The Rs 6,560 crore initial public offering (IPO) of Bajaj Housing Finance had received a huge response from investors and the stock made a stellar debut on the bourses on Monday, with the stock opening at more than the double the issue price.
With assets under management of Rs 97,100 crore as of the April-June quarter, Bajaj Housing Finance is the largest non-deposit-taking housing finance company (HFC) in the country. The company's IPO is the largest so far this year.
On Monday, the shares made a stock market debut at Rs 150 a share, an 114 per cent premium to its issue price of Rs 70. It was trading at around Rs 158.50 in late morning trading, up 5.7 per cent from its opening.
The public issue of the Bajaj Finance subsidiary had been subscribed close to 64 times last week and attracted subscription of over Rs 3.2 lakh crore, versus its issue size. The Rs 6,560 crore IPO included a net public issue of Rs 4,802 crore and an anchor investor portion of Rs 1,758 crore. It had received highest ever number of applications at 88.94 lakh.
According to analysts, Bajaj Housing Finance issue was valued at a premium to most other housing finance companies, but that was justified given its strong growth and sturdy asset quality.
Large HFCs along with top private banks and State Bank of India remain key competitors of Bajaj Housing Finance due to their wide presence as well as competitive interest rates. However, Bajaj Housing Finance is gaining traction on the back of extensive customer service, said Jignesh Shial of InCred Equities.
"Fastest turnaround time due to enhanced digital adoption in loan processing, as well as a high level of digitisation incorporated to enhance simplicity and efficiency in customer servicing are the key features of Bajaj Housing Finance that attract low-risk salaried customers to its home loan products. Small banks and HFCs are not major competitors of Bajaj Housing Finance, given their high interest rates. This enables cherry-picked balance transfers from small HFCs," he said.
In the year-ended March 2024, Bajaj Housing Finance reported 38 per cent rise in its net profit at Rs 1,731 crore, with net income rising 34 per cent to Rs 7,618 crore.
Bajaj Housing Finance's AUM has grown at a 31 per cent CAGR over FY2022-24, according to analysts at Nirmal Bang. Its gross non-performing assets (GNPA) of 0.3 per cent and net NPA of 0.1 per cent were among the lowest among peers, they added.
As such the industry outlook for the housing finance industry remains strong, given its low penetration, and seeing healthy growth on the back of rising disposable incomes and strong housing demand, say analysts. According to analysts at SMC Global, the housing finance market clocked a 13.1 per cent compounded annual growth between financial year 2019 to 2023. It is estimated to grow around 13-15 per cent over FY2024-2027.
"Strong parentage, the best credit rating, and impressive management team with an enviable execution track record help firmly position Bajaj Housing Finance in the structurally attractive housing finance space, amid favourable central/ state government policies and regulatory environment as well as growing demand," said Avinash Singh of Emkay Global Financial Services.
Prashant Tapse, senior vice-president (research) at Mehta Equities, said that the listing gains were above expectations and conservative investors could choose booking profits, while long-term investors could continue to hold the stock as the sector outlook remained very optimistic and the company had a well positioned business model.
