Bajaj Housing Finance IPO: Should You Subscribe? Here's What Analysts Say

Bajaj Housing Finance IPO witnessed robust subscription on the first day of bidding, September 9. The issue was subscribed by more than 80 per cent in the initial few hours, indicating strong investor interest. The bidding process will end on September 11 and many analysts have already raised the "subscribed" banner on the D-street.

The Housing finance company is raising Rs 6,560 crore which includes a fresh issue of 50.86 crore shares and an offer-for-sale of 42.86 shares. The price band is set at Rs 66- Rs 70. Last week the mega IPO raised Rs 1,758 crore from anchor investors.

As of 1:30 PM, the shares of Bajaj Housing Finance were trading at a grey market premium (GMP) of Rs 58, commanding a premium of over 83 per cent.

Should You Subscribe? Here's What Brokerages Are Saying

Incred Equities- Subscribe

"BHFL is valued at a premium to most HFC peers which, we believe, is justified given its robust growth, sturdy asset quality & superior tech-enabled platform," Incred Equities said in its report.

The housing finance company is largely focused on prime salaried customers and offers competitive yields similar to banks, giving it an advantage over smaller competitors. However, its cost of funds is higher than banks, leading to weaker margins. Despite this, the brokerage firm believes that the diverse AUM profile, including high-yield loans and lease rental discounts, allows the housing finance company to manage yields effectively.

"Bajaj Finance or BAF, with its best-in-class management pedigree, strong promoter back-up and the ability to maintain high quality growth, has traded at a premium to peers which, we believe, is applicable to BHFL as well. We recommend subscription to the IPO." the brokerage firm said.

Anand Rathi- Subscribe

Besides having a strong and diverse AUM, Bajaj Housing Finance has one of the lowest GNPA (Gross Non-Performing Assets) and NNPA (Net Non-Performing Assets).

The company also holds the highest possible credit ratings for both long- and short-term borrowings. "The premium valuation is well-supported by the company’s accelerated AUM growth, driven by a diversified product portfolio, lower credit costs, and superior asset quality, all of which the company looks well placed to benefit from growing mortgage penetration in the country. Hence we believe that investors may consider to “subscribe” to this IPO," the brokerage firm said in its report.

StoxBox- Subscribe

The company's AUM has grown at a CAGR of 30.9 per cent between FY22 and FY24. This growth trajectory positions the company as the fourth fastest growing NBFC within the upper-layer category (as per RBI) in India, as per Manish Chowdhury, head of research, StoxBox. The company has demonstrated robust performance through strategic emphasis on enhancing direct home loan origination and increasing average ticket size across its product suite.

"The issue is valued at a P/BV of 3.8x on the upper price band based on FY24 book value, which is fairly valued. We, therefore, recommend a Subscribe rating for the issue on the back of a strong credit underwriting process and risk management framework which helps in mitigating adverse effects on the asset quality," Chowdhury added.

Motilal Oswal- Subscribe

"Bajaj Housing Finance benefits from distinguished heritage of the “Bajaj” brand, which enjoys widespread recognition as a reliable retail brand. It has strong risk management framework which helps it to maintain stable asset quality. The IPO is fairly priced at 3x FY25 P/BV. Given all the positives, recommend Subscribe to the issue," the weath management firm said in its report.

However, the company's AUM is concentrated in four states only. Any adverse developments in these regions could have an adverse effect on the housing finance company.