Bajaj Housing Finance IPO: All You Need To Know

Bajaj Group is set to hit the primary after over three decades with an initial public offering of Bajaj Housing Finance Ltd. The housing financier, which plans to raise up to Rs 6,560 crore, will open for subscription on Monday.

The IPO consists of a fresh issue of equity shares worth Rs 3,560 crore and an offer for sale worth Rs 3,000 crore from its owner, Bajaj Finance Ltd. The price band is set at Rs 66–70 apiece.

The mortgage lender is a wholly owned subsidiary of Bajaj Finance, which in itself is a subsidiary of Bajaj Finserv Ltd. This IPO has come as BHFL aims to comply with the Reserve Bank of India's listing requirement norms.

BHFL is classified as an upper-layer non-banking finance company. According to RBI norms, upper-layer NBFCs are expected to list within three years of the list being created. The timeline to list BHFL ends on Sept. 30 next year.

The three-day issue will close on Sept. 11 and bidding for anchor investors will be on Friday. Proceeds from this issue will be used towards augmenting the company's capital base to meet future business requirements and onwards lending.

Bids can be made for a minimum of 214 shares and in multiples of 214 shares thereafter. For subscription by Bajaj Group employees, the reserved portion includes shares aggregating up to Rs 200 crore and for shareholders of Bajaj Finance and Bajaj Finserv, the reserved portion includes shares worth up to Rs 500 crore.

Kotak Mahindra Capital Co., BofA Securities India Ltd., Axis Capital Ltd., Goldman Sachs India Securities Pvt., SBI Capital Markets Ltd., JM Financial Ltd. and IIFL Securities Ltd. are the lead managers of the offer.

• Issue opens: Sept. 9.

• Issue closes: Sept. 11.

• Issue price: Rs 66–70 per share.

• Total issue size: Rs 6,560 crore.

• Fresh Issue: Rs 3,560 crore.

• Offer for sale: Rs 3,000 crore.

• Bid lot: 214 shares.

• Listing: BSE and NSE.

BHFL primarily focuses on providing mortgage loans to upper-end individual homebuyers as well as large-scale developers in India. Backed by the strong parent, Bajaj Group, the housing finance company has an extensive distribution network of 215 branches as on June 30.

The company, which commenced mortgage lending in financial year 2018, is the largest non-deposit taking HFC in terms of assets under management. It also has the highest salaried customer mix in home loan portfolio among large HFCs and has the lowest gross-bad-loan and net-bad-loan ratios among large HFC peers in the industry.

The company’s assets under management rose to Rs 97,000 crore at the of June quarter from Rs 74,100 crore in the year-ago period. The average ticket size, particularly of the home loan segment, remained much higher at Rs 46 lakh as compared to Rs 25–29 lakh among its listed peers.

The mortgage lender also has the lowest gross non-performing assets and net NPA among its peers in the last financial year. The GNPA ratio was 0.3% and NNPA ratio was 0.1%.

The company is the second-most profit-making HFC in India with a net profit of Rs 482.6 crore for the quarter ended June, according to Crisil Markets Intelligence and Analytics.

• High-interest-rate risk: Majority of loans are lent on floating interest rates, while a significant portion of borrowings are on a fixed-interest basis, thereby increasing the interest-rate risk.

• Credit assessment: Reliable on customers, credit bureaus for checking the creditworthiness of customers, making it difficult in assessing credit risks associated with day-to-day lending operations.

• Asset-quality concerns: Exposure to top 20 customers accounted for 8.8% as of June quarter, which are either lease-rental discounting or developer financing loans. This increases risks of accounts turning into an NPA.

• High risk to developer financing portfolio: This portfolio is susceptible to risks associated with regulatory actions against developers, construction delays or failures.