Bajaj Housing Finance IPO Analysis 2024: GMP, Subscription Status & More

The IPO (initial public offering) of Bajaj Housing Finance Ltd (BHFL) commences on September 09 and concludes on September 11, 2024. The IPO is a mix of fresh issue as well as an offer for sale (OFS) by the promoters and selling shareholders. 

The offering, carrying a Grey Market Premium (GMP) of 81%, attracted significant interest on its first day of bidding. However, investors need a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.

Bajaj Housing Finance IPO Details

• Issue Size: Rs 6,560 crore
• Fresh Issue: Rs 3,560 crore
• OFS: Rs 3,000 crore
• Price Range: Rs 66 – Rs 70
• Lot size: 214 shares

Bajaj Housing Finance IPO Subscription Status

The IPO of Bajaj Housing Finance Ltd witnessed robust demand on its first day, with subscriptions reaching 2.14 times by 5 p.m. Non-institutional investors subscribed 4.62 times their allocation, while retail investors subscribed 1.60 times. Meanwhile, qualified institutional buyers subscribed 1.14 times their reserved portion.

Overview of Bajaj Housing Finance

BHFL ranks as India's second-largest housing finance company and operates as a wholly-owned subsidiary of Bajaj Finance, the largest retail asset financier in the country. BHFL provides a range of mortgage products for both retail and commercial customers, featuring tailored offerings to facilitate cross-selling and up-selling. It holds a 34% market share in the prime home loan segment, which represents over 57% of its total product portfolio.

Bajaj Housing Finance Key Strengths

• Strong Market Position: BHFL is India's second-largest HFC in terms of assets under management, backed by strong growth and a diverse portfolio. 
• Impressive Growth Trajectory: BHFL has shown robust financial growth with its total income and net profit experiencing CAGRs of 42% and 56% respectively, from FY22 to FY24. 
• Impressive AUM Growth: The assets under management (AUM) have seen a significant increase, growing at a CAGR of 31% from Rs 53,322 crore in FY22 to Rs 91,370 crore in FY24. 
• Robust Risk Management: BHFL boasts industry-leading credit practices, achieving the lowest GNPA at 0.28% and NNPA at 0.11% among peers in Q1FY25.

Bajaj Housing Finance Risk Factors

• Geographical Concentration: 85% of BHFL's AUM is concentrated in five states as of June 30, 2024, exposing it to regional risks that could negatively affect its financial stability.
• Customer Concentration Risk: As of June 30, 2024, loans to BHFL's top 10 and 20 customers make up 6.2% and 8.8% of total loans, highlighting significant exposure to individual customer defaults.

Bajaj Housing Finance Valuation & Recommendation

The IPO is offered at a price-to-earnings (P/E) ratio of 27x based on FY24 earnings. Although the valuation is at a premium compared to some of its peers, we believe this premium is justified due to the robust backing from its parent company and its impressive track record of high-quality growth. Additionally, the positive grey market premium also indicates a strong market debut.

Considering BHFL's low exposure to risky assets, consistent profitability, strong parentage, and significant market potential, investors are advised to subscribe to the IPO from a medium-to-long term perspective.

For a deeper dive into this IPO, explore: IPO Corner on Liquide

Discover Investment Opportunities with Liquide

Unlock the potential of informed investing with Liquide, featuring pioneering tools like LiMo, an AI co-pilot for stock investing. Available on both Google Play Store and Apple App Store, Liquide offers up-to-date market analysis, expert recommendations, and real-time insights to guide your investment decisions. Download today and enhance your financial journey with Liquide's cutting-edge features.