India Shelter Finance IPO Introduction
India Shelter Finance is coming up with an IPO scheduled to open on December 13, 2023. India Shelter Finance Corporation Ltd is engaged in the business of housing finance. Should you invest in India Shelter Finance Corporation IPO? This article provides insights into India Shelter Finance IPO, including its dates, details, price band, GMP, positive aspects, risk factors, and provides a complete review and analysis.
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About India Shelter Finance Corporation Limited
The company is a retail focused affordable housing finance company with an extensive distribution network comprising 203 branches as of September 30, 2023. It has a scalable technology infrastructure across its business operations and throughout the loan lifecycle.
Between Financial Year 2021 and 2023, they witnessed a two-year CAGR growth of 40.8% in terms of assets under management (AUM).
Its target segment is the self-employed customer with a focus on first time home loan takers in the low and middle income group in Tier II and Tier III cities in India, and affordable housing loans, i.e., loans with a ticket size lower than ₹ 25 Lakhs as per the criteria set out in the Refinance Scheme under the Affordable Housing Fund for the Financial Year 2021-22 issued by the National Housing Bank.
India Shelter Finance IPO Dates, Price Band and Size
| IPO Opening Date | 13-Dec-23 |
| IPO Closing Date | 15-Dec-23 |
| IPO Listing Date | 20-Dec-23 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 5 per equity share |
| IPO Price band | Rs 469 to Rs 493 per equity share |
| Lot Size | 30 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 1200 Crores |
| Fresh issue | Rs. 800 Crores |
| OFS | Rs. 400 Crores |
Objects of the IPO
India Shelter Finance IPO Size is Rs 1,200 Crores which contains both fresh issue and OFS.
#1 – Offer for Sale (OFS) for Rs 400 Crores – This goes to the selling shareholders and the company would not get any proceeds.
#2 – Fresh issue of Rs 800 Crores – These funds would be used for the following:
- To meet future capital requirements towards onward lending, and
- General corporate purposes.
About Company Financials
| Financial Year ending / Period ending (Amt in Crores) | ||||
| Period Ended | 31-Mar-21 | 31-Mar-22 | 31-Mar-23 | 30-Sep-23 |
|---|---|---|---|---|
| Assets | 2,462.64 | 3,221.22 | 4,295.59 | 4,758.68 |
| Revenue | 322.80 | 459.81 | 606.23 | 398.58 |
| Profit After Tax | 87.39 | 128.45 | 155.34 | 107.35 |
| Net Worth | 937.27 | 1,076.13 | 1,240.53 | 1,374.97 |
| Reserves and Surplus | 894.20 | 1,033.02 | 1,197.98 | 1,335.36 |
| Total Borrowing | 1,480.72 | 2,059.40 | 2,973.43 | 3,272.48 |
India Shelter Finance IPO Price Valuation
- The IPO price band is Rs 469 to 493 per share
- P/E Ratio Analysis
- If we consider the last year FY23 EPS of Rs 17.47, the P/E ratio works out to be 28x
- If we consider last 3 years weighted EPS of Rs 15.27, the P/E ratio works out to be 32x
- Comparison with listed peers
- Home First Finance Company trading at P/E 37.7x (Highest)
- Aavas Financiers is trading at P/E of 27.4x (Lowest) and
- Industry average P/E is 31.7x
- Hence, the IPO Price band at P/E of 28x to 32x is fully priced
Positive Factors to invest in India Shelter Finance IPO
Positive factors of investing in this company include:
- Impressive Growth: The company has demonstrated a two-year CAGR growth of 40.8% in terms of assets under management (AUM) between Financial Year 2021 and Financial Year 2023. This indicates a robust and growing financial position.
- Focus on Affordable Housing: India Shelter Finance targets the self-employed customer in the low and middle-income group in Tier II and Tier III cities, emphasizing affordable housing loans with ticket sizes lower than ₹2.5 million. This focus on a specific market niche can lead to higher demand and relatively high yields on advances.
- High Yield on Advances: The company achieved a yield to advances of 14.9% for the Financial Year 2023, which was the third highest in India for that period. This suggests a profitable lending portfolio and effective utilization of resources.
- Effective Credit and Risk Management: With a GNPA of 1.00% as of September 30, 2023, and 2.79% as of September 30, 2022, the company has maintained a low level of non-performing assets. This indicates effective credit and risk management policies, supported by technology and data analytics.
- Extensive Distribution Network: The company has a well-established network of 203 branches spread across 15 states, with a significant presence in key states like Rajasthan, Maharashtra, Madhya Pradesh, Karnataka, and Gujarat. This widespread distribution network enhances the company’s reach and market penetration.
- Diversified Financing Profile: India Shelter Finance has historically met its debt financing requirements from diverse and long-term sources, including public and private sector banks, refinancing from the National Housing Bank (NHB), external commercial borrowings, and non-convertible debentures. A diverse financing profile can contribute to financial stability.
- Strong Credit Ratings: The company has a healthy credit rating of ICRA A+ (stable) and CARE A+ (Positive) as of September 30, 2023. Strong credit ratings from reputable agencies provide confidence to investors regarding the company’s creditworthiness.
- Strategic Focus: The outlined strategies, including further growing and diversifying the distribution network, leveraging technology for scalability, optimizing borrowing costs, and enhancing brand equity, demonstrate a clear roadmap for sustainable growth.
Negative or risk factors of investing In this IPO
- The IPO objects contain both OFS and fresh issue. OFS portion goes to selling shareholders and company would not benefit.
- The business heavily relies on substantial capital, and any disruption in financing sources may adversely impact operations, results, and financial condition.
- Failure to comply with financial and other covenants in debt financing arrangements could negatively affect business, results, and financial condition.
- Non-payment or default by customers poses a significant risk, potentially affecting the company’s business, results, and financial condition.
- Over 60% of assets under management are concentrated in three states. Adverse developments in these states could have a detrimental effect on the business, results, and financial condition.
- The presence of stage 3 assets totaling ₹ 439.27 million and ₹ 880.96 million as of September 30, 2023, indicates potential credit quality deterioration. Ineffective monitoring and collection methods may adversely impact operations.
- Inability to recover the full value of the collateral or amounts from defaulted loans in a timely manner could adversely affect business, results, and financial condition.
- Difficulty in identifying, monitoring, and managing risks or implementing effective risk management policies may negatively impact business operations.
- Periodic inspections by the National Housing Bank and the Reserve Bank of India pose regulatory compliance risks. Non-compliance may result in penalties, fines, and damage to reputation, affecting business, financial condition, results, and cash flows.
- The business is vulnerable to interest rate fluctuations affecting both lending and treasury operations. This volatility may lead to varying net interest income, impacting profitability.
- Historical negative cash flows and the potential for continued negative cash flows in the future pose a financial risk to the company
- Investors should go through all risk factors indicated in India Shelter Finance IPO RHP.
India Shelter Finance IPO GMP
India Shelter Finance IPO GMP is not available as there are no trades happening in the offline trading.
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India Shelter Finance IPO – Should you buy or not?
Investors should consider all pros and cons before assessing whether this IPO is good or bad for investment.
- India Shelter Finance Corporation IPO presents an attractive investment opportunity with a notable two-year CAGR growth of 40.8% in assets under management (AUM) between Financial Year 2021 and 2023. The company’s strategic focus on the self-employed segment in low and middle-income groups, especially in Tier II and Tier III cities, offers the potential for high yields on advances.
- However, investing in such IPO comes with risks. The concentration of 62.7% of assets in three states poses a vulnerability to adverse developments in these regions. Concerns about credit quality are evident in the presence of stage 3 assets, and the inability to effectively monitor and collect on loans could adversely impact operations. Furthermore, exposure to volatility in interest rates, historically negative cash flows, and the ongoing need for substantial capital underscore financial challenges that potential investors should carefully consider before making investment decisions.
- The IPO is also fully priced.
Investors can invest in this IPO after considering all positive and risk factors.
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Hi Sir:
Earlier you used to give a clear opinion whether to invest or not. But now it is not categorical. can you go back to the old style where people like us get a clear idea!! thanks!
Since I am not SEBI registered investment advisor, I may not be able to provide precise recommendation in the articles. However, last line still indicates my view. Keep reading.