Aavas Financiers IPO: Brokerage Views & Run up to IPO


This post on IAavas Financiers IPO tries to bring out consolidated brokerage views , Grey Market Premium, Subscription information. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Aavas Financiers IPO or not.

 Related Link : Aavas Financiers IPO Review
Subscription: Aavas Financiers IPO  ( x times)
  QIB NII Retail Total
Day 3     
Day 2   0.64   0.09 0.05 0.23
Day 1  0.09  0.00 0.02 0.03
Aavas Financiers IPO: Grey Market Premium etc.

26/09/18 Grey Market Premium Rs.  NIL

Anchor Investors

Anchor Investors (AIs) portion in the Public Issue of Aavas Financiers for Rs 520 has been subscribed. The anchor investors that include AU Small Finance Bank, Abhu Dhabi Investment Authority-Behave, DSp Blackrock Tax Saver Fund, SBI Life, Bajaj Life Insurance and Morgan Stanley India Investment. 
Click here for Complete Aavas Financiers Anchor Investors List

Consolidated opinion of Brokerages, Analysts, Business New Paper Reports, Management Views on Aavas Financiers IPO.

Aditya Birla Money:”We believe the company is well-poised to deliver strong earnings growth in the forthcoming years considering the underpenetrated housing finance market, niche presence of Aavas, well-managed risk matrix and efficient usage of technology. Expect the company to command rich valuations as competition intensity remains on lower side in the space Aavas operates; and the visibility of healthy 5% spread, stable asset quality and 2.5% RoA remains high. The company is adequately capitalized for superlative growth with CAR at ~61.6% as on FY18. With further capital infusion from IPO, the case is well-set for a rating upgrade which will further improve business prospects. At an upper price band of Rs 821, the stock is available at ~4.1x FY18 P/ABV and P/E ratio of 65.4x on post money basis. We recommend investors to SUBSCRIBE the issue and hold the stock from long term perspective. Listing gains may get limited considering the recent mayhem in NBFC space.”

Angel Broking: “On the valuation front, at the upper end of the IPO price band, Aavas demands price-book (PB) multiple of 4.3x on FY18 book value (considering Fresh Issue) and 69x FY18 EPS. Established listed peers are trading in the range of 2.5- 3.5x of FY18 PB and in terms of PE these players are trading at valuation of 14-35x of FY18 EPS. Thus, considering the higher valuation, intense competition, and regional concentration of its loan portfolio we recommend NEUTRAL rating to Aavas Financiers. “

Asic C Mehta: ” At the upper price band, asking price is at a P/BV of 5.23X at FY18 book value of Rs 157, making the issue fairly priced. We recommend to Subscribe the issue from a long-term perspective.”

Capital Market: ” Score 47/100, The annualized EPS on post-issue equity works out to Rs 11.82 for FY2018. At the price band of Rs 818 to Rs 821, P/E is 69.2 to 69.4 times of FY2018 EPS. Though P/BV looks in line with the peers, return on net worth (RoNW) is very low. That makes the issue costly.”

Choice Broking: On valuation front, Aavas is demanding a valuation of 5.9x to its FY18 adjusted book value, which is at a premium to its peer average of 4x. The issue seems to be fully priced, thereby leaving little scope for listing gains. Additionally, considering the future business potential, profitability, stable asset quality and risk linked to the addressable target market, we are cautiously optimistic about the outlook of the company. Thus we assign a “Subscribe with Caution” rating for the issue.”

Emkay:AAVAS has announced an IPO price band of Rs818-821. At an upper price band of Rs821, the stock is available at ~3.5x P/FY18 Book (post money) & ~56x P/FY18 earnings with ~10.2% FY18 ROEs (pre-dilution). As the company accelerates its overall leverage, the likely probability of achieving superior RoEs of ~20% remains fairly high. Also with sufficient capital already in place, further risk of dilution is also quite limited. We recommend SUBSCRIBE to the IPO.

SMC : “
Rating 1.5/5 The Company has a strong distribution network with deep penetration serving underservedcustomers in Rural and Semi-Urban Markets. However, the operations of the company are concentrated in a few states of Western India. Also its loan book is dominated by the retail customers,which formed 99.5% of the loan book. The company focuses on Low and Middle Income Self Employed Customers. The risk of non-payment or default by borrowers may adversely affect its business, results of operations, financial condition and cash flows. Meanwhile, 92% of the loan assets qualify for priority sector. Along term investors may opt the issue.”

SP Tulsiyan website:While company’s growth rates due to small base and high NIMs are attractive, extremely premium valuations, recent corporate governance practice and rising macro concerns make it an avoid. Better to stock up on the larger peers ruling lower, with stronger fundamentals as well as a proven track record.” 

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk. 

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