Bajaj Housing Finance IPO: Key strengths, risks and business strategies from the RHP to consider before subscribing

Bajaj Housing Finance IPO has received a robust response from investors, with the issue being booked 32.13 times so far on Wednesday, the third day of subscription. Qualified institutional buyers have bid the most, subscribing 89.49 times the quota reserved for them. Non-institutional investors took the second spot with 33.10 times subscription. The retail investors' portion was booked 6.02 times. As the bidding ends on September 11, here's a look at strengths, risks and business strategies.

Bajaj Housing Finance IPO: Strengths

• According to Red Herring Prospectus (RHP), the company enjoys widespread recognition as a reliable retail brand due to the distinguished heritage of the "Bajaj" brand.
• It is the second largest housing finance company (HFC) with strong growth driven by a diversified portfolio.
• The company has a strategic presence with an omni-channel strategy driven by customer-focused digitisation initiatives and technology.
• It has a well-defined credit evaluation and risk management procedure, leading to the lowest GNPA and net NPA among peers in the financial year 2023-24.
• It has access to diversified and cost-effective borrowing sources.
• The company is led by an experienced management team.

Bajaj Housing Finance IPO: Business strategies

• The company will continue to leverage technology and analytics to improve productivity, reduce expenses, enhance customer experience, and manage risks.
• It intends to diversify and strengthen its market presence with strategic customer focus and comprehensive risk management.
• Bajaj Housing Finance, according to RHP, will continue to diversify its borrowing profile to optimise borrowing costs.

Bajaj Housing Finance IPO: Risks

• If the company is unable to fully recover the collateral value of sums due to defaulted loans, it could affect the business, cash flow, and financial condition.
• Unable to control gross non-performing assets (GNPA) can affect operations.
• Inability to comply with financial and other covenants under debt financing arrangement may adversely affect its business.
• A significant part of the company's home loan portfolio comprises lending to salaried and self-employed customers, who may be affected by factors such as loss of employment, business failure, personal emergencies, or insolvency. These facts can lead to customer defaults, thereby leading to non-performing assets (NPAs) and a decline in the rate of loan portfolio expansion.
• The volatility in interest rates could affect its net interest income, net interest margin, and value of its fixed-income portfolio.
• Interest rate and maturity mismatches between assets and liabilities could lead to liquidity concerns.
• Unable to second funding at competitive rates when needed can affect business.
• It is subject to periodic inspection by the National Housing Bank, and non-compliance with observations could result in penalties and fines.
• The business depends on the real estate sector.
• The business is subject to operational risks linked to the financial industry, including fraud.
• Assets under management (AUM) are concentrated in four states and the union territory of New Delhi.
• Loans to the top 10 and 20 largest customers amounted to 6.1% and 8.5% of total outstanding loans, respectively.
• The company relies on an external distribution network that does not work exclusively for the company.

Bajaj Housing Finance IPO, which opened on September 9, will close on September 11. After this, investors will be updated about their allotment status on September 12.   Investors allotted equity shares can expect them to be credited to their Demat account on September 13. The Bajaj Housing Finance IPO listing date is September 16.