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Aptus Value Housing Finance India Limited (AVHFIL) is an entirely rural focused housing finance company primarily serving low and middle income self-employed customers in the rural and semi-urban markets of India. Incorporated in 2009, they are one of the largest housing finance companies in south India in terms of AUM, as of Q4FY21. The Gross Loan Assets have grown at a CAGR of 34.54% from Rs.2247.2cr, in FY19 to Rs.4067.8cr, in FY21. As of FY21, they conduct the operations in the states of Tamil Nadu (including the union territory of Puducherry), Andhra Pradesh, Karnataka and Telangana through 190 branches.

* Overall housing finance market to log a CAGR of 11-12% and the low income housing segment to grow at ~9% CAGR between FY21 and FY25 on account of a rise in disposable income, healthy demand, attractive interest rates and government impetus on housing.

* AVHFIL has a diversified loan portfolio of home loans, loans against property and business loans, which accounted for 51.7%, 21.9% and 26.4% of the AUM, respectively , as of Q4FY21.

* Focus on rural lending especially in mid and lower income group has helped AVHFIL to enjoy premium margins. For FY21, FY20 and FY19, the calculated net interest margin was 11.7%, 11.3% and 8.8%, respectively. 

* All of the loans are secured and the average ticket size is in the range of Rs.5lakhs to Rs.15lakhs with a safe average loan-to-value of 38.5%.

* During FY21, FY20 and FY19, AVHFIL was able to maintain a superior collection efficiency of 99.7%, 99.3% and 99.5% respectively.

* As of FY21, the calculated average yield on disbursements was 17.2.%, where the business loan segment has the highest yield followed by property loans and home loans.

* According to the CRISIL Report, AVHFIL had the highest RoA of 6.5% among the peers in FY21 and has an average RoE of 11.1%, 11.4% and 9.3% in FY21, FY20 and FY19 respectively.

* They only offer loans to retail customers and do not provide any loans to builders or for commercial real estate.

* Despite its focus on low and mid income group, AVHFIL was able to keep slippages under control resulting in lower NPA levels. As on FY21, the Gross NPAs were 0.68%, while the Net NPAs were 0.49%.

* They intend to expand the branch networks to Maharashtra, Odisha and Chhattisgarh along with deeper penetration in the existing markets with an average addition of 30 branches per year.

* At the upper price band of Rs.353, AVHFIL is available at P/BV of 8.8x (FY21) which appears to be fully priced. We assign a “Subscribe” rating for the issue on a long-term basis cons

Purpose of IPO

The offer comprises of the fresh issue and the offer for sale. The proceeds from the offer for sale will go to the selling shareholders, while the amount received from the sale of fresh issue will be utilized for fully augmenting the tier I capital requirements of the Company.

Key Risks

* COVID-19 has had adverse effects on the business, operations, cash flows and financial condition and may continue to do so in the near future.

* The operations are primarily focused in the states of Tamil Nadu(52.3% of AUM) and Andhra Pradesh(27.3%).

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