IPO Note - Aptus Value Housing Finance Ltd By Nirmal Bang
BACKGROUND
Aptus is a retail focused housing finance company primarily serving low and middle income self-employed customers in the rural and semiurban markets of South India. As on FY21, Aptus has AUM of Rs. 4,068 Cr. Aptus offers customers home loans (52% mix); loans against property (22% mix); and business loans (26% mix). As on FY21, the states of T.N, A.P, Karnataka and Telangana accounted for 52%, 27%, 10% and 10% of its AUM, respectively. Aptus has a network of 190 branches covering 75 districts in these states.
Details and Objects of the Issue
The public issue consists of –
(i) Offer for sale of Rs. 2,280 Cr by investors.
(ii) Fresh issue of Rs. 500 Cr to augment Tier 1 capital for future growth.
Investment Rationale
* Robust risk management architecture from origination to collections leading to superior asset quality
* Domain expertise in a niche segment characterized by low ticket size, first time borrowers, self employed clientele in rural areas results in a business model which is difficult to replicate
* Experienced management team with marquee shareholders
* Strong track record of growth; long runway ahead
* Business model supporting superior return ratios compared to peers
Valuation and Recommendation
Over the last 11 years of its operating history, Aptus has demonstrated strong credit underwriting track record having consistently maintained its GNPA below 1% level. Aptus has grown its AUM at a CAGR of 42% over FY18-21, despite FY21 being impacted with Covid, one of the fastest amongst listed financials. With AUM of just Rs. 4,068 Cr, the runway for accelerated growth has a long way to go with management targeting 30% CAGR over next 5 years. Further, Aptus has one of the highest ROA among listed financials at 6.1% (post issue), which, when levered at above 4x in the long term has the potential to generate ROE in excess of 20%. Thus we recommend to ‘Subscribe’ to the issue.
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