Bajaj Housing Finance Limited (BHFL), a key player in the Indian housing finance market, is about to launch its Initial Public Offering (IPO). As a non-deposit-taking Housing Finance Company (HFC) registered with the National Housing Bank (NHB) since 2015, BHFL has seen rapid growth. In this Bajaj Housing Finance IPO Review, we cover 10 points every investor should know.
#1 Bajaj Housing Finance IPO Review: Corporate History and Structure
Bajaj Housing Finance, formerly Bajaj Financial Solutions, was incorporated in 2008 as a subsidiary of Bajaj Finserv. In 2014, Bajaj Finance Limited (BFL) acquired the company, transforming it into a dedicated housing finance subsidiary. By 2015, it received NHB approval as a non-deposit-taking housing finance company. The firm commenced mortgage lending in FY 2018 and has rapidly grown, achieving NBFC-Upper Layer (NBFC-UL) status under RBI’s Scale-Based Regulations by 2022.
Bajaj Housing Finance’s parent, Bajaj Finance, is publicly listed on the BSE and NSE, adding to investor confidence in this well-structured, growing entity.
#2 Bajaj Housing Finance IPO Review: Growth and Market Position
BHFL has emerged as a dominant player in the Indian housing finance sector. Within just seven years of launching its mortgage operations in 2018, the company has become the largest non-deposit-taking HFC in terms of assets under management (AUM). As of 30 June 2024, BHFL’s AUM stood at INR 97,071.33 crore, making it the second-largest HFC in India, showcasing a compound annual growth rate (CAGR) of 30.9% from fiscal 2022 to 2024. This impressive growth demonstrates the company’s ability to capture market share in a highly competitive space.
#3 Bajaj Housing Finance IPO Review: Diversified Product Portfolio
BHFL offers a comprehensive suite of mortgage products tailored to meet diverse customer needs. Its portfolio includes home loans, loans against property (LAP), lease rental discounting, and developer financing. Home loans comprise the bulk of its AUM, contributing 57.8% as of 31 March 2024. Within this, 87.5% of home loan borrowers are salaried customers, which provides stability to the company’s loan book. Other significant contributors to its AUM include lease rental discounting (19.5%), developer finance (11.2%), and LAP (10%).
#4 Bajaj Housing Finance IPO Review: Offer Details
Bajaj Housing Finance IPO is scheduled for 9 to 11 September 2024, and shares are scheduled to make debut on the BSE, and NSE on Monday, 16 September 2024. The public issue consists of an Offer for Sale (OFS) of INR 3,000 crore and a Fresh Issue amounting to INR 3,560 crore. The minimum bid size is 214 shares, priced at INR 14,980, and retail investors will be allotted 35% of the shares. The IPO will be listed on both BSE and NSE. In addition, there is reservation for shareholders of Bajaj Finance and Bajaj Finserv.
#5 Bajaj Housing Finance IPO Review: Huge Untapped Demand
India faces a significant housing shortage, with a demand for housing loans estimated between INR 50 trillion to INR 60 trillion, according to CRISIL. The total outstanding housing loans as of March 2023 were around INR 28.7 trillion, indicating that BHFL operates in a sector with immense growth potential. As urbanization accelerates and income levels rise, the demand for affordable and mid-segment housing is set to increase, providing ample growth opportunities for BHFL.
#6 Bajaj Housing Finance IPO Review: Robust Financial Performance
BHFL has consistently posted strong financial results. For fiscal 2024, it reported total loan disbursements of INR 44.66 crore, and for the three months ending 30 June 2024, it disbursed INR 12 crore. Over the years, the company’s disciplined growth strategy has led to profitability, with BHFL ranking as the second-most profitable HFC in India. This performance is further supported by its low gross non-performing assets (GNPA) ratio of 0.28% and net non-performing assets (NNPA) ratio of 0.11% as of 30 June 2024, the lowest among large HFCs in the country.
| Â | FY 2022 | FY 2023 | FY 2024 |
| Revenue | 3,766.71 | 5,664.73 | 7,617.31 |
| Expenses | 2,807.27 | 3,965.38 | 5,456.39 |
| Net income | 709.62 | 1,257.80 | 1,731.22 |
| Margin (%) | 18.84 | 22.20 | 22.73 |
#7 Bajaj Housing Finance IPO Review: Valuation
Bajaj Housing Finance’s earnings per share (EPS) has consistently risen over 3 years from INR 1.50 in FY 2022 to INR 2.08 in FY 2024, along with a rise in return on net worth (RONW) to 15.20% which is the highest among its listed peers. The company’s profitability is robust, with a profit after tax of INR 4.83 billion and a Return on Average Equity of 14.3% as of 30 June 2024. Bajaj Housing Finance IPO GMP of INR 50 per share, roughly 71.4% of the offer price indicates towards high chance of a fantastic listing.
| FY 2022 | FY 2023 | FY 2024 | |
| EPS | 1.50 | 1.90 | 2.08 |
| PE Ratio | – | – | 31.75 – 33.67 |
| RONW (%) | 11.1 | 14.6 | 15.2 |
| NAV | 13.8 | 15.6 | 18.2 |
| EBITDA (%) | 83.39 | 87.29 | 90.50 |
| Debt/Equity | 6.2 | 5.1 | 5.7 |
#8 Bajaj Housing Finance IPO Analysis: Among Lowest NPAs in Industry
The company has well-defined credit evaluation and risk management practices resulting in lowest Gross Non Performing Assets (GNPA) and Net NPA among its peers. As of 30 June 2024, its GNPA and NNPA levels were at 0.28% and 0.11%, respectively. Similarly, comparative figures stood at 0.27% and 0.10% for fiscal year 2024. The company counts LIC Housing Finance, PNB Housing Finance, Can Fin Homes, Aadhar Housing, Aavas Financiers, Aptus Value Housing Finance, Home First Finance among its peers.
#9 Bajaj Housing Finance IPO Analysis: Expansion and Digital Innovation
With a network of 215 branches across 174 locations in 20 states and three union territories as of 30 June 2024, BHFL has established a strong geographic presence. To enhance customer experience, the company has embraced digitization. In fiscal 2023, it introduced OTP-based e-agreements for faster loan processing and launched a DIY home loan portal for a seamless digital onboarding experience. These innovations have improved operational efficiency and positioned BHFL as a tech-forward housing finance player.
#10 Bajaj Housing Finance IPO Review: Risk Factors
- The Indian housing finance market is highly competitive, with major players like SBI, HDFC, and LIC. To gain a competitive edge, BHFL will need to provide attractive interest rates and exceptional customer service.
- The company is sensitive to interest rate fluctuations. Changes in the RBI’s repo rate could affect the rates it charges its customers.
- The company’s assets are primarily concentrated in four states and New Delhi. Adverse developments in these regions, such as economic downturns, regulatory changes, or natural disasters, could significantly affect the company’s business and financial stability.
Bajaj Housing Finance IPO Analysis: Conclusion
Bajaj Housing Finance IPO comes at a time when the housing finance sector in India is poised for significant growth. With its diverse product offerings, prudent risk management, focus on high-quality customers, and backing from the Bajaj Group, BHFL is well-positioned to capitalize on the country’s growing demand for housing. For investors, this IPO represents a chance to invest in a company with strong fundamentals, impressive growth prospects, and a well-managed loan book. There is also a strong premium in grey market on Bajaj Housing Finance IPO.
