Bajaj Housing Finance Limited has come up with an IPO that would open for subscription on September 9 and closes on September 11, 2024. Bajaj Housing Finance is a non-deposit-taking Housing Finance Company (HFC) registered with the National Housing Bank (NHB) since 2015. Notably, company has collected Rs 1,758 Crores from Anchor Investors days ahead of the IPO. Should you invest in Bajaj Housing Finance IPO? In this article we would provide Bajaj Housing Finance IPO Review covering the IPO details, about the company, financial performance, why to invest, risk factors, IPO Price valuation and review with analysis.
About Bajaj Housing Finance Limited
Company is a non-deposit taking Housing Finance Company (HFC), registered with the National Housing Bank (NHB) since 2015. They began offering mortgage loans in 2018. In September 2022, RBI classified the company as an “Upper Layer” NBFC as part of its revised regulations for NBFCs.
Company offers a broad range of mortgage products, including home loans, loans against property, lease rental discounting, and developer financing. Their primary focus is on individual home loans, which made up 57.8% of their total assets under management (AUM) as of March 2024, with a strong emphasis on salaried customers. Their AUM grew at a compound annual growth rate (CAGR) about 30.9% from 2022 to 2024, reaching ₹970.7 billion by June 2024.
The company is well-positioned in India’s housing finance sector, benefiting from the country’s significant housing shortage and growing demand for home loans, which could range between ₹50 trillion to ₹60 trillion in the coming years. Additionally, they boast a high credit quality portfolio, with over 75% of their home loans coming from customers with a CIBIL score above 750.
According to various reports, the company ranks among the largest and most profitable HFCs in India. They have a diverse mortgage product portfolio, high customer satisfaction, and some of the lowest non-performing asset (NPA) ratios in the industry. With a strong growth trajectory, they are a key player in India’s growing mortgage market.
Bajaj Housing Finance IPO Details
| IPO Opening Date | 09-Sep-24 |
| IPO Closing Date | 11-Sep-24 |
| IPO Listing Date | 16-Sep-24 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 10 per equity share |
| IPO Price band | Rs 66 to Rs 70 per equity share |
| Lot Size | 214 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 6560 Crores |
| Fresh issue | Rs. 3560 Crores |
| OFS | Rs. 3000 Crores |
What are the Objectives of the IPO?
Here are the objectives of the IPO:
- Offer for sale (OFS) – In OFS the selling shareholders would sell the shares and company would not get any benefit.
- Fresh issue – Fresh proceeds from the IPO would be used for the augment capital base to meet future business requirements of the company towards onward lending.
How is the Company Financial Performance?
Company’s shown significant increases in assets and strong growth in both revenue and profit over the past few years. Its net worth and borrowings have also risen, reflecting a solid expansion in operations and financial strength.
| Financial Year ending / Period ending (Amt in Crores) | ||||
| Period Ended | 31-Mar-22 | 31-Mar-23 | 31-Mar-24 | 30-Jun-24 |
|---|---|---|---|---|
| Assets | 48,527.08 | 64,654.14 | 81,827.09 | 88,538.83 |
| Revenue | 3,767.13 | 5,665.44 | 7,617.71 | 2,208.73 |
| Profit After Tax | 709.62 | 1,257.80 | 1,731.22 | 482.61 |
| Net Worth | 6,741.36 | 10,503.19 | 12,233.50 | 14,719.91 |
| Reserves and Surplus | 1,858.03 | 3,791.03 | 5,520.81 | 4,252.83 |
| Total Borrowing | 41,492.32 | 53,745.39 | 69,129.32 | 73,347.06 |
Company Key Performance Indicators
Bajaj Housing Finance IPO Market Capitalization is Rs 58,297 Crores. Below are some of the KPIs.
- Debt to Equity Ratio – 5.0
- RONW – 3.6%
- Profit to Book Value (P/BV) – 3.72
- AUM Rs Crores – 97,071.3
- Loan to Book value – 53%
- Gross NPA – 0.27% for the year ending Mar-24
- Net NPA – 0.1% for the year ending Mar-24
- Short Term Bank Rating – CRISIL A1+ by CRISIL Ratings
- Long Term Bank Rating – CRISIL AAA/Stable by CRISIL Ratings
Bajaj Housing Finance IPO Price Valuation
- The IPO price band is Rs 66 to 70 per share
- P/E Ratio Analysis
- If we consider the last year FY24 EPS of Rs 2.6, the P/E ratio works out to be 27x
- If we consider last 3 years weighted EPS of Rs 2.2, the P/E ratio works out to be 32x
- If we consider 3 months ending Jun-24 EPS and annualize it, the P/E ratio works out to be 29x.
- Means company is asking the IPO price in the P/E ratio of 27x to 32x.
- Comparison with listed peers
- The listed peers like Home First Finance trading at P/E 30.3x (Highest) and LIC Housing Finance Limited is trading at P/E of 7.7x (Lowest) and industry average P/E is 20x.
- Hence, the IPO Price band at P/E of 27x to 32x is overpriced
Positive Factors and Strenghts in Bajaj Housing Finance IPO
- The company is a leading non-deposit taking HFC in India, distinguished by its significant growth in assets, diverse mortgage products, and strong financial performance. It holds a prominent position in the industry, with high credit ratings, a low NPAs ratio, and a substantial share of prime, salaried home loan customers.
- Company is distinguished heritage of the “Bajaj” brand, which enjoys widespread recognition as a reliable retail brand with strong brand equity
- Company’s financial performance has shown strong growth, with significant increases in assets, revenue, and profits over the past few years. Their net worth and borrowings have also risen, reflecting a solid expansion.
- It is the second largest HFC in India in terms of AUM with a track record of strong growth driven by a diversified portfolio
- Strategic presence with omni-channel sourcing strategy, driven by customer-focused digitization initiatives and technology
- Well defined credit evaluation and risk management practices resulting in lowest GNPA and NNPA among its Peers in Fiscal 2024
- Access to diversified and cost-effective borrowing sources facilitated by the highest possible credit ratings from rating agencies
Risk Factors in Bajaj Housing Finance IPO
- Company IPO price is over priced compared to its peers. In short term, investors may or may not get good gains.
- Company’s inability to fully recover the collateral value or the sums due from defaulted loans promptly or entirely, could adversely affect its business.
- If they are unable to control the level of Gross Non-Performing Assets/Stage 3 Assets in its portfolio effectively, its financial condition could be adversely affected
- If they are unable to comply with the requirements stipulated by Reserve Bank of India, it could have a material adverse effect on its business.
- Its assets under management are concentrated in 4 states and the union territory of New Delhi and any adverse developments in these regions could have an adverse effect on its business.
- They have allotted Equity Shares to Bajaj Finance Limited, one of its Promoters, in Fiscal 2023 at a price lower than the current offer price.
- Its portfolio is significantly exposed to real estate and any significant downturn or any adverse developments in the real estate sector could affect its business.
- Investors can through internal and external risk factors indicated in the Bajaj Housing Finance IPO RHP
Bajaj Housing Finance IPO Reservation
- QIB Shares Offered – Not more than 50.00% of the Net offer
- Retail Shares Offered – Not less than 35.00% of the Offer
- NII (HNI) Shares Offered – Not less than 15.00% of the Offer
Bajaj Housing Finance IPO GMP
Grey Market Premium (GMP) is the price at which the IPOs are traded in unofficial / unregulated markets before the listing. While it does not give any major indication, understanding this can provide a direction of the listing gains.
- Bajaj Housing Finance GMP is at Rs 55 based on Livemint website
- Economic times listed the GMP of this IPO as Rs 51-51 indicating a potential upside of Rs 73%.
- Finology website indicated tentative GMP of Rs 45
Bajaj Housing Finance IPO Shareholders Quota
- The company has set aside shares worth Rs 5000 million for shareholders.
- Shareholders of Bajaj Finance Limited and Bajaj Finserv Limited as of August 30, 2024, can apply for these shares.
- Only bids at or above the offer price will be accepted in this category.
- The reserved portion of shareholders will not be more than 10% of the total offer size.
Bajaj Housing Finance IPO Review – Should you Invest or Avoid?
After going through all the parameters you might be wondering whether to buy this IPO or not.
Bajaj Housing Finance is part of Bajaj Group which has good brand value. Company is a leading Housing Finance company in India. It has strong financial growth in the last few years.
On the negative side, the IPO price is over priced. Its major business is from 4 states and 1 UT poses region concentration risk. Also, majority of its business is exposed to real estate and any downtrend in this sector can affect its business.
High Risk Investors can invest in such IPOs after considering all these risk factors.
Disclaimer: This article provides IPO review including pros, cons, review and analysis (which no other website does). If you like the article and want such unbiased reviews and analysis going forward, please click the like button and share this among your social media groups for higher reach. This article is for educational purposes only and should not be constituted as investment advice. Please consult your investment advisor before investing in this IPO.
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excellent review. super sir, annurkannan
thanks for giving the peer comparison with LIC HFin and stating clearly that the issue is over price. Grey market margins are not to be quoted at all as a basis for investment, really speaking.
100% with you on GMP. Like I said it is unofficial trading and we should not consider this except it gives a direction.
Dear Sir, I am a regular reader of your posts and they are extremely helpful to the investors.
I am a share holder of Bajaj Finance, hence I got an email from the company about this IPO. I would like to apply for this IPO in the priority quota for Bajaj Finance shareholders. It is told that such share holders should apply in the GREEN form. My doubt is how can I get the GREEN form. I don’t find any link in the RHP to down load this GREEN form. Will you please advise me the procedure to get the GREEN form.
Thanking you in anticipation
When you apply in your demat account, you would see shareholder quota box. Just tick that which is enough