5 Factors That Make Bajaj Housing Finance IPO a Smart Investment in a Growing Market

Summary:

Bajaj Housing Finance Limited (BHFL) is gearing up for an IPO to raise ₹6,560 crore through a combination of fresh share issues and an offer for sale. With rapid growth since its inception, a diversified loan portfolio, and strong financials, BHFL is well-positioned to capitalize on India’s surging housing demand. Here’s a detailed look at why this IPO stands out.

Why This IPO Matters for Investors

Bajaj Housing Finance Limited (BHFL), the second-largest mortgage lender in India after LIC Housing Finance, plans to raise ₹3,560 crore through fresh share issuance and ₹3,000 crore through an offer for sale.

Post-IPO, promoter Bajaj Finance will dilute its stake from 100% to 88.7%.

Key Facts & Figures:

• Capital Raise via IPO Fresh Issue of Shares: ₹3,560 crore
• Offer for Sale: ₹3,000 crore
• Promoter Stake Post-IPO: 88.7%

Growth Story Operations

• Started: 2018
• Assets Under Management (AUM)
• Growth: 29.3% annually (FY20-FY24)
• AUM (FY24): ₹91,370.4 crore
• AUM (June 2024): ₹97,071.3 crore
• Largest Competitor’s AUM (LIC Housing Finance, June 2024): ₹2,88,665 crore
• Loan-to-Value Ratio: 69.3% (June 2024)
• Average Loan Size: ₹46 lakh

Diverse Loan Portfolio

Drives Stability BHFL offers a wide range of lending services, making it more resilient. Home loans make up the majority (57%) of its assets under management (AUM), while loans against property (LAP) and lease rental discounting add further diversification.

Loan Composition>

• Home Loans: 57% of AUM
• Lease Rental Discounting: 20% of AUM
• Other Offerings: LAP, Developer Financing

Impressive Financial Performance

BHFL's financial metrics show strong growth, with notable gains in both net interest income and net profits. Despite the rising cost of borrowings, the company maintains a healthy return on assets (RoA) and low non-performing assets (NPA).

Financial Highlights (FY22-FY24)

• Net Interest Income Growth: 35.6% annually
• Net Profit Growth: 56.2% (to ₹1,731.2 crore)
• Net Interest Margin (NIM): 4%+
• Non-Performing Assets (GNPA) Ratio: Under 0.3%
• Cost of Borrowings: 7.6% (FY24), up from 5.9% (FY22)
• Return on Assets (RoA): 2.4% (up from 1.8%)

Premium Valuation for Strong Growth

BHFL’s valuation demands a price-to-book (P/B) multiple of 3.2, a premium over its peers such as LIC Housing Finance (P/B: 1.2) and PNB Housing Finance (P/B: 1.8). This premium is justified by BHFL’s stronger AUM growth, diversified offerings, and superior asset quality.

• Valuation Metrics Price-to-Book (P/B) Ratio: 3.2

Competitor Valuations:

• LIC Housing Finance P/B: 1.2
• PNB Housing Finance P/B: 1.8