Why Bajaj Housing Finance IPO is a Must-Watch for Investors in September 2024
Sep 6, 2024
The upcoming Bajaj Housing Finance IPO is generating significant buzz in the investment community, and for good reason. Scheduled to open for subscription on September 9, 2024, this IPO is poised to be one of the most anticipated events in the financial markets this year. Here’s a detailed look at why this IPO is a must-watch for investors.
About Bajaj Housing Finance Limited
Bajaj Housing Finance Limited (BHFL) is a subsidiary of Bajaj Finance Limited and is promoted by Bajaj Finserv. Established in 2008, BHFL has grown to become a significant player in the housing finance sector in India. The company offers a comprehensive range of mortgage products, including home loans, loans against property, lease rental discounting, and developer financing. With a strong focus on customer satisfaction and innovative financial solutions, Bajaj Housing Finance Limited has built a robust portfolio and a loyal customer base.
BHFL is registered with the National Housing Bank (NHB) and has been identified as an upper-layer Non-Banking Financial Company (NBFC) by the Reserve Bank of India (RBI). The company’s robust risk management practices and top-tier credit ratings further strengthen its position in the market.
Details of the Bajaj Finance Limited IPO
The Bajaj Housing Finance IPO is priced in the range of ₹66 to ₹70 per share. The total issue size is ₹6,560 crore, which includes a fresh issue of shares worth ₹3,560 crore and an offer for sale (OFS) of shares worth ₹3,000 crore.
The proceeds from the IPO may be used to enhance the capital base, so as to help its future business requirements and lending activities. This strategic use of budget is expected to strengthen BHFL’s growth plans, making it a promising company to invest in.
IPO Subscription Date | September 9, 2024 - September 11, 2024 |
Allotment Date | September 12, 2024 |
Listing Date | September 16, 2024 |
IPO Price Band | ₹66 -₹70 per share |
Lot size | 214 shares |
Total Issue Size | ₹6,560 crore |
Financial Performance and Growth Prospects
BHFL has shown strong financial overall performance during the last few years. For the year FY24, the company mentioned a net earnings of ₹1,731 crore, marking a growth of 38% from the previous year. This consistent increase in profitability is a fine indicator for potential investors. Additionally, the corporation’s diverse product portfolio caters to an extensive variety of clients, from homebuyers to big developers, enhancing its market reach and revenue streams.
Financials (in ₹crores) | FY24 | FY23 | FY22 |
Revenue | 7,617 | 5,665 | 3,767 |
PAT | 1,731 | 1,257 | 709 |
Net worth | 12,233 | 10,503 | 6,741 |
Borrowings | 69,129 | 53,745 | 41,492 |
Net Interest Margins(%) | 4.10 | 4.50 | 4.00 |
Net NPA(%) | 0.10 | 0.4 | 0.5 |
AUM Growth(%) | 32.0 | 29.8 | 37.2 |
EPS(₹) | 2.6 | 1.9 | 1.5 |
Peer Comparison based on Net NPA(%)
Companies | AUM (in ₹ crs) FY24 | Net NPA (%) FY24 |
LIC Housing Finance | 2,50,000 | 1.63 |
Bajaj Housing Finance | 1,50,000 | 0.10 |
PNB Housing Finance | 75,000 | 0.95 |
Tata Capital Housing Finance | 45,000 | 0.40 |
Can Fin Homes | 30,000 | 0.42 |
Aadhar Housing Finance | 15,000 | 0.65 |
Aavas Financiers | 12,000 | 0.67 |
Home First Finance Company | 10,000 | 1.20 |
Peer Comparison based on P/E(X)
From the above 2 tables, an investor can understand that Bajaj Housing is managing a large amount of AUM with lowest NPA across its peers (mentioned in the table).
Why Investor should consider Bajaj Housing Finance IPO
There are several compelling reasons:
Strong Market Position and Prominent Backing: Bajaj Housing Finance Limited, a completely owned subsidiary of Bajaj Finance Limited, is the second one-biggest housing finance company in India. Being a part of the distinguished Bajaj Group and supported by using its figure companies, Bajaj Finance and Bajaj Finserv, the organization enjoys vast brand trust and an extensive financial base.
Established Brand: Backed via Bajaj Finance's stellar recognition, BHFL has built a widespread presence inside the housing finance marketplace with its varied portfolio of mortgage products together with home loans, loans against property, and actual estate developer finance.
Solid Parent Company: Bajaj Finance Limited is one of the main NBFCs in India, recognized for its diversified business model, innovative financial solutions, and wide customer base.
Impressive Financial Metrics: The company’s stellar profitability increase, increasing mortgage book, and efficient value management make it a compelling investment opportunity. BHFL’s focus on keeping low non-performing assets (NPA) even as increasing aggressively is an indicator of good governance.
Favorable Industry Dynamics: The Indian housing finance industry is experiencing a rapid growth, driven by rising urbanization, affordable housing activities, and government regulations like Housing for All. BHFL is well-positioned to gain from these tailwinds, given its market share and attention on home loans.
Investor Sentiment and Market Response
The Bajaj Housing Finance Ltd. shares already show a strong Grey Market Premium (GMP) of ₹55 against the offer price of ₹70. This reflects a premium of nearly 80%, indicating high demand and positive market sentiment towards the IPO. The high GMP suggests that investors are optimistic about the company’s prospects and are willing to pay a premium for its shares even before the official listing.
Conclusion
The Bajaj Housing Finance IPO stands out as a compelling investment opportunity due to its strong market position, impressive financial performance, attractive pricing, and strategic use of proceeds. With a high GMP and a diverse product portfolio, this IPO is poised to deliver value to investors. While the short-term dip in ROE due to the capital infusion may be a consideration, the company’s long-term growth prospects and the broader impact on the housing finance sector make it a compelling investment case.
Investors should keep a close eye on the listing performance, as the current GMP and market sentiment suggest a potentially strong debut. With a solid foundation in the Indian housing finance sector and strategic growth plans, Bajaj Housing Finance stands as a must-watch IPO for both retail and institutional investors.