extensive network of 487 branches including 109 sales offices across India covering 20 states and union territories of India, as of December 31, 2023.

BCP TOPCO VII PTE. LTD. (a Blackstone Group Company) is the holding company of Aadhar Housing Finance Ltd.

Industrial Overview:

The Indian housing finance market clocked a healthy approximately 14% CAGR (growth in loan outstanding - total housing loans on the books of all financiers put together) over Fiscals 2018-2023 on account of a rise in disposable income, healthy demand emanating from smaller cities' markets, attractive interest rates and government impetus on housing. The same, is expected to log a CAGR of 13-15% in the long term between fiscal year 2023 and 2026.

Growth in housing loans outstanding:

India’s mortgage market can broadly be divided into two segments by ticket size of the housing loan at the time of disbursement - loans with ticket size of more than ₹ 1.5 million, and loans with ticket size of ₹ 1.5 million and below. The former can be called the normal mortgage market, which is prominent in the metro/urban areas, and the latter which generally includes houses in the outskirts of these areas and semi-urban and rural areas can be defined as the housing finance market focusing on the low-income housing segment.

Home loan growth was driven by bigger loans (over ₹1.5 million). The share of these larger loans increased significantly from 76% in March 2018 to 86% in December 2023. This is partly due to economic slowdowns hitting lower income borrowers harder and partly due to rising construction costs pushing people towards larger loans. However, the majority of the housing loan share in terms of volumes is still dominated by the lower ticket size segment (less than ₹ 1.5 million), which accounted for 52% of housing loans outstanding as of March 2023.

State wise market share of outstanding housing loans focused on low income housing finance sector:

Based on the home loans outstanding in the low income housing segment, the top 10 states/union territories (“UTs”) account for approximately 79% of the market size in this segment as of December 2023. Maharashtra tops the list with the highest share of 16%, followed by Gujarat (12%), Tamil Nadu (9%), Rajasthan (7%) and Madhya Pradesh (7%).

Company’s Product wise Gross AUM:

Company’s AUM by Segment* (RETAIL VS. CORPORATE CUSTOMERS)

Financials of the Company:

1. Total Revenue

Over the recent 3 years, total revenue has grown at a CAGR of 13.88%

2. EBITDA

3. Net Profit

Over the recent 3 years, Net Profit has grown at a CAGR of 26.55%

4. Other Financial Ratios

Key Strengths of the Company:

1. HFC is focused on the low income housing segment (ticket size less than ₹1.5 million) in India with the highest AUM and net worth among its analyzed peers in Fiscal 2021, Fiscal 2022, Fiscal 2023 and nine months ended December 31, 2022 and December 31, 2023;

2. Seasoned business model with strong resilience through business cycles

3. Extensive branch and sales office network, geographical penetration and sales channels which contribute significantly to loan sourcing and servicing;

4. Robust, comprehensive systems and processes for underwriting, collections and monitoring asset quality;

5. Access to diversified and cost-effective long-term financing with a disciplined approach to asset liability and liquidity management;

6. Experienced, cycle-tested and professional management team with strong corporate governance

Key Risks:

1. The Company is involved to certain legal proceedings and any adverse outcome in these or other proceedings may adversely affect their business

2. The Promoter (Blackstone Group Company) will continue to exert substantial voting control over the Company after completion of the Offer, which may limit Shareholder’s ability to influence the outcome of matters submitted for approval of the shareholders.

IPO Objectives:

1. To meet future capital requirements towards onward lending; and

2. General corporate purposes

Valuation:

The calculated PE ratio for the company is 23.5, while the industry average is 31.9.

Peer Comparison:

*Only highlighted companies are listed peers.

IPO Details: