In IPOs investors invest assuming that stock will be available at a reasonable valuation and for listing gains, but as seen in the recent past where listing gains have been monumental, 30-40% gains are not much given the current scenario for listing.
And now as we shall the third IPO by home financing company Home First Finance opening tomorrow for public subscription. Here are things to note about the same:
1. Issue details:
Issue size is Rs. 1153 crore and includes fresh issuance of Rs. 265 crore and an OFS of Rs. 888.72 crore by True North Fund V LLP and Aether (Mauritius), investor Bessemer India Capital Holdings II Ltd, and two individual shareholders.
The company has reduced its fresh issuance from earlier planned Rs. 344 crore because of its pre-placement to Orange Clove and employees.Investor can put in a minimum bid of 28 equity shares and in multiples of 28 equity shares thereafter.
The price band for the maiden public issue has been fixed at Rs 517-518 per equity share. The lower issue price band is 258.50 times the face value of equity share and the upper price band is 259 times the face value. The issue ends on January 25, 2021.
2. About the company:
Technological driven affordable housing company targets first time home buyers from low and middle income and started operations in the year 2010.
The company's major areas of operations include states like Gujarat, Maharashtra, Karnataka and Tamil Nadu.
3. Issue objectives:
The proceeds from fresh share issuance will be put to augment the company's capital and support in its growth going forward.
The company's clientele is primarily salaried class and its loan assets registered a growth of 63 percent between FY18 and FY20.
Valuations for the issue are deemed on a higher side in comparison to other listed peers. "A granular business with average ticket size of its housing loans of Rs 10.1 lakh, with an average loan-to-value on gross loan assets of 48.8 percent, as on September 2020 places it at lower competition intensity from banks and other peers. However, on a P/BVPS (of FY2020) basis, its valuation is on the higher side, as compared to peers," said Sharekhan in its note.
6. Should you subscribe to the issue of Home First Finance?
There are divided views on the valuation of Home First Finance, while some see it to be aggressively priced in comparison to listed peers, some see it to be priced fairly. And while near term hiccups due to rise in NPAs cannot be ignored for such companies, government measures such as Housing for all initiative as well as the current consolidation in the real estate sector shall be beneficial for these companies in the long run.
But for now, investors can park the money in the IPO for listing gains given the grey market premium that it is commanding which is though less than that of Indigo Paints. Another point to be noted here is that the listing of this scrip shall be post budget so any favourable or adverse policy changes are likely to impact.