Bajaj Housing Finance IPO: A steal at Rs 66-70 price band – Will you invest?
Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of 44 per cent in interest income, 42 per cent in total income, and 56 per cent in net profit.
About the Issue
Bajaj Housing Finance Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
September 09, 2024 |
| IPO Closing Date |
September 11, 2024 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Rs 10 per equity share |
| IPO Price |
Rs 66 to Rs 70 per equity share |
| Min Order Quantity |
214 shares |
| Listing At |
BSE, NSE |
| Total Issue |
937,142,858 shares of FV Rs 10* |
| (Aggregating up to Rs 6,560.00 Cr)* |
| Fresh Issue |
508,571,429 shares of FV Rs 10* |
| (Aggregating up to Rs 3,560.00 Cr)* |
| Offer for Sale |
428,571,429 shares of FV Rs 10* |
| (Aggregating up to Rs 3,000.00 Cr)* |
| QIB Shares Offered |
50% of the Offer |
| Retail Shares Offered |
35% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue to augment the capital base to meet future business requirements of the company towards onward lending.
Promoter holding
Bajaj Finance Ltd and Bajaj Finserv Ltd are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 100 per cent in the company.
Company profile
Bajaj Housing Finance Ltd, a part of the Bajaj group, is a non-deposit-taking Housing Finance Company (HFC) registered with the National Housing Bank (NHB) since 2015. Active in mortgage lending since FY18, the company provides tailored financial solutions to individuals and corporate clients for the purchase and renovation of homes and commercial properties. Its offerings include (i) home loans, (ii) loans against property, (iii) lease rental discounting, and (iv) developer financing.
As of June 30, 2024, the company had 3,23,881 active customers, with 83.2 per cent being home loan customers. As of March 31, 2024, the company’s assets under management (AUM) stood at Rs 913,704 million, representing a compound annual growth rate (CAGR) of 30.9 per cent from FY 2022 to FY 2024.
According to the CRISIL MI&A Report, as of June 30, 2024, the company holds several notable distinctions:
- The largest non-deposit-taking HFC (in terms of AUM) in India within seven years of starting mortgage operations.
- The second largest HFC in India.
- The second most profitable HFC in India, with strong returns on average assets and equity for Fiscal 2024 and the three months ended June 30, 2024.
- One of the fastest-growing HFCs/NBFCs-UL, based on AUM CAGR from FY22 to 2024.
- The lowest GNPA ratio of 0.28 per cent and NNPA ratio of 0.11 per cent among large HFCs in India.
- The highest possible credit ratings in India for both long-term and short-term borrowing programs.
As of June 30, 2024, the company operated a network of 215 branches across 174 locations in 20 states and three union territories, supported by six centralised hubs for retail underwriting and seven centralised processing hubs for loan management.
The company has also partnered with multiple insurance providers to offer bundled products to its customers. As a registered corporate agent with the Insurance Regulatory and Development Authority of India (IRDAI), it now offers a comprehensive range of insurance products, including life, general, and health insurance.
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Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
Q1FY25 |
| Interest Income |
3,481.75 |
5,269.24 |
7,202.36 |
2,063.54 |
| Total Income |
3,767.13 |
5,665.44 |
7,617.71 |
2,208.73 |
| Profit before tax |
959.86 |
1,700.06 |
2,161.32 |
629.88 |
| Net Profit |
709.62 |
1,257.80 |
1,731.22 |
482.61 |
The company has shown consistent and substantial growth in both total income and profit over recent years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of 44 per cent in interest income, 42 per cent in total income, and 56 per cent in net profit.
The June quarter performance was equally impressive, showing notable growth when annualised compared to FY24. In FY24, the company reported an impressive Return on Equity (RoE) of 14 per cent and a Return on Assets (RoA) of 2 per cent.
Valuation and outlook
| Company Name |
P/E |
P/B |
RoE (%) |
RoA (%) |
| Bajaj Housing Finance Ltd |
29 |
3.2 |
14 |
2 |
| Listed Peers |
|
| LIC Housing Finance Ltd |
8 |
1.19 |
16 |
2 |
| PNB Housing Finance Ltd |
17 |
1.75 |
12 |
2 |
| Can Fin Homes Ltd |
15 |
2.6 |
19 |
2 |
| Aadhar Housing Finance Ltd |
25 |
2.45 |
19 |
4 |
| Aavas Financiers Ltd |
28 |
3.67 |
14 |
3 |
| Aptus Value Housing Finance India Ltd |
25 |
4.09 |
17 |
8 |
| Home First Finance Company India Ltd |
32 |
4.82 |
16 |
4 |
The issue is priced with a P/BV ratio of 3.72 times, calculated using its Net Asset Value (NAV) of Rs 18.8 as of June 30, 2024. At the upper price cap, it is priced at a P/BV ratio of 3.20 times, considering its post-IPO NAV.
When we calculate the PE ratio for the company by considering the annualised FY25 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 29.
Though the company’s valuation and return metrics align with its listed peers without indicating exceptional outperformance, its strong market share and leading industry position set it up for substantial growth potential. Factors such as the government’s focus on 'Housing for All,' affordable housing initiatives, urbanization, and rising demand driven by increased affordability from higher incomes, all support its potential for future expansion.
Therefore, we advise investors to consider subscribing to the issue with a long-term investment horizon.