RHFL generated 22.2% RoE in 1HFY2013E and would trade at 1.8x FY2013E ABV (at the upper end of its price band, based on post-issue networth). Closest comparable peer – Gruh HF (mainly western India, rural and semi-urban focus, largely PSL qualifying home loans) appears extremely expensive at valuations of 7.3x FY2013E BV, notwithstanding its ~30% earnings growth trajectory and ~35% ROEs (FY2013E). Other NBFCs like Mahindra Finance and Shriram Transport Finance operating in different priority sector segments to a varying degree and generating similar return ratios, are trading at 2.6x and 2.3x FY2013E ABV, respectively (but they have larger, relatively more seasoned loan books and longer proven track record). Overall, keeping in mind RHFLs attractive niche loan segment, strong growth prospects and reasonable valuations, we recommend subscribe to the issue at the upper band
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