Aptus Housing Finance (India), a Chennai-based affordable housing finance player, made a weak debut in the stock markets today. The company listed at a 6.5 per cent discount to its issue price of ₹353 a piece on the BSE. However, recouping much of the losses, the stock touched an intra-day high of ₹348.8.

Despite its best-in-class metrics the company’s initial public offer saw a tepid response from retail investors. While the issue was subscribed 17.2 times, the portion reserved for retail individual investors was subscribed 1.35 times. Many issues in the past have seen retail participation crossing 30 times. The valuations were mostly to blame for the weak investor sentiment.

Aptus Value Housing Finance raises ₹834 crore from anchor investors

At its issue price, the company was valued 7 times its FY21 book value (post-issue), leaving little headroom for appreciation for long-term investors. At the current price of ₹345.5, the stock trades at 6.9 times its FY21 book, which is still expensive.

Aptus Value Housing IPO receives 17.20 times subscription on closing day of offer

Besides, in the fast-growing affordable housing space, the sustainability of the company’s best-in-class metrics is uncertain. Listed peer Aavas Financiers has double the AUM (assets under management) of Aptus, at ₹9,450 crore as of March 2021. In the recent June quarter, while Aavas recorded a healthy year-on-year growth of 21.2 per cent in its loan book, its gross non-performing assets (GNPA) inched up by 16 basis points (bps), since March 2021, to 1.1 per cent. Home First Finance, another listed peer similar-sized as Aptus, also saw a 10 bps rise in GNPA to 1.9 per cent in the June 2021 quarter.

While Aptus had reported a pandemic-proof performance in FY21, its collection efficiencies so far in FY22 continue to reflect resilience in its business model. The management indicated that its overall collection efficiencies dropped to 95 and 88 per cent in April and May 2021, respectively, from 100 per cent in March 2021. Thereafter, the collections improved to 98 and 99 per cent in June and July 2021, respectively. Hence, it would be wise for long-term investors to wait and watch its performance over a couple of quarters before entering the stock.