Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Aptus Value Housing Finance India / Equity Capital Markets

Aptus Value Housing Finance (AVHF) aims to raise around US$375m in its India IPO. The company is backed by a host of investors including WestBridge, Malabar Investments, Sequoia, Madison and Steadview CapitalAptus Value Housing Finance India Limited (AVHF) is a retail focussed housing finance company (HFC) primarily serving low and middle income self-employed customers in the rural and semi-urban markets in India. AVHF was one of the largest HFC’s in South India in terms of AUM, as of Mar 21. AVHF’s net interest income has grown by 38-55% pa over FY18-FY21, while its Pre-provision operating profit has done even better with 40-63% pa growth. Earnings growth has been driven by its rapid loan growth which has been between 28-58% pa over the past three years.Although loan growth has been slowing down and disbursements growth had already declined from 47% YoY in FY19 to just 2% YoY in FY21.In this note, we will look at the company’s past performance, run the deal through our ECM framework and talk about pricing

Aptus Value Housing Finance (AVHF) aims to raise around US$375m in its India IPO. The company is backed by a host of investors including WestBridge, Malabar Investments, Sequoia, Madison and Steadview CapitalAptus Value Housing Finance India Limited (AVHF) is a retail focussed housing finance company (HFC) primarily serving low and middle income self-employed customers in the rural and semi-urban markets in India. AVHF was one of the largest HFC’s in South India in terms of AUM, as of Mar 21. AVHF’s net interest income has grown by 38-55% pa over FY18-FY21, while its Pre-provision operating profit has done even better with 40-63% pa growth. Earnings growth has been driven by its rapid loan growth which has been between 28-58% pa over the past three years.Although loan growth has been slowing down and disbursements growth had already declined from 47% YoY in FY19 to just 2% YoY in FY21.In this note, we will look at the company’s past performance, run the deal through our ECM framework and talk about pricing

Aptus Value Housing Finance IPO - Valuation Is Too Rich, Especially with an Over-Capitalised Book

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*ChallengesMount: HDFC Ltd (HDFC.IN) [HDFC] reported FY 1Q22 results of INR 30.0 bn, decreasing INR 1.8 bn (5.6%) on a linked quarter basis. However, core operating results came in at INR 24.7 bn, declining INR 2.7 bn (9.9%) over the same period – despite net interest income improving INR 819 mn  (2.0%) off of a 20 bp NIM improvement to 3.70% and managed loan growth of 0.2%; and*Credit Quality Worsens: Given the INR 5.0 bn in NCOs during FY 1Q22, net new NPLs accelerated to INR 19.0 bn and increased 65.5% on an annualized basis versus INR 3.6 bn or 14.2% on an annualized basis in FY 1Q21. We would have preferred that HDFC be even more vigilant given the continued growing uncertainty of COVID-19. As such, we still find that HDFC’s reserve still needs shoring up by another INR 83 bn or over three quarters of core operating results.

*ChallengesMount: HDFC Ltd (HDFC.IN) [HDFC] reported FY 1Q22 results of INR 30.0 bn, decreasing INR 1.8 bn (5.6%) on a linked quarter basis. However, core operating results came in at INR 24.7 bn, declining INR 2.7 bn (9.9%) over the same period – despite net interest income improving INR 819 mn  (2.0%) off of a 20 bp NIM improvement to 3.70% and managed loan growth of 0.2%; and*Credit Quality Worsens: Given the INR 5.0 bn in NCOs during FY 1Q22, net new NPLs accelerated to INR 19.0 bn and increased 65.5% on an annualized basis versus INR 3.6 bn or 14.2% on an annualized basis in FY 1Q21. We would have preferred that HDFC be even more vigilant given the continued growing uncertainty of COVID-19. As such, we still find that HDFC’s reserve still needs shoring up by another INR 83 bn or over three quarters of core operating results. 

External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

External broker reports(aggregated public sources)

HSIE Results Daily Marico: Marico posted in-line revenue growth, however margin was a miss. Revenue/EBITDA grew by 31/3% (HSIE 31/7%). Domestic revenue and volume grew 31/21%, 7/2% 2-year CAGR, a good show despite the COVID pressure. PCNO saw volume growth of 12% YoY, albeit on a low base (- 11%), impacted by extended lockdowns in its core south and west markets. VAHO registered 35% YoY value growth (-32% in the base year) and saw 70bps share gain. Saffola remained a torchbearer (clocked 60/24% value/volume growth), aided by improved penetration and +450bps volume share gain.
<div class="content-highlight">Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</div>

HSIE Results Daily Marico: Marico posted in-line revenue growth, however margin was a miss. Revenue/EBITDA grew by 31/3% (HSIE 31/7%). Domestic revenue and volume grew 31/21%, 7/2% 2-year CAGR, a good show despite the COVID pressure. PCNO saw volume growth of 12% YoY, albeit on a low base (- 11%), impacted by extended lockdowns in its core south and west markets. VAHO registered 35% YoY value growth (-32% in the base year) and saw 70bps share gain. Saffola remained a torchbearer (clocked 60/24% value/volume growth), aided by improved penetration and +450bps volume share gain.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HSIE Results Daily: Marico, JSW Energy, Container Corporation and More

*Credibility Gap Widens: LIC Housing Finance (LICHF.IN) [LIC] reported FY 1Q22 bottom-line results of INR 1.5 bn, declining INR 2.5 bn (61.5%) linked quarter. Negative operating jaws, were the culprit, as costs increased INR 469 mn (21.1%) whilst revenues declined INR 2.6 bn (16.7%); and*Very Negative Credit Delta: Despite the limited NCOs, net new NPLs at LIC still skyrocketed INR 44.7 bn or 190.3% on an annualized basis linked quarter significantly accelerating from a very high INR 12.6 bn (62.0%) during FY 4Q21. By our calculation, if the large blip in credit continues, LIC management ought to think about adding another INR 158 bn to the reserve – which amounts to 78% of stated equity at just 50% cover of NPLs.

*Credibility Gap Widens: LIC Housing Finance (LICHF.IN) [LIC] reported FY 1Q22 bottom-line results of INR 1.5 bn, declining INR 2.5 bn (61.5%) linked quarter. Negative operating jaws, were the culprit, as costs increased INR 469 mn (21.1%) whilst revenues declined INR 2.6 bn (16.7%); and*Very Negative Credit Delta: Despite the limited NCOs, net new NPLs at LIC still skyrocketed INR 44.7 bn or 190.3% on an annualized basis linked quarter significantly accelerating from a very high INR 12.6 bn (62.0%) during FY 4Q21. By our calculation, if the large blip in credit continues, LIC management ought to think about adding another INR 158 bn to the reserve – which amounts to 78% of stated equity at just 50% cover of NPLs.

LIC Housing Finance – Unmitigated Disaster

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

<a href="https://www.smartkarma.com/entities/bajaj-finance-ltd" target="_blank" data-smartkarma-citation="entities:8950:1" rel="noopener">Bajaj Finance Ltd (BAF IN)</a> reported weaker than expected Q1FY22 earnings led by weakening asset quality and subdued growth due to adverse impact from the second wave of COVID. On the other hand, it reported strong advancement in its next phase transformation of becoming an app based fintech ecosystem. With this app based ecosystem, we think BAF is gearing up to be the next big fintech in the country. If all goes well, we won’t be surprised to see BAF getting bigger than Paytm, PhonePe, etc. over time. BAF has an inherent advantage over its peers in the form of a large vetted and wealthy customer base as well as in-house products that can be tailored as per customer requirements. BAF’s fintech peers, on the other hand, acquire customers through significant discounts and cash burn. Also, these peers have limited in-house products and have to rely mostly on third-party products that provide limited leeway for customization. While, BAF’s current valuations are around fair at 65-70x on a normalized profit base (i.e. ex of COVID impact), we think BAF still has potential to surprise on earnings growth led by its new Fintech avatar.

Bajaj Finance Ltd (BAF IN) reported weaker than expected Q1FY22 earnings led by weakening asset quality and subdued growth due to adverse impact from the second wave of COVID. On the other hand, it reported strong advancement in its next phase transformation of becoming an app based fintech ecosystem. With this app based ecosystem, we think BAF is gearing up to be the next big fintech in the country. If all goes well, we won’t be surprised to see BAF getting bigger than Paytm, PhonePe, etc. over time. BAF has an inherent advantage over its peers in the form of a large vetted and wealthy customer base as well as in-house products that can be tailored as per customer requirements. BAF’s fintech peers, on the other hand, acquire customers through significant discounts and cash burn. Also, these peers have limited in-house products and have to rely mostly on third-party products that provide limited leeway for customization. While, BAF’s current valuations are around fair at 65-70x on a normalized profit base (i.e. ex of COVID impact), we think BAF still has potential to surprise on earnings growth led by its new Fintech avatar. 

Bajaj Finance: Undergoing Major Transformation Towards Becoming a Fintech Company

India

LIC Housing Finance Limited provides housing finance services to individuals for purchase, construction, repair and renovation of new or existing flats and houses. The Company also provides finance on existing property for business, personal needs and gives loans to professionals for purchase, construction of clinics, nursing homes, diagnostic centers, and office space throughout India.

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LIC Housing Finance (LICHF IN)

Aptus Value Housing Finance IPO - Valuation Is Too Rich, Especially with an Over-Capitalised Book

Aptus Value Housing Finance aims to raise around US$375m in its India IPO. It is backed by a host of investors including WestBridge, Malabar...

Sumeet Singh

HDFC Ltd – Just Getting Worse

HDFC: HDFC reported FY 1Q22 QOQ core result decline of 9.9%. Net new NPLs increased 65.5% annualized basis; HDFC’s reserve needs shoring up INR 83...

Thomas J. Monaco

HSIE Results Daily: Marico, JSW Energy, Container Corporation and More

HSIE Results Daily Marico: Marico posted in-line revenue growth, however margin was a miss. Revenue/EBITDA grew by 31/3% (HSIE 31/7%). Domestic...

HDFC Securities

LIC Housing Finance – Unmitigated Disaster

LIC HOUSING: LIC's FY 1Q22 bottom-line results declined 61.5% linked quarter due to negative operating jaws. Net new NPLs skyrocketed 190.3%...

Thomas J. Monaco

Bajaj Finance: Undergoing Major Transformation Towards Becoming a Fintech Company

Bajaj Finance is undergoing a major transformation and could become the next big fintech of India. It is launching an app ecosystem offering omni...

Ankit Agrawal, CFA

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