With the tagline “Ghar Banega Toh Desh Banega,” Aadhar home Finance Ltd. is a top supplier of affordable home options in India. The Company has made the decision to enter the bourses with an impending IPO since it has a strong technological advantage and ambitious aspirations.
Aadhar Housing Finance Ltd (Aadhar) is one of India’s major affordable housing finance organizations, serving the home financing needs of low-income people. Aadhar aims to enable millions of underprivileged people to own their first house.
Loan Model
The following are the features and benefits of Aadhar Housing Finance house loans:
- The loan can be requested either singly or jointly.
- Under the Pradhan Mantri Awas Yojna, applicants can get housing loan subsidies.
- Customers can select loan terms of up to 30 years.
- Private employees, third and fourth-grade government personnel, teachers, and police officers, among others, are eligible for the loans.
- A monthly salary of at least Rs.5,000 is required to apply for Aadhar Housing Finance
home loans.
IPO Details
BCP Topco, which is funded by Blackstone, owns 98.72 percent of Aadhar Housing and intends to generate Rs 5,800 crore by selling its controlling stake in the housing finance company. The US investment business purchased the stake from Dewan Housing Finance Co. Ltd and the Wadhawan group in June 2019 for around Rs 2,200 crore. Following the transaction, Blackstone increased its investment in the company by Rs 1,300 crore.
The draft papers state that Blackstone plans to sell existing shares for Rs 5,800 crore while Aadhar Housing plans to issue additional shares through the IPO for Rs 1,500 crore. The size of the interest that Blackstone intends to sell was not stated.
Objective of the Issue
- The primary goal of the offer is to reserve Rs. 1,500 crore for the expansion of the company’s capital base.
- Aadhar Housing Finance Ltd intends to obtain lower-cost funding in order to maintain cost-effective long-term financing. This will also help the company cut its overall borrowing expenses, enhancing profit margins.
Why one should Invest?
- Focused on Lower Income Group: They are the largest Housing Finance Corporation specializing in mortgage-related loans to low-income people in rural and semi-rural areas.
- Asset, liability and liquidity Management: In a 12-month bucket, Aadhar Housing Finance has the greatest ALM surplus among peers.
- Stable Credit Rating: Aadhar Housing Finance has A1+ and AA- credit ratings from CRISIL for short and long-term loans, respectively.
- Efficient sourcing of loans: Factors such as geographical penetration, Sales channel and fulfilling remote housing requirement, help it to contribute to the loan sourcing and servicing.
- Strong Governance: They have a sophisticated and comprehensive process for underwriting, collection, and asset quality monitoring, these features denote a company’s strong corporate governance.
Risks
- Low Capital Adequacy Ratio: The capital adequacy ratio is the amount of capital set aside by the bank to serve as a cushion for the risk connected with the bank’s assets. A low ratio shows that the bank lacks sufficient capital to cover the risk connected with its assets.
- Risk of Losing Credit Rating: Any downgrade in a company’s credit rating may increase interest rates of raising new debts, refinancing its outstanding debts, which would ultimately increase its finance costs.
- Increase in NPAs: The major growth hurdle of such companies lies in the possible increase in the number of Non-Performing Assets.
- Dependency on Real Estate Sector: As the company is associated with housing loans, therefore the sector is largely dependent on the performance of the Real Estate sector which is largely volatile.
Financial Analysis
- A large increase in Net Profit Margins (NIM) can be noted when the incremental cost of capital falls from 8.15% to 7.23%.
- Over the last three years, net worth/total equity and ROE% have increased.
- The Company had a good Return on Assets (ROA) of 3.18% and a Return on Equity (ROE) of 15.23% in FY 2022, compared to 2.62% and 13.49% in FY 2021.
Conclusion
The business is among the biggest home loan providers in the nation. It meets the demands of the lowest income sections in society for home financing. Millions of people have been sought to be empowered from their first residences by the nation.
At Aadhaar, they promote financial inclusion by providing easy access to ethical and responsible housing financing. Their financing procedure is easy, clear, and efficient. They are encouraging India to develop sophisticated financial capabilities because they are dedicated to the highest standards of ethical conduct and professionalism.
