Aadhar Housing IPO likely by March next year: MD Rishi Anand Low-income mortgage major Aadhar Housing Finance may apply for an initial public offering (IPO) with the Securities and Exchange Board of India (SEBI) by March end, MD & CEO Rishi Anand told FE in an interaction. The housing finance company (HFC) may also see stake sale of up to 25% by promoter private equity firm Blackstone, in case the IPO plans do not fructify, he said.“We are in discussion with promoters on the next steps,” Anand says. “Indicatively, it looks like before March 2024, we should have some deal in place,” he added. Aadhar Housing Finance’s total assets under management (AUM) stood at nearly Rs 19,000 crore as of August end and is likely to grow to Rs 22,000 crore by the end of current fiscal, the MD said. A 100% of the HFC’s AUM is towards the low-income housing group with average ticket size of Rs 950,000. The HFC’s branch network or sales office outlets currently stand at 500 and will grow by 200 more in the next two fiscals. The HFC operates between spreads of 5%-6% and therefore does not intend to broaden its product lines with lower margins in near term, he added. According to Anand, the total size of affordable housing market in India is about `1.5 trillion and would likely grow by 30% year-on-year (YoY) in the coming fiscals. Aadhar Housing Finance’s gross non-performing assets stood at 1.49% as of June end and the HFC is targeting to lower it to below 1% by the end of current fiscal, Anand said. Separately, the HFC sourced Rs 250 crore of loans via co-lending for its banking partners like UCO Bank and Punjab National Bank in FY23 and in FY24, it is aiming to partner with YES Bank and Axis Bank and sanction about Rs 400 crore-Rs 450 crore of loans through co-lending partnerships, he said.
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Services miss estimates; Software better than expected: Services business grew 0.6% q-o-q cc and missed HCLT’s Q3FY23 guidance, mainly due to a 3.8% q-o-q cc decline in the ER&D segment. Growth in the IT&BS segment moderated slightly to 1.6% q-o-qcc but was in line with estimates. BFSI and Life Sciences were the key growth drivers, while communications were the drag among verticals. Growth was led by the Americas region, while Europe and ROW posted declines.
Decline in bookings reflects delays in decision-making: HCLT won 10 large deals in services and three large deals in Software with net-new deal TCV of $2.1bn, down 8% y-o-y. Deal wins were driven by the services portfolio, were centered on cost optimisation and vendor consolidation and came mainly from BFSI, manufacturing and Life Sciences verticals. Management highlighted a ramp-down in discretionary spending in Hitech and communications verticals but pointed to a strong deal pipeline.
FY24 guidance in line with expectations: HCLT has guided for 6-8% y-o-y growth for overall business and 6.5-8.5% y-o-y cc growth in services segment and 18-19% margins in FY24—all in line with our assumptions. We maintain our FY24-25 cc revenue growth and margin estimates and expect HCLT to deliver 6.5% cc revenue growth and 18.4% margins in FY24. However, we lower our earnings forecasts by 2% to factor the higher tax rate indicated by the management.
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Raise PT: HCLT has fared better in Q4, particularly in North America and BFSI, unlike its peers. However, rising demand uncertainty as a US recession nears remains a concern. HCLT’s stock at CMP trades at 17x PE and offers a 5% yield, which in our view should limit downsides and derating. Hence, we raise our target PE to 17x (16x earlier) and raise our PT to Rs 1,125, offering 8% potential upside.
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