India Shelter Finance opens for subscription, GMP up 29%; should you subscribe to the issue?

India Shelter Finance IPO: India Shelter Finance IPO opens for public subscription today and will close on Friday, December 15, 2023. The bidding for anchor investors concluded on Tuesday, wherein the company collected Rs 360 crore. The price band for its public issue at Rs 469-493 per equity share of face value Rs 5 each. At the upper end of the price band, the company’s promoters and shareholders seek to raise Rs 1,200 crore from the IPO. Ahead of the public issue, India Shelter Finance shares’ GMP rose 29.41% over the upper end of the share price on offer.

The IPO comprises a fresh issue of 16,227,181 equity shares aggregating up to Rs 800 and Offer-For-Sale (OFS) with promoters offloading 8,113,590 shares aggregating up to Rs 400. The company intends to use the net proceeds from the IPO to meet future capital requirements towards onward lending, and general corporate purposes. For potential investors, the bidding starts at a minimum of 30 equity shares, with subsequent bids in multiple lots of 30 equity shares each, with a maximum of 13 lots.

Should you apply for the India Shelter Finance Corporation IPO?

Geojit: Subscribe

“The company has an AUM of Rs 5,181cr in H1FY24, up from Rs 2,199cr in FY21, which grew at a CAGR of 41%, indicating its growing financial position. ISFCL’s average cost of borrowing has reduced to 8.3% in FY23 from 8.7% in FY21, primarily due to its improved financial performance and credit rating. The company’s net interest income rose to Rs 293cr in FY23 reflecting a 32% CAGR between FY21-23 while net profit of ISFCL increased from Rs 87cr to Rs 155cr at a 33% CAGR during the same period. At the upper price band of Rs 493, ISFCL is available at a P/B of 2.4x (FY24 annualized), which appears to be fairly priced as per industry peers’ valuations. Considering the government’s focus on housing, an increase in per capita income, ISFCL’s consistent improvement in asset quality, and robust AUM growth with high yields, we assign a ‘Subscribe’ rating for the issue on a short-term basis.”

Choice Broking: Subscribe with Caution

“ISFCL is a housing finance company that caters to retail customers, specifically targeting the low and medium-income groups in Tier II and Tier III cities in India. The company has consistently demonstrated growth in both its revenue and profits. At the higher price band of Rs 493, ISFCL’s issue is priced at a P/BV of 2.4x based on post-issue Adj. BVPS, representing a discount compared to its peer group’s average P/BV of 4.2x. However, even with this apparent discount, ISFCL’s financial ratios do not appear as impressive as those of its competitors. The company’s return ratios do not quite match the steady growth seen in both revenue and profit. Considering this, we suggest a ‘Subscribe with Caution’ rating for the issue.”

StoxBox: Subscribe

“Amongst its peer set, ISFC had the second-highest annualized RoA of 4.7% for the six months ended September 30, 2023. Furthermore, the company has posted steady growth in its top and bottom lines. As the lender will utilize the net proceeds of the fresh equity shares issue to meet future capital requirements towards lending, we are positive about the IPO. At the current adjusted P/BV multiple of 2.5x, we believe the company is attractively valued and advise investors to “Subscribe” to the issue from a long-term perspective.”

(The recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)