Bajaj Housing Finance IPO - Issue Details, Financials, Peer Comparison, Strategies, Risks And More: DRChoksey

Deven Choksey Research Report

Bajaj Housing Finance Ltd, will launch its initial public offering today and will conclude on Sept. 11. A reputable non-deposit-taking housing finance company has fixed the price band in the range of Rs 66 to 70 per share.

The Rs 6,560 crore IPO comprises of a fresh issue amounting to Rs 3,560 crore and an offer-for-sale aggregating to Rs 3,000 crore from its promoter company Bajaj Finance. The equity shares carry a face value of Rs 10 each.

Object of the offer

1. Utilize the net proceeds from the fresh issue towards augmenting its capital base to meet future business requirements towards onward lending.

2. Receive the benefits of listing of the equity shares on the Stock Exchanges.

3. A portion of the proceeds from the fresh issue will be used towards meeting offer expenses.

Strengths:

• Distinguished heritage of the Bajaj brand- A reliable retail brand with strong brand equity.

• Leading Indian HFC with diversified portfolio and strong AUM growth.

• 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 FY24.

• Access to diversified and cost-effective borrowing sources facilitated by the highest possible credit ratings from rating agencies.

• Experienced management team supported by a team of dedicated professionals and ability to attract and retain talented employees.

Future Growth Strategies

• Continue to leverage technology and analytics to enhance productivity, reduce expenses, improve customer experience and manage risks.

• Diversifying and strengthening market presence with strategic customer focus and comprehensive risk management.

• Continue to diversify its borrowing profile to optimize borrowings costs.

• Continue to diversify its borrowing profile to optimize borrowings costs.

Outlook and Valuation

Bajaj Housing Finance has seen consistent performance backed by its business growth, balanced portfolio, and improved operating efficiency. As a result, the HFC has seen a robust AUM growth of 30.9% CAGR over FY22-24 with 56.2% PAT CAGR.

The HFC is strategically positioned to meet the specific needs of its target customers, as demonstrated by its increased market access, minimal concentration risk, and diverse product portfolio. The prime housing segment (loans above Rs 5.0 million) experienced rapid growth from FY19 to FY24, with a CAGR of 20.2% and expected to grow in the range of 21.0-23.0%.

The segment accounts for a market share of approximately 35.0%. As a prominent player in this category, Bajaj Housing Finance is strongly positioned to leverage the growing demand for housing finance solutions, offering an attractive investment opportunity with significant long-term growth potential.

The company’s solid backing from its parent company and its capacity to invest in and explore new geographical areas are poised to bolster its market presence and increase its market share. Bajaj Housing Finance aims to achieve balanced growth by expanding its diversified loan portfolio and capitalizing on multiple positive trends in the mortgage industry.

The company plans to gradually increase its presence in the affordable housing segment while remaining mindful of market demand. Bajaj Housing Financeintends to use the net proceeds of its fresh Rs 35,600 million issue to bolster its capital and expand lending capabilities to enhance its position in the housing finance sector.

At the upper end of the price band, the HFC's price-to-book value multiple stands at 3.2 times for the post-IPO book value of Rs 21.9 per share as of June 30, 2024, which is reasonable compared to its peers.

The average price-to-book value for the industry is 3.0 times. We are optimistic on Bajaj Housing Finance’s outlook due to its substantial brand equity, strategic business expansion plans, extensive geographic coverage, and enhanced technological infrastructure through its omnichannel approach.

These factors are expected to improve operational efficiency and maintain favourable credit costs, supported by superior asset quality. Therefore, we recommend rating Bajaj Housing Finance's IPO as 'Subscribe'.

Click on the attachment to read the full IPO report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.