Home First Finance lists at 19% premium over issue price of Rs 518

Riding on the strong momentum in the secondary market, shares of Home First Finance Company (HFCC) listed at Rs 618.80 on the NSE, a premium of 19.46 per cent over its issue price of Rs 518. Meanwhile, on BSE, the stock debuted at Rs 612.15, a premium of 18.18 per cent. The stock, however, came under heavy selling pressure and ended just 2 per cent higher against the issue price at Rs 527 on the BSE.

The Rs 1,154 crore initial public offer (IPO) by the firm that ran between January 21-January 25 was subscribed 27 times. The offer of the mortgage financier, which got fully subscribed on the first day itself on January 21, received bids for 41,64,36,944 shares against 1,56,20,948 shares on offer, according to data available with the NSE.

The category reserved for qualified institutional buyers(QIBs) was subscribed 52.53 times, non-institutional investors 39 times and retail investors 6.59 times.

The firm is a niche housing finance company (HFC) with an asset under management (AUM) of Rs 3,730 crore as of H1FY21. The company serves salaried customers in low and middle-income groups which account for 73.1 per cent of its gross loan assets, and self-employed customers account for 25 per cent as of September 30, 2020.

According to analysts at IIFL Securities, the firm's small size and niche market set it up for growth. Pricing power in its customer base, its ability to leverage technology for better service delivery, funding availability with competitive cost of funds, strong parentage and high capitalisation are some of the other key advantages for the company, the brokerage said in an IPO note. 

"In the medium to long-term, HFFC should be able to take advantage of strong underlying growth momentum in the affordable housing space. This, coupled with its own strong core operating metrics (2.5-3 per cent RoA) would help it lever up the current capital. While the pricing is a tad expensive at 3.4x 1HFY21 P/BV, we believe its strong metrics and high growth would lead to healthy EPS growth," IIFL Securities further added.

The company over the last three years has performed consistently with growth of CAGR 63 per cent from FY2018-FY2020. 

According to analysts at Dealmoney Securities, growth at this robust rate would continue on the back of its niche positioning in the segment i.e. targeting salaried and self-employed customers. 

"As affordable housing segment is set for a boom with government's drive of “Home for all by 2022", it will likely benefit the company's model of targeting first home buyers. with EPS at Rs 10.5 for FY 20, the stock is available at a P/E of 49 times," it said in a note.

Meanwhile, ICICI Direct, in a research report, said Home First is a fast-growing home financier. Utilizing technology, the company focusses to enhance operational efficiency, return ratios (11 per cent) and asset quality (0.74 per cent). "At the higher end of the price band of Rs 518 per share; the stock is available at a Price-to-Book value of nearly 3.6 times on H1FY21 book value (post issue)," they said.