Is Bajaj Housing Finance IPO Good or Bad - Detailed Review
06 September 2024
8 min read
00:00 / 00:00
Bajaj Housing Finance Limited is kicking off its initial public offering which will be open from September 9, 2024, to September 11, 2024. While considering applying for this IPO, certain questions may arise in your mind, some of which include whether Bajaj Housing Finance IPO is good or bad, whether it is worth investing in it, and so on.
In this article, we will give the Bajaj Housing Finance IPO review with its business and fundamental analysis to better assess its IPO.
Bajaj Housing Finance IPO - Company Overview
Bajaj Housing Finance Limited is a non-deposit-taking Housing Finance Company (HFC), registered with the National Housing Bank since September 24, 2015. The company is engaged in mortgage lending since FY18. As of September 2022, the company has been identified and categorized as an “Upper Layer” NBFC ("NBFC-UL”) in India by the RBI as part of its "Scale Based Regulations (SBR): A Revised Regulatory Framework for NBFCs" dated October 22, 2021.
Under its scope of business, the company offers financial solutions tailored to individuals and corporate entities for purchasing and renovating homes and commercial spaces. Currently, the company’s comprehensive product suite comprises home loans, loans against property (LAP), lease rental discounting, and developer financing.
Among these products, the company primarily gives importance to individual retail housing loans, complemented by a diversified collection of lease rental discounting and developer loans. Consequently, its products cater to every customer segment ranging from individual homebuyers to large-scale developers.
Furthermore, the company has partnered with multiple insurance providers to offer bundled products to its customers. On December 22, 2023, it was officially registered as a corporate agent with the Insurance Regulatory and Development Authority of India (IRDAI), allowing it to broaden its insurance product offerings to include life, general, and health insurance. This strategic expansion not only addresses the diverse insurance needs of its customers but also creates an additional stream of fee-based income for the company.
To support its product offerings, the company has set up numerous branches across various states. As of June 2024, the company operated a network of 215 branches across 174 locations in 20 states and three union territories, supported by six centralized hubs for retail underwriting and seven centralized hubs for loan processing. This diversified geographic reach enables the company to cater to the specific needs of its target customers in both urban and upcountry areas, ensuring broad accessibility to its offerings across various regions.
Bajaj Housing Finance IPO - Financial Overview
The below table shows the financials of Bajaj Housing Finance Limited for the last 3 years
S. No. | Metrics | FY24 | FY23 | FY22 |
1 | Assets under Management (in Rs. crores) | |||
- Home Loans | 52,819.60 | 42,706.86 | 34,544.85 | |
- LAP | 9,567.93 | 7,816.89 | 7,405.28 | |
- Lease Rental Discounting | 17,636.80 | 11,259.48 | 6,869.42 | |
- Developer Financing | 9,599.33 | 5,669.32 | 2,898.70 | |
- Others | 1,746.74 | 1,775.35 | 1,603.47 | |
Total Assets under Management | 91,370.40 | 69,227.90 | 53,321.72 | |
2 | Disbursements (in Rs. crores) | 44,656.24 | 34,333.63 | 26,175.24 |
3 | Net Worth (in Rs. crores) | 12,233.50 | 10,503.19 | 6,741.36 |
4 | Average Ticket Size (in Rs. crores) | |||
- Home Loans | 0.46 | 0.46 | 0.42 | |
- LAP | 0.58 | 0.49 | 0.43 | |
5 | Interest Income (in Rs. crores) | 7,202.36 | 5,269.24 | 3,481.75 |
6 | Net Total Income (in Rs. crores) | 2,925.10 | 2,454.12 | 1,611.82 |
7 | Profit after Tax (in Rs. crores) | 1,731.22 | 1,257.80 | 709.62 |
8 | Yield on Loans (%) | 10.20% | 9.70% | 8.70% |
9 | Finance Cost as % of Average Borrowings (%) | 7.60% | 6.70% | 5.90% |
10 | Net Interest Margin (%) | 4.10% | 4.50% | 4.00% |
11 | Operating Expense to Net Total Income Ratio (%) | 24.00% | 25.70% | 29.20% |
12 | Profit before Tax Margin (%) | 28.40% | 30.00% | 25.50% |
13 | Credit Cost (%) | 0.10% | 0.20% | 0.50% |
14 | Return on Average Assets (%) | 2.40% | 2.30% | 1.80% |
15 | Return on Average Equity (%) | 15.20% | 14.60% | 11.10% |
16 | Leverage | 6.7 | 6.2 | 7.2 |
17 | GNPA Ratio (%) | 0.27% | 0.22% | 0.31% |
18 | NNPA Ratio (%) | 0.10% | 0.08% | 0.14% |
19 | Provision Coverage Ratio (%) | 63.70% | 63.60% | 54.30% |
20 | Capital Adequacy Ratio (%) | 21.28% | 22.97% | 19.71% |
From the above table, we can see that the company has a robust financial performance. Over the past three years, the company has consistently increased its AUM from Rs. 53,321.72 crores in FY22 to Rs. 91,370.40 crores in FY24. This AUM refers to the total value of loans the company has on its books through which it will earn its interest income.
Along with the rising AUM, the company has also managed to increase its interest income every year and this value was reported at Rs.7,202.36 crores during FY24. Similarly, its profits have also increased every year and after accounting to all the expenses, the company has reported a net profit of Rs. 1,731.22 crores. From the total revenue, the company earns its major portion of the revenue from the home loan segment.
Furthermore, the company has reported increasing return ratios every year. For FY24, the company has reported a healthy ROA of 2.40% which an indicating of efficient use of its assets to generate profits. Similarly, the ROE of the company was reported at 15.20% which indicates the company has given a good return to its shareholders.
Over the past three years, the company has reported a very low GNPA, and the GNPA during FY24 was reported at 0.27%. Additionally, the NNPA was 0.10% after accounting to provisions set aside by the company.
The company also maintained a healthy Provision Coverage Ratio and Capital Adequacy Ratio which reported at 63.70% and 21.28%, respectively. These strong metrics show the company has enough reserves to cover potential losses from bad loans and a solid capital buffer that exceeds regulatory requirements.
Bajaj Housing Finance IPO - Geographical Overview
State/Union Territory | AUM (Rs. crores) | % of total AUM | Disbursements (? crores) | % of total Disbursements | Branches |
Maharashtra | 31,105.91 | 32.00% | 4,296.05 | 35.80% | 55 |
Karnataka | 22,059.70 | 22.70% | 2,537.77 | 21.10% | 20 |
Telangana | 14,325.39 | 14.80% | 1,646.33 | 13.70% | 12 |
Gujarat | 7,847.26 | 8.10% | 1,269.28 | 10.60% | 29 |
New Delhi | 7,361.93 | 7.60% | 836.09 | 7.00% | 6 |
Total | 82,700.19 | 85.20% | 10,585.52 | 88.20% | 122 |
Gross Total | 97,071.33 | 100.00% | 12,003.51 | 100.00% | 215 |
From the above table, you can see that the company’s Assets Under Management (AUM) are heavily concentrated in four states—Maharashtra, Karnataka, Telangana, Gujarat—and the union territory of New Delhi, which together make up 85.2% of the total AUM. The company also has a significant portion of its loan disbursements from these regions, making it vulnerable to adverse developments in these areas, such as political, economic, or market changes, which could negatively impact its business, operations, cash flows, and financial condition.
Bajaj Housing Finance IPO - Industry Overview
According to the CRISIL MI&A Report, India's housing finance market remains significantly underpenetrated compared to other economies, indicating substantial growth potential for Indian housing finance companies. Between Fiscal 2019 and Fiscal 2023, the Indian housing finance market experienced a robust compound annual growth rate (CAGR) of approximately 13.1%, driven by rising disposable incomes, strong demand, and an increasing number of players entering the market. Looking ahead, CRISIL MI&A projects the overall housing finance segment to expand at a CAGR of 13-15% between Fiscal 2024 and Fiscal 2027.
Bajaj Housing Finance IPO - Peer Comparison
The below table shows the comparison of Bajaj Housing Finance Limited along with its listed industry peers as of FY24:
Name of the Company | Total Income (Rs. crores) | Face Value (Rs per share) | Basic EPS (?) | RoNW (%) | NAV (? crores) | NAV per Equity Share (?) |
Bajaj Housing Finance Limited | 7617.71 | 10 | 2.6 | 15.20% | 1223.35 | 18.2 |
LIC Housing Finance Limited | 27277.8 | 2 | 86.5 | 16.20% | 3148.01 | 572.3 |
PNB Housing Finance Limited | 7057.09 | 10 | 58.4 | 11.60% | 1497.44 | 576.6 |
Can Fin Homes Limited | 3524.69 | 2 | 56.4 | 18.80% | 434.39 | 326.2 |
Aadhar Housing Finance | 2586.98 | 10 | 19 | 18.40% | 444.98 | 104.3 |
Aavas Financiers | 2020.69 | 10 | 62 | 13.90% | 377.33 | 476.8 |
Aptus Value Housing Finance | 1416.84 | 2 | 12.3 | 17.20% | 376.79 | 75.5 |
Home First Finance | 1156.55 | 2 | 34.7 | 15.50% | 212.15 | 239.7 |
As you can see from the above table, Bajaj Housing Finance, with a total income of ?7,617.71 crores, is positioned as a key player in the housing finance sector, though smaller in scale compared to giants like LIC Housing Finance.
The company's Return on Net Worth (RoNW) of 15.2% indicates strong profitability and efficient use of equity to generate returns, demonstrating its ability to manage its resources effectively and provide value to shareholders. While its revenue is lower than industry leaders, its RoNW shows that the company is performing well in terms of profitability.
Bajaj Housing Finance IPO Details
Bajaj Housing Finance IPO Date
The IPO of Bajaj Housing Finance is open to subscription from September 9, 2024 to September 11, 2024. The shares will be allocated to investors on September 13, 2024, and the company will be listed in the NSE and BSE on September 16, 2024
Bajaj Housing Finance IPO Issue Price
Bajaj Housing Finance is offering its shares in the price band of Rs.66 to Rs.70 apiece. This means you would require an investment of Rs. 14,980 per lot (214 shares) if you are bidding for the IPO at the upper price band.
Bajaj Housing Finance IPO Size
The company is offering a total of 93,71,42,858 shares, amounting to Rs.6,560.00 Crores. Out of these, 50,85,71,429 shares worth Rs.3,560.00 Crores are offered through a fresh issue, and 428,571,429 shares worth Rs.3,000.00 Crores are offered through an offer for sale.
Apply for Bajaj Housing Finance IPO
Bajaj Housing Finance IPO Subscription Status
The Bajaj Housing Finance IPO was subscribed 48.42 times overall by September 11, 2024. The retail category saw a 6.82 times subscription, while Qualified Institutional Buyers (QIB) led with a 147.97 times oversubscription. Non-Institutional Investors (NII) subscribed 40.96 times, with large bids above ?10 lakh at 47.16 times and small bids below ?10 lakh at 28.55 times. Anchor investors were fully subscribed, while the employee segment saw 1.91 times subscription.
Is Bajaj Housing Finance IPO a Good or Bad Investment? Final Thoughts
Bajaj Housing Finance IPO Review: The IPO offers an investment opportunity in a growing player within India's expanding housing finance market. The company demonstrates strong financial performance, with consistent growth in AUM, revenue, and profits, alongside low non-performing asset ratios and healthy return ratios.
However, potential investors should consider several factors: the geographic concentration of its business in five regions, competition from larger established players, exposure to interest rate risk that could affect profit margins and borrower repayment capacity. Investors should carefully evaluate these aspects along with their personal risk tolerance and investment objectives before deciding to participate in the IPO.
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