Bajaj Housing Finance IPO opens on September 9: Check price band, lot size, business model & more

The much-awaited initial public offering (IPO) of Bajaj Housing Finance Ltd. is set to hit the markets next week. The ₹6,560-crore mainboard issue will open for subscription on September 9, and the bidding window will close on September 11.

If you are planning to bid for Bajaj Housing Finance shares, here is a complete guide to help you review the company’s business model, financials, and competitors, along with the important IPO details that you shouldn’t miss.

About the Bajaj Housing Finance IPO

Bajaj Housing Finance IPO is a 100% book-built offer comprising fresh issuance of shares and an offer for sale (OFS). The fresh issue will be 50.86 crore shares aggregating to ₹3,560 crore, while the OFS would be 42.86 crore shares aggregating to ₹3,000 crore. The selling shareholder in the OFS is Bajaj Housing Finance’s promoter company Bajaj Finance Ltd.

The IPO price band has been fixed at ₹66 to ₹70 per share. The lot size, or minimum bid quantity, for an application by retail investors, is 214 shares.

Business model and operations of Bajaj Housing Finance

Bajaj Housing Finance is a non-deposit taking housing finance company (HFC) registered with the National Housing Bank since September 24, 2015. It is a subsidiary of Bajaj Finance Ltd and has been engaged in mortgage lending since the financial year 2017-18.

The company offers financial solutions tailored to individuals and corporate entities for the purchase and renovation of homes and commercial spaces. Its mortgage product suite comprises home loans, loans against property, lease rental discounting and developer financing.

The company’s primary emphasis is on individual retail housing loans, complemented by a diversified collection of lease rental discounting and developer loans.

The company originates loans from direct and indirect channels. It sources direct loans through strategic partnerships with developers, self-sourcing through customer engagement, and partnerships with digital players. It also source loans indirectly through a distribution network of channel partners, aggregators, direct selling agents, third-party agents and connectors.

As of 30 June 2024, the Bajaj Group company had 3.23 lakh active customers, of which 81.7% were home loan customers.

The company had a presence in 23 states and Union Territories across India, with 215 branches in operation in FY24. Its total number of branches stood at 208 across 20 states/UTs in FY23, while in FY22, the company operated 201 branches in 17 states and UTs.

As of March 31, 2024, its employee strength stood at 2,372, compared to 2,788 in FY23 and 3,705 in FY22.

Key Financials

Bajaj Housing Finance is the second largest housing finance firm, with assets under management (AUM) of ₹97,070 crore as of June 30, 2024. It is also the fastest-growing HFC, with a compounded annual growth rate (CAGR) of 29.3% between FY 2019-20 and FY 2023-24.

Its revenue for FY24 stood at ₹7,617.71 crore, up 34% compared to ₹5,665.44 crore in FY23. Profit after tax (PAT) jumped 38% to ₹1,731.22 in FY24 against ₹1,257.8 crore in FY23.

The company’s overall loan disbursements increased to ₹44,656.24 crore in FY24 compared to ₹34,333.63 crore in FY23. The total loan disbursements in FY22 stood at ₹26,175.24 crore.

Its net profit increased at a CAGR of 56.2% between FY22 and FY24. Its net profit more than doubled to ₹1,731.22 crore in FY24 compared to ₹709.62 crore in FY22.

Expanding customer base and an increase in the loan book also helped the AUM to rise to ₹91,370.4 crore in FY24 compared to ₹53,321.72 crore in FY22, marking a CAGR of 30.9% during the period.

The company’s AUM grew to ₹91,370.4 crore in FY24, up 32% compared to ₹69,227.9 crore in FY23.

Competitors

The company faces competition from other housing finance players and non-banking finance companies (NBFCs) as well as scheduled commercial banks that offer home loans.

Among HFCs, the company has many prominent peers, some of which are backed by the government. These include names like LIC Housing Finance Ltd and PNB Housing Finance Ltd. Privately run competitors include Can Fin Homes Ltd, Aadhar Housing Finance, Aavas Financiers, Home First Finance, and Aptus Value Housing Finance, among others.

Strengths and key risks

The biggest strength of Bajaj Housing Finance is the distinguished “Bajaj” brand that enjoys widespread recognition with strong brand equity.

The company is also the second largest housing finance firm in India (in terms of AUM), with a track record of strong growth driven by a diversified portfolio. It also boasts a strategic presence with an omnichannel sourcing strategy driven by customer-focused digitisation initiatives and technology.

Major risks for the HFC include liquidity and funding risks, interest rate risk, credit risk, technology risks and operational risks.

Purpose of IPO

The public offer has been launched to comply with the Reserve Bank of India’s (RBI’s) mandatory requirement that ‘upper layer’ NBFCs should list within three years of being notified, i.e., September 2025.

The company proposes to use IPO proceeds from the fresh issue to augment its capital base and meet future business requirements for onward lending, which are expected to arise from the growth of its business and assets.

What’s in store for Bajaj Finance and Bajaj Finserv shareholders

The Bajaj Housing Finance IPO has reserved a portion of shares for existing shareholders of parent companies Bajaj Finance and Bajaj Finserv. The size of this quota is ₹500 crore.

Shareholders who own at least 1 share in Bajaj Finance or Bajaj Finserv are eligible to apply for shares in the Bajaj Housing Finance IPO under the shareholder category. The maximum bidding allowed under the shareholder quota is for shares worth ₹2 lakh.

Shareholders can also combine their applications under the shareholder quota with other applications in categories like HNI (high-net-worth individuals) and retail.

Even if not applying for Bajaj Housing Finance shares, Bajaj Finance and Bajaj Finserv shareholders can benefit as analysts believe that a strong listing of Bajaj Housing Finance could drive up the share prices of its parent companies.