Aptus Value Housing Finance India Ltd IPO

Competitive Strengths:

Some of the competitive strengths are as follows

Presence in large, underpenetrated markets with strong growth potential:

Aptus Value Housing Finance is one of the largest housing finance companies in south India in terms of AUM, as of March 31, 2021, with presence in the states of Tamil Nadu (including the union territory of Puducherry), Andhra Pradesh, Karnataka and Telangana. According to the CRISIL Report, the company had the largest branch network in south India among the Peer Set, as of March 31, 2021. These four states have high per-capita incomes, better financial literacy and GDP growth rates. As a result, the company is well positioned to capitalize on growth opportunities and cater to the housing finance requirements of their target customer base in these geographies.

In-house operations leading to desired business outcomes:

Aptus Value Housing Finance conducts all aspects of their lending operations in-house including sourcing, underwriting, valuation and legal assessment of collateral and collections, which enables the company to maintain direct contact with their customers, reduce turn-around-times and the risk of fraud. The direct sourcing model has helped the company maintain contact with their customers and establish strong relationships with them, led to customer referrals, high levels of customer satisfaction and increased loyalty. It has also helped mitigate underwriting and default risks by enabling the company to have a customer base with a better credit profile. Their in-house sourcing model helps them make a better credit evaluation of customers on a wide range of parameters after collating all customer information in their database.

Domain expertise built over time resulting in a business model difficult to replicate by others:

The company targets first time home buyers where the collateral is a self-occupied residential property. Loans to self-employed customers accounted for ₹29,308.79mn, or 72.05% of their AUM, while loans to salaried customer accounted for ₹11,368.83mn, or 27.95%, as of March 31, 2021. Since Aptus Value Housing Finance primarily caters to self-employed customers, many of who are new to credit and do not have formal in-come proofs such as pay slips or income tax returns, the company assess their income through various methods and conduct a cash flow assessment of their income to determine their ability to repay loans. On account of their domain expertise to underwrite self-employed customers with limited income proofs, the company has been able to effectively serve customers, grow their business and create a business model that is difficult to replicate in their geographies.

Risk Factors:

Some of the risk factors are as follows

1.    The company requires substantial capital for their business and any disruption in their sources of capital could have an adverse effect on their business, results of operations and financial condition.

2.    Extended period of the pandemic could have an impact on the quality of the assets and adversely affect their business. 

3.    The risk of non-payment or default by borrowers may adversely affect their business, results of operations and financial condition.