India Shelter Finance Corporation IPO opens today: Should you subscribe to the issue?

India Shelter Finance Corporation's initial public offering (IPO) commences for bidding on Wednesday, December 13. The company plans to sell its shares within the price range of Rs 469-493 per share, with a lot size of 30 equity shares. The bidding period for the three-day offer will conclude on Friday, December 15.

Established in 1998, India Shelter Finance Corporation specializes in housing finance, providing loans for house construction, extension, renovation, and the acquisition of new homes or plots. The company also extends loans against property (LAP) ranging from Rs 5 lakh to Rs 50 lakhs, with a repayment tenure of up to 20 years.

The IPO aims to raise Rs 1,200 crore, comprising a fresh share sale of Rs 1,200 crore, while existing investors, including Catalyst Trusteeship, Madison India Opportunities IV, MIO Starrock, and Nexus Ventures, will offload shares worth Rs 400 crore through an offer-for-sale (OFS).

Also read: India Shelter Finance Corp IPO to open on December 13; check price band & other details

The net proceeds from the IPO will be utilized for future capital requirements, onward lending, and general corporate purposes. For the fiscal year ending on March 31, 2023, India Shelter reported a net profit of Rs 155.34 crore with a revenue of Rs 606.23 crore.

India Shelter had disbursed over Rs 5,500 crore in loans, facilitating families in owning, extending, or improving their homes as of November 30, 2023. The company operates through a network of 183 branches across 15 states, with a presence in Rajasthan, Maharashtra, Madhya Pradesh, Karnataka, and Gujarat.

India Shelter Finance Corporation raised Rs 360 crore from anchor investors by allocating 73,02,229 equity shares at a price of 493 per share. 38 investors participated in the anchor book, including marquee names such as Goldman Sachs, Massachusetts Institute of Technology, NHIT, and Steinberg India.

ICICI Securities, Citigroup Global Markets India, Kotak Mahindra Capital Company, and Ambit are the book running lead managers, with Kfin Technologies Limited serving as the registrar for the issue. The company's shares are scheduled to be listed on both BSE and NSE on Wednesday, December 20.

The IPO allocation includes 50 per cent reservation for qualified institutional bidders (QIBs), 15 per cent for non-institutional investors (NIIs), and remaining 35 per cent for retail investors. Here's what a host of brokerage firms say about the IPO of India Shelter Finance Corporation:

Anand Rathi Research
Rating: Subscribe for long term
The company has one of the fastest growing AUM among housing finance companies in India, high yields and granular, retail focused portfolio. At the upper price band, the company is valued at P/BV of 2.4 times with a market cap of Rs 5,277.6 crore post issue of equity shares. We believe that the issue is fairly priced and recommend 'subscribe for long term' rating, said Anand Rathi Research.

SBICap Securities
Rating: Subscribe
ISFC is one of the fastest-growing housing finance companies in India, with an extensive distribution network and a well-established presence in Tier II and III cities. The business model is analytical-driven and scalable, with strong underwriting, collection, credit control, and collateral evaluation processes. We are optimistic about their niche presence, said SBICap Securities with a 'subscribe' rating.

Choice Broking
Rating: Subscribe with caution
ISFC is a housing finance company that caters to retail customers, specifically targeting the low and medium-income groups in Tier II and Tier III cities in India. The company has consistently demonstrated growth in both its revenue and profits.  The company's return ratios do not quite match the steady growth seen in both revenue and profit, said Choice Broking.

"At the higher price band, the issue is priced at a P/BV of 2.4 times based on post-issue adjusted BVPS, representing a discount compared to its peer group’s average P/BV of 4.2 times. However, even with this apparent discount, ISFCL's financial ratios do not appear as impressive as those of its competitors," it added, suggesting a 'subscribe with caution' rating for the issue.

Geojit Financial Services
Rating: Subscribe
ISFCL gross NPA ratios for FY22, FY23, and H1FY24 were 2.1 per cent, 1.1 per cent, and 1.0 per cent, and their respective Net NPA ratios were 1.6 per cent, 0.9 per cent, and 0.7 per cent indicating an improvement in asset quality. The Net interest margin was 8.9per cent in FY23, while return on assets and return on equity were 4.1 per cent and 13.4 per cent during the same period, said Geojit.

"The issue appears to be fairly priced as per industry peers' valuations. Considering the government’s focus on housing, an increase in per capita income, ISFC’s consistent improvement in asset quality, and robust AUM growth with high yields, we assign a 'subscribe' rating for the issue on a short-term basis," Geojit added.

Ventura Securities
Rating: Subscribe
ISFC primarily focuses on financing residential property purchases and self-construction for first-time home loan applicants through home loans and loans against property. As of September 30, 2023, 70.7 per cent of their customers were first-time home loan takers, said Ventura Securities with a 'subscribe' tag.

"Home loans accounted for 57.6 per cent of their AUM, while loans against property represented 42.4 per cent of their AUM. With a notable AUM growth of 40.8 per cent between financial years 2021 and 2023, ISFC has demonstrated the effectiveness of its operational model in catering to targeted segments in Tier II and Tier III cities in India, as per the CRISIL Report," it said.

Sushil Finance
Rating: Subscribe with caution
The company presents an investment opportunity as both it’s toplilne & bottomline has shown significant growth. 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, said Sushil Finance.

"The company’s smooth operations depend on ability to raise both, debt and equity from various external sources on suitable terms and in a timely manner, The risk of non-payment or default by customers may adversely affect the business, results of operations and financial condition," it said suggesting  cash rich investors may apply for the IPO for medium to long term.

GEPL Capital
Rating: Subscribe
The company exhibits robust AUM growth with high yields, emphasizing a granular, retail-oriented portfolio. Anticipated higher mortgage penetration is supported by rising urbanization, growing disposable income, and favourable demographics. The issue appears to be fairly valued based on the valuation, said GEPL Capital.

"The physical distribution network is extensive and diversified, primarily concentrated in Tier II and Tier III cities, constituting 89.8 per cent of the portfolio. The company benefits from pricing control, healthy margins, reduced turnaround time, and enhanced asset quality. Hence, we recommend 'subscribe' rating to the stock issue," it added.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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