Just over a year ago, Bajaj Housing Finance (BHFL) was one of India’s most celebrated IPOs — a rare play on the country’s booming housing credit market backed by the credibility of Bajaj Finance. The stock listed with 135.71% gains, briefly turning into a market favourite as investors priced in rapid growth, high-quality underwriting, and the parent’s impeccable reputation.
Fast forward to now: the same stock trades around INR 96.9, down almost 49% from its all-time high of INR 188.5. The correction has been steep and relentless, even though the company continues to deliver strong growth and pristine asset quality. The question now dominating investor discussions is straightforward yet nuanced:
Has Bajaj Housing Finance finally corrected to a fair valuation, or does it still trade ahead of fundamentals?
From IPO Darling to Deep Correction
Bajaj Housing Finance entered the bourses with fanfare, riding on the momentum of its parent Bajaj Finance and the market’s appetite for financials with high return ratios. The company’s balance sheet strength, asset quality, and growth visibility led to a sharp rally post-listing, touching INR 188.5 on the third day of debut.
Since then, however, the stock has steadily declined, losing nearly half its value from the top. The fall is largely valuation-led rather than earnings-led. After the initial listing euphoria, the market repriced expectations as housing finance valuations cooled and investors rotated towards cheaper peers.
Still, unlike many recent IPO laggards, Bajaj Housing Finance hasn’t faced any operational disappointment. Its business growth trajectory, profitability metrics, and credit performance remain firmly intact. The decline has simply narrowed the premium the market was once willing to pay.
| Metric | All-time High | Current Price | Change |
|---|---|---|---|
| Price (INR) | 188.50 | 96.90 | –49% |
In other words, while the price has corrected sharply, the business hasn’t.
Has Bajaj Housing Reached Fair Value?
At the current level, Bajaj Housing Finance trades at roughly 34.2x trailing earnings and 3.6–3.9x FY27E book value, depending on the brokerage estimate. These are premium multiples — even for a company with best-in-class metrics such as ROA of 2.3%, ROE around 12–14%, and GNPA at just 0.26%.
Yet, such valuation doesn’t exist in a vacuum. The company’s performance, scale, and pedigree justify a higher multiple relative to peers like LIC Housing Finance or PNB Housing, which continue to face asset-quality and funding-cost headwinds.
The market, however, appears to be in a phase of recalibration — weighing premium quality against realistic growth expectations. Investors are reassessing whether a near-50% correction brings Bajaj Housing Finance to fair value territory, or whether it remains “premium-priced for perfection.”
This debate sets the stage for the next part of our analysis — examining how the company’s Q2 FY26 performance, regulatory-driven stake sales, and brokerage perspectives are shaping sentiment in one of India’s most closely watched new-age lenders.
Resilient Operations Amid a Competitive Cycle
While the stock has lost nearly half its value since the euphoric debut, Bajaj Housing Finance’s operating performance tells a very different story. The company has continued to report robust growth and near-flawless asset quality, even as competition in the mortgage segment has intensified and lending rates softened.
In the September quarter (Q2 FY26), the company’s consolidated numbers underscored this strength:
- Assets under management (AUM): INR 1.26 lakh crore, up 24% YoY
- Profit after tax (PAT): INR 643 crore, up 18% YoY
- Annualised ROA / ROE: 2.3% / 12.2%
- Gross NPA / Net NPA: 0.26% / 0.12%
- Disbursements: INR 15,914 crore, up 32% YoY
- Capital adequacy: a healthy 26.1%
- Cost of funds: 7.4%, down 50 basis points YoY
Management commentary on the earnings call reflected a tone of quiet confidence.
“Competition is now a feature, not an aberration,” said Managing Director Atul Jain. “Our strategy is to deepen presence in each micro-market while maintaining pricing discipline and operating efficiency.”
Operating metrics support this view. The cost-to-net-total-income ratio improved to 19.6%, from 20.5% in the previous year, thanks to digital process adoption (93% customer onboarding done digitally). Spreads and net interest margins have remained broadly stable despite a softening interest-rate environment.
Put simply, business momentum hasn’t slowed — only the market narrative has.
Regulatory Overhang: Stake Sale Is Compliance, Not Capitulation
The sharp correction in BHFL’s share price has also coincided with news of promoter stake offloading, which some investors misread as a loss of promoter confidence. The reality, however, is far more procedural.
Under SEBI’s Minimum Public Shareholding (MPS) norms, listed companies must ensure at least 25% public shareholding within a prescribed timeframe. For large-cap companies with post-issue market capitalisation between INR 50,000 to 1,00,000 crore, the latest 2025 amendment allows five years from listing to meet this threshold.
As of September 2025, Bajaj Finance, the parent, holds 88.7% in Bajaj Housing Finance — well above the 75% regulatory ceiling. This implies that over the next few years, the promoter must offload roughly 13.7% stake in phases to comply with SEBI rules by September 2029.
The process has already begun. The group has confirmed plans for an initial 2% stake sale, and both Bajaj Finance and Bajaj Finserv have clarified that they will not purchase BHFL shares in the open market, ensuring that the dilution truly enhances public float.
Crucially, this offloading is regulatory, not strategic. It does not signal a change in the company’s ownership intent, financial outlook, or earnings prospects.
The EPS, PAT, and business fundamentals remain unaffected — though investors should expect minor supply-driven price volatility as additional shares gradually enter the market.
In fact, from a long-term perspective, greater public float could enhance liquidity and institutional participation, potentially improving valuation discovery.
Brokerages Stay Positive: Quality at a Reasonable Correction
Despite the price correction and upcoming share supply, brokerages have largely retained a constructive stance on Bajaj Housing Finance. Both Motilal Oswal Financial Services and ICICI Securities view the company as a fundamentally strong franchise commanding a justified premium.
| Brokerage | Rating | Target Price (INR) | Upside from CMP INR 96.9 | Key View |
|---|---|---|---|---|
| Motilal Oswal | Neutral | 120 | +24% | Growth intact; valuations full. Premium justified given RoE of 13–14%. |
| ICICI Securities | Add | 130 | +34% | Strong Q2FY26, best-in-class asset quality, manageable overhang. |
ICICI Securities (Nov 2025) reiterated its “Add” rating with an INR 130 target price, valuing the stock at 3.9x FY27E book value (INR 33.3). The report highlighted 21% PAT CAGR and 14% RoE by FY28, emphasizing that the valuation is “moderate post-correction.”
Motilal Oswal (Sep 2025) initiated coverage at a “Neutral” with an INR 120 target, citing strong execution and balance-sheet quality but acknowledging limited near-term rerating at 3.6x Sep’27E P/BV.
“Despite a sharp correction, BHFL continues to trade at premium valuations relative to peers,” the report noted, “but its scale, asset quality, and parentage justify that positioning.”
In essence, both brokerages agree on one point: Bajaj Housing Finance remains a high-quality, high-valuation play — not cheap, but credible.
Bajaj Housing vs Peers: High Quality, Higher Price Tag
Even after a steep decline from its ATH, Bajaj Housing Finance (BHFL) still trades at a premium across almost every valuation metric in India’s housing finance space. The reason, analysts argue, lies not in exuberance but in the company’s superior growth profile, pristine asset quality, and operational efficiency, all backed by the credibility of the Bajaj group ecosystem.
Bajaj Housing vs LIC Housing vs PNB Housing vs Aadhar Housing
| Metrics | Bajaj Housing Finance | LIC Housing Finance | PNB Housing Finance | Aadhar Housing |
|---|---|---|---|---|
| Current Price (INR) | 96.8 | 548 | 887 | 481 |
| MCap (INR Cr) | 80,615 | 30,154 | 23,098 | 20,866 |
| P/E (x) | 34.2 | 5.48 | 10.5 | 21.1 |
| P/BV (x) | 3.81 | 0.78 | 1.28 | 3.00 |
| PEG Ratio | 0.76 | 0.16 | 0.31 | 0.78 |
| EV/EBITDA (x) | 18.6 | 11.2 | 11.1 | 14.2 |
| Price to Sales (x) | 7.81 | 1.05 | 2.82 | 6.18 |
| Debt to Equity (x) | 4.44 | 7.08 | 3.62 | 2.55 |
| ROE (%) | 13.5 | 16.0 | 12.3 | 16.9 |
| ROCE (%) | 9.55 | 8.93 | 9.46 | 11.4 |
| Return on Assets (%) | 2.35 | 1.80 | 2.52 | 4.31 |
| NPM (Last Year, %) | 22.6 | 19.4 | 25.5 | 29.4 |
| Current Ratio | 0.79 | 0.72 | 1.31 | 3.99 |
| Sales Growth (3Y CAGR, %) | 36.5 | 12.1 | 7.6 | 21.6 |
| Profit Growth (5Y CAGR, %) | 38.7 | 17.8 | 23.3 | 36.6 |
Valuations: Premium That Commands Proof
At 34.2x P/E and 3.8x P/BV, Bajaj Housing Finance remains far ahead of the pack.
- LIC Housing Finance, despite being India’s largest HFC by loan book (~INR 2.87 lakh crore), trades at a mere 5.5x P/E and 0.8x book,
- PNB Housing Finance at 10.5x P/E, and
- Aadhar Housing Finance, a niche affordable player, at 21x P/E and 3x P/BV.
BHFL’s premium thus reflects institutional confidence in its superior execution quality and lower credit risk, not mere hype.
Even its PEG ratio of 0.76 — versus 0.16 for LIC and 0.31 for PNB — suggests that valuation aligns proportionately with its growth rate, unlike legacy HFCs trading cheap largely due to structural inefficiencies or slower disbursal momentum.
Profitability and Efficiency: Digital Edge Delivers
Bajaj Housing Finance’s return on assets (2.35%) is the highest among mainstream HFCs, indicating superior yield on capital employed. Its ROE of 13.5% is slightly below LIC’s 16% but achieved with far lower leverage (D/E 4.44x vs. 7.08x) — a sign of conservative yet scalable balance sheet management.
The company’s fully digital loan origination system, with 93% onboarding and 94% e-agreement penetration, drives industry-leading cost control — reflected in a steadily improving opex-to-income ratio (19.6%) and clean asset quality (GNPA 0.26%).
Meanwhile, LIC Housing and PNB Housing, though larger in legacy presence, continue to grapple with higher cost ratios and non-performing asset volatility, which explains their subdued valuations.
Leverage and Risk: Controlled Expansion
BHFL’s debt-to-equity ratio of 4.44x remains moderate relative to industry standards — a comfortable level considering its AAA-rated balance sheet and strong liquidity coverage (CAR 26.1%). By comparison, LIC’s leverage of 7.08x and PNB Housing’s 3.62x highlight the capital intensity gap between state-promoted and professionally managed HFCs.
Aadhar Housing, despite its small-ticket book, exhibits best-in-class ROA (4.31%) and highest NPM (29.4%), but operates in a riskier low-income lending segment where credit costs can be cyclical.
Verdict: Premium Quality at a Reasonable Correction
Bajaj Housing Finance’s share price correction is deep enough to restore sanity to what was once a euphoric listing. Yet, calling it “cheap” would still be a stretch.
The company remains valued at roughly 34x trailing P/E and close to 4x FY27E book, levels that already price in superior execution. However, this is also a company delivering 2.3% ROA, 12–14% ROE, and top-tier asset quality — a mix few peers can match.
Importantly, the ongoing promoter stake reduction is regulatory, not strategic. The EPS and profitability remain untouched, even as public float and liquidity improve. Brokerage houses, while not unanimously bullish, remain confident that the franchise deserves a premium.
“The correction has moved BHFL from exuberant to rational valuations,” notes one Mumbai-based fund manager. “For long-term investors, it’s now closer to fair value than froth.”
In sum, Bajaj Housing Finance today stands as a case study in re-rating discipline — from post-IPO euphoria to a more grounded equilibrium. The fundamentals remain pristine, the governance credible, and the growth runway long.
The stock may not be a bargain, but it is increasingly a quality franchise available at a reasonable correction — a space where patient investors often find their best compounders.
Key Takeaway
- Stock down ~49% from highs, but business metrics are solid
- Promoter stake sale is regulatory — no impact on EPS or control
- Brokerages (ICICI Sec: INR 125, Motilal Oswal: INR 120) see 20–25% upside
- Premium valuations justified by high RoA, asset quality, and growth visibility
- A high-quality lender entering its valuation reset phase — not its decline