Bajaj Housing Finance Sees Blockbuster Debut, Adds ₹79,000 Crore in Market Value

Bajaj Housing Finance Ltd. (BHF), a subsidiary of India's largest non-banking financial company Bajaj Finance, made a stellar trading debut on Monday, skyrocketing 2.4 times and adding ₹79,000 crore to its market value. The shares closed at ₹165, a gain of ₹95 or 135% over the issue price of ₹70.BHF's impressive debut follows strong demand for its shares during its ₹6,560 crore IPO, which saw 67 times more demand than shares on offer and garnered record ₹3.2 trillion worth of bids. The IPO also saw the highest-ever applications of almost 8 million.

Valuation and Growth Prospects

At the closing price, BHF was valued at ₹1.37 trillion, making it the country's most valuable housing finance company. Analysts at Phillip Capital have initiated coverage on BHF with a 'Buy' call, giving a target price of ₹210 and seeing a 27% upside.BHF's assets, which total around ₹971 billion, have expanded at an average rate of 33% over the past three years, positioning it as the second-largest housing finance entity in India. The company is expected to deliver "significant value" over the next 12 to 15 months due to ongoing growth prospects.

Factors Driving Strong Listing Gains

Analysts attribute BHF's strong debut to its robust financials, backed by the prestigious Bajaj Group, and the domestic market's willingness to pay a premium for high-quality businesses. The company's focus on salaried home loans, steady expense ratio, and benign credit costs have manifested in strong return ratios.BHF sources around 40% of its home loans from its parent company Bajaj Finance's customers and gives around 90% of its home loans to salaried customers, which reduces costs and augments its risk-adjusted spreads. The company also offers top-up home loans in addition to the original home loan, boosting its yield in the competitive market.

Caution for Investors

While most analysts are positive on BHF's long-term prospects, they advise caution as the stock now trades at over six times its estimated book value for FY 2025-26. Other listed HFC peers trade in the range of 0.9x and 3.5x despite a similar or better return on asset profile. Investors who were fortunate enough to secure allotments in the IPO may consider booking some profit, but those who want to hold their positions may do so by potentially setting a stop loss at ₹135 as a risk management strategy. However, it's essential to continuously monitor the company's performance and market conditions for informed decision-making.

by:- Paras Nagpal

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