Aptus Value Housing Finance India Ltd - IPO Note

Finance - Housing

Aptus Value Housing Finance India Ltd - IPO Note

Finance - Housing

Price range
Rs. 346 - 353
Issue Period:
Aug 10, 2021
Aug 12, 2021
August 10, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 2735-2780 cr.
Public Issue
7.86 cr. shares
Market cap post IPO
17157-17494 cr.
Equity Pre - IPO
96.28 cr.
Equity Post - IPO
99.11 cr.
Issue type
Fresh Issue & Offer for Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research


Robust risk management architecture shall aid in superior asset quality
The company has implemented robust risk management architecture to identify, monitor and mitigate risks inherent in their lending operations. Hence, the company was able to maintain its asset quality across economic cycles including events such as demonetization, the implementation of the Goods and Services Tax, the liquidity crisis that was triggered by defaults by large financial services companies and the COVID-19 pandemic. Most importantly, the company has not restructured any loans or written-off any loans receivable since the inception, as the company primarily targets customers whose sources of income according to them are more resilient to economic cycles. As of March 31, 2021, their home loans, loans against property and business loans had an average loan-to-value of 38.89%, 38.27% and 39.21%, respectively, at the time of sanctioning of the loan. They also seek to maintain an instalment to income ratio of at least 1:2.

Expanding its market in other states shall provide further impetus to growth
The company intends to expand their branch network in large housing markets in the states of Maharashtra, Odisha and Chhattisgarh. The company also continues to expand their presence in an on-ground continuous manner in order to achieve deeper penetration in the existing regions. Before setting up new branches, the company conducts research and considers a number of factors such as regional demographics, level of urbanization and the competitive landscape. The company believes that their operating model is scalable and shall assist them in expanding their operations with lower incremental costs to drive efficiency and profitability.

Major focus on maintaining robust asset quality
The company intends to grow their business while focusing on maintaining their asset quality. The company has also maintained its asset quality across economic cycles and were able to consistently perform well through such macro-economic challenges due to several factors including the risk management architecture, the strength of the management team and proactive measures undertaken during such periods. As of FY19/FY20/FY21, its Gross NPAs expressed as a percentage of Gross Loan Book stood at 0.40%, 0.70% and 0.68%, (the GNPA for rural portfolio was 0.49%, 0.72% and 0.68% the same for their urban portfolio was 0.28%, 0.67% and 0.71%) while its Net NPAs stood at 0.30%, 0.54% and 0.49%, respectively.

Diversifying sources of borrowing has led to reduction in borrowing cost
Historically, the company has secured financing from several sources including private and public sector banks, refinancing from NHB, financing from IFC, issuance of NCDs and securitization transactions and these access to diversified and cost effective sources of borrowings have aided in reducing its credit costs. The company has been able to obtain cost-effective financing and optimize their borrowing costs due to several factors including their improved credit ratings, stable credit history, conservative risk management policies and strong brand equity. The credit ratings by both ICRA and CARE are ICRA A+(Stable) and CARE A+; Stable, respectively as of March 31, 2021. This has resulted into reducing their average cost of borrowings (including securitization) to 9.11% as of March 31, 2021 from 10.17% as of March 31, 2020. The company aims to further increase their lender base, which has grown to 17 as of March 31, 2021 from 14 as of March 31, 2019.

Established track record of financial performance with cost efficiencies
The company’s major focus is to serve self-employed customers which has resulted in high yields for their loan portfolio. As of March 31, 2021, their average yield on disbursements was 16.88%, with home loans, loans against property and business loans accounting for 15.38%, 17.00% and 20.45%, respectively. The company’s loan portfolio also qualifies for priority sector lending and it lays emphasis on improving cost efficiencies by monitoring and controlling their operating costs and setting up branches in an economical manner. According to the CRISIL Report, the company had lowest cost to income ratio amongst its peers during FY21. During the last 3 financial years i.e FY21, FY20 and FY19, their operating expenses to net income ratio stood at 21.80%, 26.08% and 30.34%, respectively. The company’s AUM per employee grew from Rs 17 million as on FY19 to Rs 21.26 million as on March 31, 2021 and this indicates their focus on low credit costs which has resulted in high Return on Assets (RoA). The company had the highest RoA of 5.7% amongst its peers during the FY21.

Particulars (Rs in crores) FY19 FY20 FY21
AUM/Gross Loan Assets
Home Loans 1219.44 1661.59 2103.21
Loan against property 302.91 580.99 890.34
Business Loans 724.88 936.11 1074.21
Total 2247.23 3178.69 4067.76
Home Loans 564.07 627.47 665.25
Loan against property 218.5 314.23 369.8
Business Loans 306.47 329.28 263.13
Total 1089.04 1270.98 1298.18
Average ticket size on disbursements
Home Loans 0.078 0.076 0.072
Loan against property 0.074 0.072 0.071
Business Loans 0.067 0.072 0.07


  1. Highly competitive business: The housing finance industry in India is highly competitive. The company faces competition from other HFCs, NBFCs, small finance banks, as well as scheduled commercial banks.
  2. Default by borrowers may adversely affect their business: Customers may default in their repayment obligations due to various reasons including business failure, insolvency, lack of liquidity, loss of employment. However, all of their loans are secured.
  3. Lacks geographic diversification: The company’s operations are primarily focused in the states of Tamil Nadu and Andhra Pradesh which leads to dependency on few markets.

Company Description

Incorporated in 2009, Aptus Value Housing Finance India Limited (“Aptus”) is an entirely retail focused housing finance company primarily serving low and middle income self-employed customers in the rural and semi-urban markets of India. The company is one of the largest housing finance companies in south India in terms of AUM, as of March 31, 2021. The company offers customers home loans for the purchase and self-construction of residential property, home improvement and extension loans; business loans; and loans against property, which constituted for 51.70%/26.41%/21.89% of their AUM, as of March 31, 2021, respectively. The company offers loan to only retail customers and do not provide any loans to builders or for commercial real estate. The company had the largest branch network in south India among the peers and as of March 31, 2021, the company had a network of 190 branches covering 75 districts in the states of Tamil Nadu, Andhra Pradesh, Karnataka and Telangana.


We expect that company may grow supported by healthy capitalization, domain expertise in specific regions, resilient asset quality, structurally higher profitability driven by better margins and lower credit costs. However, majority of the company’s loan portfolio comes from one state and past experiences of peers suggest that slowdown in home states impact growth as well as profitability for regional housing finance companies. At the upper price band of Rs 353, the IPO is valued at 8.5x of FY21 P/BV and as the issue is very highly priced it does not leave any scope of further upside. Also there is no differentiated business model which would demand such lofty valuation. Thus we recommend “Avoid” to this IPO offer.

Peer Comparison

Particulars AUM Disbursements FY21
Rs in Crores FY21 CAGR (FY17-21) FY21 CAGR (FY17-21) Total income PAT NIM% ROA%
Aptus value housing 4070 48% 1300 33% 550 220 9.72 5.73
Aadhar housing Finance 13330 43% 3550 20% 1550 340 5.65 2.62
Aavas Financiers 9450 37% 2660 18% 1110 290 7.79 3.49
Home first financing 4140 51% 1100 27% 490 100 6.73 2.5

Key Information

Use of Proceeds:
The issue offer is worth Rs 2780.05 crores (at the upper price band) via book building route. It comprises a fresh equity issue for Rs 500 crores and an Offer for Sale (OFS) of Rs 2280.05 crores. Fresh issue will be utilized to augment the capital base to meet future capital requirements and general corporate purposes.

Book running lead managers:
ICICI Securities Ltd., Citigroup Global Markets India Pvt. Ltd., Edelweiss Financial Services Ltd. and Kotak Mahindra Capital Co. Ltd.

M Anandan is the Chairman and Managing Director of the company. He has over 40 years of experience in the financial services sector and has previously served as the managing director of Cholamandalam Investment and Finance Co Ltd, part of the Murugappa Group and was also managing director of Cholamandalam MS General Insurance Co Ltd. Balaji P is the Chief Financial Officer of the company. He has various years of experience in the textiles, telecom and finance sectors. He was previously associated with the Bombay Dyeing and Manufacturing Co Ltd, Hutchison Max Telecom Ltd and Cholamandalam MS General Insurance Co Ltd.

Financial Statement

Profit & Loss Statement:- (Consolidated)

DESCRIPTION Mar-19 Mar-20 Mar-21
Interest income 310.80 485.20 623.80
Interest Expense 116.20 184.50 206.50
Net Interest Income 194.60 300.70 417.30
Other Income 26.10 38.30 31.20
Total Income 220.70 339.00 448.50
Total Operating Expenses 67.03 88.47 97.79
PPOP 153.67 250.53 350.71
Provisions and Contingencies 1.17 3.43 5.81
Profit Before Tax 152.50 247.10 344.90
Provision for Tax 41.22 36.20 78.10
Tax Rate% 27.00% 15.00% 23.00%
Profit After Tax 111.28 210.90 266.80
Earnings Per Share 2.83 4.77 5.56