India Shelter Finance IPO Review: ISFC IPO Apply or Not?

ISFC IPO: The India Shelter Finance Corporation Limited is set to go public with an Initial Public Offering (IPO) of Rs 1200 crore on December 13th. This IPO comprises a fresh issue of Rs 800 crore and an offer-for-sale (OFS) for 8 million shares at a price range of Rs 469-493 per share. The capital raised will be used to bolster the company’s capital base for future funding requirements and lending operations. In this blog, we will delve into the factors to consider when deciding whether to apply for the India Shelter Finance IPO.

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Affordable Housing Finance Sector Potential

India Shelter Finance operates in the affordable housing finance sector, which is currently riding on strong sectoral tailwinds. Several factors contribute to this, including a large under-penetration of affordable housing finance services and increasing government initiatives aimed at promoting affordable housing. The affordable housing segment is experiencing faster growth than the overall housing sector, providing a favorable backdrop for India Shelter’s operations.

Also See: ISFC IPO: India Shelter IPO Anchor Investors Pick Rs 360 cr Worth of Shares, Issue Opens on December 13

India Shelter Finance IPO

Unique Business Model and Pricing Power

India Shelter Finance boasts a unique business model with strong pricing power. The company primarily caters to the low-ticket informal housing finance segment, with an average loan size of Rs 10 lakh. Self-employed loans constitute 71 percent of the Assets Under Management (AUM), and around 94 percent of the AUM comprises new-to-credit customers. This customer profile gives India Shelter Finance the ability to set competitive interest rates.

Furthermore, a significant portion of the loan book consists of high-yield, secured non-housing loans, making up 42 percent of the AUM. This diversified loan mix, coupled with a high proportion of fixed-rate advances (88 percent of AUM), helps the company maintain attractive yields in the 14-15 percent range, which compensates for the inherent risks associated with this segment.

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Robust Loan Growth

India Shelter Finance has demonstrated robust loan growth, with its AUM crossing the Rs 5000-crore milestone, reaching Rs 5181 crore as of H1 FY24. Over the past five years, the company has maintained an impressive CAGR of around 40 percent in AUM, highlighting its strong growth potential.

Benign Asset Quality

The company’s asset quality is on an upward trend, supported by a robust credit appraisal process and efficient recovery mechanisms. FY23 witnessed a significant reduction in the Gross Non-Performing Asset (GNPA) ratio, thanks to strong collection efficiency. However, it’s essential to note that the relatively unseasoned loan book, high geographic concentration (top three states accounting for around 63 percent of the AUM), and the inherently risky borrower segment may pose asset quality challenges in the face of macro-economic fluctuations.

Also Read: India Shelter Finance Corporation Limited IPO Details

Improved Profitability and Sustained Return Ratios

Despite a slight moderation in the Return on Asset (ROA) due to rising interest rates, the ratio is on an improving trajectory, aided by low credit costs. In FY23, India Shelter Finance posted an ROA of above 4 percent, showcasing its ability to generate strong returns.

Attractive Valuation

The valuation of India Shelter Finance appears attractive, especially when compared to its peers. While its business model is similar to Aptus Value Housing Finance, its spreads are lower. This is partly because Aptus enjoys a market-leading position in tier 3/4/5 cities and serves a higher percentage of Low-Income Group (LIG) borrowers. However, at the upper end of the price band (Rs 493 per share), India Shelter Finance is valued at Rs 5,277 crore, translating to 2.0 times FY25 book value. This valuation is enticing, considering the healthy ROA above 4 percent in FY23.


In conclusion, India Shelter Finance Corporation Limited’s IPO presents an intriguing opportunity for investors. With a unique business model, robust growth prospects, improved asset quality, and attractive valuations, there are compelling reasons to consider applying for this IPO. However, it’s essential to keep in mind the inherent risks associated with the affordable housing finance sector and the company’s borrower profile. Investors should conduct thorough due diligence and consider their risk tolerance before making an investment decision. The IPO seems to offer room for potential listing gains, making it an option worth exploring for those seeking investment opportunities in the financial sector.

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