IPO: India Shelter Finance Corporation

India Shelter Finance Corporation, an affordable housing finance company, is coming out with its IPO (initial public offering) on December 13, 2023. Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality: Its three-year average ROE is 12 per cent, and its three-year average net interest margin is 5.5 per cent. Growth: Over the last three years, it grew its AUM (assets under management) by around 41 per cent annually and PAT by about 33 per cent annually. Valuation: The stock will be priced at a P/B of 2.4 times, compared to its peers' average of 4.3 times. Overview: The Indian housing finance industry is projected to grow 13-15 per cent annually between FY23-26 on the back of government initiatives, supportive policies, and rising income. However, intense competition remains a threat to the company. About the company Incorporated in 1998, India Shelter Finance Corporation is an affordable housing finance company primarily providing housing loans (58 per cent of AUM) and loans against residential properties (42 per cent). It is present in 15 states and has access to nearly 94 per cent of the Indian housing finance market. Strengths of India Shelter Finance Corporation It has registered a solid annual AUM growth of around 41 per cent over the last three years. Low LTV ratio: It uses mortgages as collateral against loans and has maintained an average loan-to-value (LTV) of 50 per cent as of September 30, 2023. For the uninitiated, the LTV ratio is how much of the property value the loan covers. Weaknesses of India Shelter Finance Corporation High NPAs: It reported an average net NPA of 1.3 per cent in the last three years and a net NPA of 2.1 per cent in FY22. Also, its provision coverage ratio stood at 28.7 per cent as of September 30, 2023. The housing loan sector is highly competitive . Several other players, including banks, offer similar services. IPO details Total IPO size (Rs cr) 1200 Offer for sale (Rs cr) 400 Fresh issue (Rs cr) 800 Price band (Rs) 469-493 Subscription dates December 13-15, 2023 Purpose of issue To meet capital requirements towards onward lending Post IPO M-cap (Rs cr) 5278 Net worth (Rs cr) 2175 Promoter holding (%) 48.3 Price/earnings ratio (P/E) 26.3 Price/book ratio (P/B) 2.4 Financial history Key financials 2Y CAGR (%) TTM FY23 FY22 FY21 NII (Rs cr) 32 338.26 293.08 225.28 169.22 PAT (Rs cr) 33 200.67 155.34 128.447 87.38 Advances (Rs cr) 40.8