#AadharHousingFinance #IPO: CEO Rishi Anand discusses the company's business model and plans for with the proceeds on #IPO Adda, in conversation with Vishwanath Nair.
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00:00 Hello and welcome to NDTV Profit. You are watching IPO Adda and today we are discussing
00:05 the IPO announcement that is coming in from Aadhaar Housing Finance. Of course, it is
00:09 a affordable housing finance company. It has been around for a very long time and I have
00:14 with me Mr. Rishi Anand, the MD and CEO of the company. Mr. Anand, welcome to this conversation.
00:19 I just wanted to, you know, give you a chance to tell us a little bit about the IPO, why
00:24 you are coming to the market and what you intend to do. Just a short answer on that,
00:30 sir. Great. Thank you. First of all, thank you
00:32 so much for having us. So, in terms of the IPO, we are looking at 3000 crore of IPO,
00:40 out of which 1000 crore is primary and offer for sale is 2000 crores. In terms of price
00:48 band, we are looking at 300 to 315 price band. In terms of timelines, we are opening the
00:56 issue on 8th of May and closing will be on 10th of May and probable listing is on the
01:02 15th of May. 7th, sorry, my mistake, 7th is the opening of the anchor book.
01:07 7th is the opening of the anchor book. That's a brief on the IPO.
01:11 Got it, sir. I wanted to tackle the first question first with respect to the amount
01:16 that you outlined, 3000 odd crore. You know, when this discussion was happening last year,
01:23 the number was close to 5000 crore. There, that has been brought down to 3000 primarily
01:29 because the selling shareholders, which is the promoter of the company, Blackstone is
01:32 not looking to sell as much as what it was talking about earlier. Can you just tell us
01:37 about what went behind this decision? I think, you know, the answer lies in your
01:41 question itself. The primary intake remains more or less the same. You know, we were talking
01:46 about 1000 to 1200 crores earlier. We are talking about similar numbers now. It's not
01:50 to be precise. It is 1000 crores primary, which is going to be used towards expansion
01:56 strategy of the company. As far as the offer for sale goes, earlier it was 4000 crores.
02:02 Now we're talking about 2000 crores. I think it is more to do with more external market
02:07 factors and the way the promoters view the current situation. Management obviously would
02:13 not have too much to comment on, you know, why it has dropped.
02:18 Okay. Let me also get in some answers with regard to where the business stands as of
02:24 31st of December, which is the numbers that you have disclosed on your RHP. First and
02:31 foremost, on the profitability side, you are a fairly highly profitable housing finance
02:37 company out there in the market. Can you tell us a little bit about the operating environment
02:40 that you have been functioning in over the last two or three years since COVID?
02:45 So I would say since you use the word COVID, I think post COVID, the market has been very,
02:50 very dynamic. You know, while there were fears immediately post COVID, there were fears of
02:55 the market shrinking down. But I think it is an industry wide phenomena when it comes
02:59 to low income housing. You know, people have evolved together, seen a thrust in demand.
03:05 I think it is also to do with a lot of to do with the kind of segment that we operate,
03:09 the kind of sentiment that this segment operates in everybody post COVID, I think has at least
03:15 the segment that I operate in wants to have a own house to secure their family for a future
03:22 perspective. There has been thrust in demand from all kinds of loans that we do. We do
03:27 resale loans, we do self construction loans. So I think the demand has equally moved across
03:32 the product portfolio. So I would in nutshell say the market has been very dynamic. And
03:38 when we interact with our peer groups, I think this is a similar feeling that we have across
03:43 the industry, which is an excellent sign when it comes to, you know, especially the segment
03:48 that we are dealing in. It's a great sign that the market has been very, very dynamic.
03:55 The other question that I had was with regard to, you know, the general expectation, which
04:00 you mentioned earlier that it was expected that the market will shrink as the after effects
04:06 of COVID sort of play themselves out. But it hasn't really played out the way the expectations
04:12 were laid out earlier. I wanted to understand from you what are some of the factors that
04:16 are helping your borrower base to sort of continue pushing on that demand for housing?
04:22 Right. So as I mentioned, one is obviously the sentiments of the segment that you are
04:26 dealing with that gave a thrust. More importantly, I think it was also a lot of initiatives by
04:31 the government of India, as simple as, you know, passing on subsidy to the end home user.
04:39 If you recall, there used to be a scheme under the PMAY, which is Pradhan Mantri Awas Yojana
04:43 called the CLSS Subsidy Scheme. That brought in a lot of thrust and impetus, especially
04:50 to people who were on the fence of deciding whether to go for a home or not. You know,
04:54 typically if I were to quote some numbers, let's say a person who's taking a 10 lakh
04:58 loan and he gets a straight benefit of close to about 25 percent, two and a half lakh rupees,
05:03 2.57 lakh rupees is adjusted towards the loan if he gets a subsidy. I think those people
05:08 who were lying on the fence moved towards taking a decision on the positive side of
05:12 moving. So PMAY subsidy played a very important role. Then there are multiple initiatives
05:18 like tax sops, RERA, SARFSI. So there are multiple things that happened, which has overall
05:24 in the scheme of things created this demand. Coming to your capital adequacy ratio, now
05:30 that's close to 40 odd percent and it's remained in the 40-42 percent range for a
05:35 while for you. In terms of runway for growth, there's plenty and more. What does this
05:42 1000 crores of primary issuance do for the balance sheet?
05:45 So the way we look at this is we are very precisely now 39 percent as of December. The
05:50 way we look at it that we would want to come to the market only once in the next four or
05:54 five years kind of time frame. In terms of strategy, we are looking at expanding our
06:00 network into deeper locations. Primarily the reason why we've come for this 1000 crores,
06:05 750 crores is going to be used for our in-house business expansion. And when we say expansion,
06:12 we use words like going deeper into larger states of the country. So that's why we've
06:16 come once in the next five years, the way we look at it. We are not going to be hitting
06:21 the market again.
06:22 Understood. At about 487 branches, I just wanted to get a sense as to how the distribution
06:29 strategy is playing out. You mentioned you want to get into the bigger states a little
06:35 deeper. Try and tell us about how that is going to play out.
06:40 The way it is, we've been a 15-year-old company and when it comes to our distribution
06:45 strategy, that is one of the most significant part of our business. One of the most strongest,
06:50 I would say, levers that we have. Today, as we stand, 20 states and Union Territory, hardly
06:57 any more state to expand. The only location that we are not there is Jammu and Kashmir
07:02 and Northeast. And for, I would say, in the near future, I don't think we are going to
07:06 be venturing out in these locations. But given the kind of segment we deal with, it is very
07:11 important that you reach out to that customer. That has been the philosophy of this company
07:16 from since inception, since 2010. Because this segment does not come to you. They don't
07:22 know avenues of securing a home loan. When I'm talking about tier 3, tier 4 kind of locations.
07:26 So, it's very important for people like us to reach out to these customers. That's where
07:30 our strategy of a very large distribution, 487 branches as we stand today in about 20
07:38 states. Obviously, we don't have any more state to expand, but we will definitely be
07:43 going deeper into states that we understand at the back of our hand. Our birth state,
07:50 for example, Uttar Pradesh, we are about 64 branches there. We can go deep states like
07:56 Rajasthan, Maharashtra, Gujarat. These are states of high potential when you go to tier
08:01 3, tier 4 kind of locations. So, our strategies are going to be around this philosophy.
08:06 Understood. Looking at the way that your average yield on that loan book, close to about 14%
08:14 while your cost of borrowing has remained under 8%, it went up from about 7 to 7.6.
08:21 But considering the dynamic that we are operating in right now, the broader business environment,
08:28 cost of capital is not likely to go up beyond this level. Do you think that your margin
08:34 of 6% plus that is likely to continue for a very long time?
08:41 So we as an organization, typically, the way we've operated is in the spread of anywhere
08:46 ranging between 5.5 to 6%, to be precise, an average of 5.7%. Will there be an increase
08:53 in our cost? Basically, most of our borrowing is on an annual risk basis. I would say in
08:59 this quarter, we might look at a 10 to 15 bips increase in the cost. But you're right,
09:05 we will comfortably be always in 5.5 to 5.7 kind of spreads and that's the sweet spot
09:13 we want to be in.
09:14 All right. Last couple of questions from my end, sir. The first one is with regard to
09:18 your ideal customer and whether that has undergone any changes in the last few years. Who do
09:23 you want to…
09:24 As you understand, we've been a focused low income housing finance company and when
09:29 we talk about, so it is a very globally used word. So if I can pin it down to what is the
09:35 segment that we typically deal in economically weaker sections and lower income groups. That's
09:40 why at the first place the company was formed. We continue with the DNA even today. If I
09:44 were to give you some numbers, even today, as of December 73, 74% of my portfolio happens
09:50 to be in the EWS LIG segment. And that's my core segment. That's the segment I understand
09:55 the best and I would want to continue in that segment for years to come.
09:59 All right. And the final question is with regard to the pricing. I just want to go back
10:03 to the IPO discussion. 300 to 315, do you think that puts enough on the table for your
10:10 average investor who's coming in participating in this IPO and also enough for your promoter
10:16 who's looking to offload some shares?
10:18 I would say yes to both the questions, and that's how it should be to be fair to even
10:24 the investors. If you're leaving something on the table for them to look at a futuristic
10:30 perspective, that's how it happens. And I would maybe link it back to the business I
10:35 am in. Today, if I am a seller of a property, I would feel this is the right price and the
10:40 buyer would feel X is the right price. And I would say Y is the right price. Somewhere
10:44 in between is what eventually the deals happen. So that's how it is. And I would definitely
10:50 say that there is more than sufficient for the investor on the table.
10:53 All right, Mr. Anand, thank you so much for joining us on this conversation. It was a
10:56 pleasure talking to you, sir, and all the best for your coming IPO.
10:58 Thank you so much for having us. Bye bye. Good day.
11:02 So that was the management for Aadhaar Housing Finance. As he said, the IPO opens on the
11:08 8th of May and closes on the 10th. Price band is 300 to 315. The company is looking to raise
11:13 about 3000 crore through this IPO. Stay tuned to NDTV Profit and continue watching what's
11:18 coming up.
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