Core promoter’s unassuming stake, lack of succession plan, steep IPO-pricing and post-pandemic court rulings weigh against the scrip.
|
APTUS VALUE HOUSING FINANCE OFFER AT A GLANCE |
|
| Offer Type | Book Built |
| Platform | Main Frame |
| Fresh Issue | Rs 500 Cr (141.64 lakh shares) |
| Offer for Sale | Rs 2,280 Cr (645.90 lakh shares) |
| Face Value | Rs 2 |
| Price Band | Rs 346 – 353 |
| Mkt/Bid Lot | 42 Nos. |
| Implied M-Cap | Rs 17,494 Cr |
| Implied Equity Cap | Rs 99.12 Cr |
| Free Float | 37.49% |
| Lead Manager | ICICI Securities, Citigroup Global, Edelweiss Financial and Kotak Mahindra Capital |
| Registrar | KFinTechnologies |
| Listing At | BSE, NSE |
|
INDICATIVE ISSUE SCHEDULE |
|
| Opening :10-Aug-2021 | Closing :12-Aug-2021 |
| Allotment :18-Aug-2021 | Refunding :20-Aug-2021 |
| Demat Credit :23-Aug-2021 | Trading :24-Aug-2021 |
The Offer
Chennai based Aptus Value Housing Finance India Ltd (Aptus), incorporated in December 2009, is entering the capital market with an IPO of Rs 2,780 cr. The offer consists of a fresh issue of Rs 500 cr from the company and an offer for sale (OFS) of 645.90 lakh shares (valued Rs 2,280 Cr at the cap price) from select shareholders. The offer is being made through the book-building route with a price band of Rs 346-353 for Rs 2 paid-up share. The quantum of offer would be about 787.55 lakh shares which work out to 15.89% of the company’s proposed equity capital of Rs 99.12 Cr.
Applicants should bid for a minimum lot of 42 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE & NSE on August 24, 2021. Investment bankers ICICI Securities, Citigroup Global, Edelweiss Financial and Kotak Mahindra Capital are acting as managers to the offer. Karvy group’s KFin Technologies has been roped in as registrar to the issue. The bidding opens on Tuesday, August 10 and closes on Thursday, August 12, 2021.
Aptus proposes to utilize the net proceeds from the fresh issue towards fully augmenting the tier I capital requirements of the company. Considering its tier I position, the company has no plans to augment the tier II capital in the near future.
Lineage
The 11-year-old Aptus was originally promoted by M Anandan and his spouse Padma Anandan. A member of Institute of Chartered Accountants of India, Anandan has over 40 years of experience in the financial services sector. Previously, he served as the managing director of Cholamandalam Investment and Finance Company Ltd, part of the Murugappa Group and was also managing director of Cholamandalam MS General Insurance Company Ltd. When he floated Aptus, even Murugappa group members M A Alagappan and A M M Arunachalam invested in the company.
Nearly five years after Aptus’s incorporation, WestBridge Crossover Fund, LLC (WestBridge) came in and eventually became the largest shareholder of Aptus. WestBridge is owned by WestBridge Capital Management (WBCM), LLC which is a limited liability company incorporated in Mauritius and licensed by the Financial Services Commission, Mauritius to operate as a CIS Manager. Two natural persons who hold more than 15% of shares in WBCM are Sumir Chadha and Sandeep Singhal.
Stakeholders
Currently, Aptus has 62 shareholders of whom M Anandan (19.98%), Padma Anandan (5.19%) and WestBridge Crossover Fund (35.10%) are treated as promoters. JIH II, LLC (8.69%), Aravali Investment Holdings (4.11%), Anu Anand (0.99%), P Rajinikanth (0.10%), Suman Bollina (0.09%), Deepthi Anand (0.05%), Konark Trust (4,985 shares) and MMPL Trust (445 shares) are clubbed as promoter group. The promoters and their group thus control 74.87% of the equity.
Malabar India Fund (4.06%), Malabar Select Fund (3.83%), Madison India Opportunities IV (3.65%), Steadview Capital Mauritius (3.35%), SCI Investments VI (3.32%), GHIOF Mauritius (2.08%), A R Chadha and Co (1.26%) and MA Alagappan (1.22%), who individually hold more than 1% each, are categorized as public shareholders. Under the present offer, Aravali Investment Holdings and GHIOF Mauritius are offloading their entire stake while Padma Anandan, JIH II, LLC and Madison India are selling a portion of their stake.
Key Management
`Founder-promoter’ M Anandan (71) is the Chairman and Managing Director Aptus. The promoter’s son-in-law, Suman Bollina (36), who is into real estate business, is designated as Non-Executive Director. Sumir Chadha (50) and Kanarath Payattiyath Balaraj (50) have been nominated to the board as nominees of the private equity turned promoter, WestBridge. US-based Shailesh Jayantilal Mehta (72), currently an operating advisor at WestBridge Capital US Advisors, has also been roped in as a Non-executive Director.
Business Track
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. It is one of the largest housing finance companies in south India in terms of AUM. Having obtained the NHB registration in 2010, Aptus reportedly opened its first branch in the year 2011 and crossed 1200 loan disbursements in the very next year. The company’s loan book crossed Rs 700 cr by 2015. By 2019 the loan book crossed Rs 2000 cr. In fiscal 2021 the company had 191 branches and its loan book had crossed Rs 4000 cr. In other words, between 2019 and 2021, loan assets grew at an impressive CAGR of 34.54%.
Financial Track
Aptus’ consolidated operating income more than tripled in three years between 2018 and 2021, from Rs 199 cr to Rs 637 cr. Net profit quadrupled from Rs 67 cr to Rs 267 cr in the same period. Despite the COVID-19 pandemic, its operating margin has surged from 45.9% to 52.2% in fiscal 2021. Nonetheless, the company’s operating cash flow has remained negative during last three years. Thanks to the hefty share premium collections through the private placements, the company’s reserves are very healthy at Rs 1885 cr against its equity base of Rs 95 cr. Post-IPO, reserves will bulge further to Rs 2, 459 cr while capital will increase modestly to Rs 99 cr.
|
Aptus Value Housing Consolidated Financials (in Cr) |
||||
| Year Ended |
Mar-21 |
Mar-20 | Mar-19 |
Mar-18 |
| Months |
12 |
12 | 12 |
12 |
| Revenue |
637 |
500 | 324 |
199 |
| Interest |
207 |
185 | 116 |
53 |
| Operating Profit |
332 |
230 | 145 |
102 |
| OPM% |
52.2 |
45.9 | 44.8 |
51.4 |
| Other Income |
19 |
23 | 13 |
3 |
| Gross Profit |
351 |
253 | 158 |
105 |
| GPM% |
53.5 |
48.3 | 46.9 |
52.1 |
| Depreciation |
6 |
6 | 6 |
4 |
| Net Profit |
267 |
212 | 111 |
67 |
| Equity (Implied) |
99 |
95 | 79 |
79 |
| Reserves (Implied) |
2459 |
1615 | 620 |
506 |
| Borrowing |
2078 |
1370 | 898 |
540 |
Valuation
Aptus’ financials indeed compare reasonably well with its listed peers. And, its impressive recent growth during the pandemic exudes optimism. But, what should worry the prospective investors is the steep pricing and the likely impact of COVID-19 in the short run.
When Repco Home Finance, a dividend-paying company for many years operating in the same Southern region, is currently valued only 6.8 times its earnings. Also, its current market price is lower than the book value of the share. Aptus has priced its stock more than 62 times its earnings and 8 times its post-IPO premium enhanced book value. In a booming market, ultra-high P/Es may be ignored. But, when the market takes a turn, these pricing will not sustain.
| HOW APTUS COMPARES WITH LISTED PEERS | ||||
|
Financials |
||||
| (Amount in Cr) |
Aptus Val Hsg |
Aavas Fin | Home First |
Repco Home |
| Market Cap |
16756 |
20346 | 5075 |
2041 |
| Borrowing |
2078 |
4781 | 2814 |
10197 |
| Revenue |
637 |
1103 | 477 |
1373 |
| Other Income |
19 |
2 | 12 |
19 |
| EBIDTA |
557 |
831 | 362 |
1223 |
| Interest |
207 |
458 | 220 |
807 |
| Operating Profit |
332 |
371 | 130 |
397 |
| OPM% |
52.1 |
33.6 | 27.3 |
28.9 |
| Net Profit |
267 |
289 | 100 |
300 |
| Equity Cap |
95 |
79 | 18 |
63 |
| Reserves |
1885 |
2322 | 1363 |
2050 |
|
Stock Features |
||||
| Current Price (Rs) |
353 |
2592 | 580 |
326 |
| Face Value (Rs) |
2 |
10 | 2 |
10 |
| Book Value |
42 |
306 | 158 |
338 |
| Promoter Stake % |
62.5 |
50.1 | 33.7 |
37.1 |
| Debt/Equity |
1.1 |
2.0 | 2.0 |
4.8 |
|
Profitability |
||||
| OPM % |
52.1 |
33.6 | 27.3 |
28.9 |
| Net Margin % |
40.7 |
26.1 | 20.4 |
21.6 |
| Cash EPS |
5.74 |
39.43 | 12.28 |
50.06 |
| Earnings Per Share |
5.62 |
36.80 | 11.41 |
47.99 |
|
Return |
||||
| RONW % |
13.5 |
12 | 7.2 |
14.2 |
| ROCE % |
13.6 |
11.3 | 8.4 |
9.8 |
|
Discounting |
||||
| Price/Earnings |
62.8 |
70.4 | 50.8 |
6.8 |
| Price/Cash EPS |
61.5 |
65.7 | 47.2 |
6.5 |
| Price/Book Value |
8.5 |
8.5 | 3.7 |
1.0 |
| Price/EBIDTA |
30.1 |
24.5 | 14.0 |
1.7 |
| Price/Revenue |
2.7 |
4.9 | 7.8 |
3.9 |
Concern
The COVID-19 pandemic can affect finance companies in many ways. For instance, on one hand, lockdown restrictions will lead to decline in general economic and business activity, which will result in slow down of disbursements. On the other hand, it will affect the collection of dues.
The Supreme Court of India in Gajendra Sharma vs Union of India & Anr., passed an interim order in September 2020 in a public interest litigation, whereby it directed that accounts which were not declared NPA until August 31, 2020 shall not be declared as NPA until further orders. Such rulings are bound to affect the collection, financial condition and operating results of all lenders in some way or the other.