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The initial public offering (IPO) of Bajaj Housing Finance (BHFL), a subsidiary of the renowned Bajaj Group, is set to open for bidding on Monday, September 9, marking one of the most anticipated market IPOs of 2024. The offering is notable not only for its size, but also because it represents the largest public offering of the year. Through this IPO, Bajaj Housing Finance aims to raise a total of ₹6,560 crore, comprising a fresh issue of equity shares worth ₹3,560 crore and an offer for sale (OFS) amounting to ₹3,000 crore. The fresh issue is intended to bolster the company's balance sheet, while the OFS allows existing shareholders to reduce their stakes.
Founded in 2008, Bajaj Housing Finance is a non-deposit-taking Housing Finance Company (HFC) registered with the National Housing Bank (NHB) since 2015. It has been offering mortgage loans since the financial year 2018. The company's strong performance in the financial sector, combined with the backing of the Bajaj Group, is expected to draw substantial interest from both institutional and retail investors. The shares in the unlisted market already suggest a promising listing for the company.
The price band for the IPO is set at ₹66- ₹70 per share. At the upper band of ₹70, the stock will be valued at 3.2x its trailing June 2024 book value (post dilution and adjusting for rights share allocation), according to domestic brokerage firm InCred Equities. This valuation appears higher compared to peers like LIC Housing Finance (1.2x), PNB Housing (1.7x), and Can Fin Homes (2.7x), but the brokerage believes it is justified given BHFL's robust and diversified AUM growth (+30% CAGR), sturdy asset quality (NPAs less than 1%), and superior technology platform.
Bajaj Finance, the parent company of BHFL, has been a pioneer in consumer durable financing and has maintained its market leadership despite intense competition from banks and credit card companies. The brokerage attributes Bajaj Finance's success to its management's continued focus on effective use of customer data, cross-selling initiatives, product diversification, and consistent investment in technology upgrades. While mortgages seem like a simple product, they have multiple dimensions, especially in an emerging market like India. The brokerage believes BHFL's management possesses the vision and capability to explore these dimensions over time, making the company attractive for mid-to-long-term investment. Therefore, InCred Equities recommends a 'subscribe' rating for the IPO.
Source: Bajaj Housing Finance IPO: How does it stack up against LIC Housing and PNB Housing Finance?