Bajaj Housing Finance
IPO Size: Rs. 6,560 cr
- Rs. 3,560 cr Fresh Issue for growth capital and to company with RBI’s scale-based listing deadline of Sep 2025 for upper-layer NBFCs
- Rs. 3,000 cr Offer for Sale (OFS) by promoter Bajaj Finance Limited (100% stake to drop to 89%)
Price band: Rs. 66-70 per share
M cap: Rs. 58,297 cr, implying 11% dilution
IPO Date: Mon 9th Sep to Wed 11th Sep 2024, Listing Mon 16th Sep 2024
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
India’s 2nd Largest Housing Finance Company (HFC)
Bajaj Housing Finance, wholly owned subsidiary of Bajaj Finance, is India’s #1 non-deposit taking HFC, and #2 HFC (behind LIC Housing), based on assets under management (AUM) of Rs. 97,071 cr, as of 30.6.24. AUM is split as 58% home loans (80%+ salaried borrower), 10% loan against property, 20% lease rental discounting, 11% developer finance /wholesale loans.
Fastest Growing among Top 6 HFCs
Company was established in 2017, and in just 7 years, AUM is nearing the trillion rupee mark. Since FY22, AUM has growtn at an impressive 31% CAGR, even on the then high base of Rs. 53,322 cr. Among the top 6 listed HFCs in India, it recorded the fastest AUM growth, as under:
| Company Name | AUM | 2.25yr AUM | NIM | Net NPA | Mcap | PBV |
| Amt in Rs cr | 30.6.24 | CAGR | % | 30.6.24 | Rs Cr | FY25E |
| LIC Housing | 2,88,665 | 6% | 2.9% | 1.68% | 38,220 | 1.1x |
| Bajaj Housing | 97,071 | 31% | 3.9% | 0.11% | 58,297^ | 3.0x |
| PNB Housing | 72,540 | 4% | 4.4% | 0.92% | 26,580 | 1.6x |
| Can Fin | 35,557 | 14% | 3.8% | 0.49% | 11,600 | 2.3x |
| Aadhar | 21,726 | 19% | 9.8% | 0.87% | 19,060 | 3.1x |
| Aavas | 17,842 | 22% | 8.6% | 0.72% | 14,850 | 3.5x |
^at Rs. 70 per share
Healthy Asset Quality
Despite 20% of AUM being higher-risk loan against property and developer loans, net NPA stand at 0.11%, the lowest among the above large HFC peers, due to Bajaj Housing’s strong underwriting skills.
Strong Financials
Net interest income stood at Rs. 2,509 cr in FY24 and Rs.665 cr in Q1FY25, with net interest margin (NIM) of 3.9%. Higher distribution income with low provisions increased pre-provisioning operating profit (PPOP) by 20% YoY to Rs. 640 cr in Q1FY25, from Rs. 533 cr in Q1FY24. Company clocks average yields of 10% with cost of borrowing of 7.9%, on AAA credit rating. 44% of Rs. 73,350 cr borrowings are on fixed rates of interest, and 56% on floating rates.
A Blue-chip from the House of Bajaj
Post-money book value per share (BVPS) of Rs. 22 leads to a PBV multiple of 3.2x. On FY25E BVPS of Rs. 24, PBV multiple on current year basis works out to 3.0x. This is attractive for company’s high growth, impeccable asset quality and Bajaj brand pedigree. From the peer comparison table above too, none match this trilogy at Bajaj Housing’s scale.
Parent Bajaj Finance is ruling at a FY25E PBV multiple of 5x. We don’t know how sustainable that is, but it only makes Bajaj Housing’s IPO pricing look attractive. Moreover, low public float of just 11% post listing will drive premium multiple for this fundamentally strong and growing company.
Bajaj Housing Finance aspires to be the Next HDFC in the making. Excellent underwriting skills (demonstrated through low NPAs) and controlled cost of funds (despite no public deposits) act as the key ingredients.