Bajaj twins are back in the limelight ahead of Bajaj Housing IPO; here’s what it means for shareholders

About Bajaj Housing and its IPO

Founded in 2008, Bajaj Housing Finance is a non-deposit-taking Housing Finance Company (HFC) registered with the National Housing Bank (NHB) since 2015 and has been offering mortgage loans since the financial year 2018.

The RBI has identified and classified it as an "upper layer" NBFC in India. Its wide range of mortgage products includes home loans, loans against property, lease rental discounting, and developer financing.

The NBFC is looking to raise a total of ₹6,560 crore from its primary stake sale, which includes a fresh share sale of ₹3,560 crore and an offer-for-sale (OFS) of ₹3,000 crore from its promoter Bajaj Finance Ltd. Anchor book for the issue will open on Friday, September 6.

The Bajaj Housing Finance IPO will open for subscription on Monday, September 9. The company will be offering its shares in the range of ₹66-70 apiece. Investors can apply for a minimum of 214 equity shares and their multiples thereafter. The issue will close for bidding on Wednesday, September 11.

The non-banking lender aims to use the amount raised from the public offer to strengthen its capital base for future lending activities and cover offer-related expenses. The IPO listing will help the company with the benefits of brand recognition and public presence as a listed entity on the secondary market.

For the entire FY24, the housing finance firm recorded a net profit of ₹1,731 crore, reflecting a 38% increase from ₹1,258 crore in FY23.

The company's assets under management (AUM) stand at ₹91,370 crore as of FY24 and at ₹97,071 crore for the first quarter of FY25. The AUM growth has been at 30.9% and profit growth stood at 56.2% over FY22-24.

In June, Bajaj Finance announced that its arm Bajaj Housing Finance was classified as 'NBFC-Upper Layer' and hence, it is mandatorily required to be listed on or before September 30, 2025.

What does this IPO mean for Bajaj Finance and Finserv?

By investing in both Bajaj Twins, investors stand to gain from potential growth in these stocks. It also increases their chances of getting shares in the Bajaj Housing Finance IPO through the allotment process, due to the special quota for shareholders of Bajaj Finserv and Bajaj Finance.

Special quota for IPO

Bajaj Finance has a 100% stake in Bajaj Housing, while Bajaj Finserv holds 51.34% in Bajaj Finance. Therefore both these companies are classified as promoters for Bajaj Housing. Hence the IPO has a special quota for shareholders of Bajaj Finserv and Bajaj Finance, shares worth ₹500 crore would be reserved for eligible shareholders of Bajaj Finance and Bajaj Finserv.

According to SEBI rules, those who held the parent company's shares on the RHP (Red Herring Prospectus) filing date will be eligible to apply for the subsidiary company under the shareholders' quota. Therefore shareholders of Bajaj Finance and Bajaj Finserv holding shares as of the end of last week's Friday i.e August 30, 2024 session are eligible to apply to the upcoming IPO under the shareholders' quota.

Further, the company has reserved shares worth ₹200 crore for the eligible employees of the company, Also of the net offer, 50% of shares will be allocated for qualified institutional bidders, while NII (Non- institutional investors) and retail investors will get 15% and 35% of the net offer.

Bajaj Housing is strategically important to Bajaj Finance, being its vehicle for growing the mortgage business, which is amongst the key focus areas for the Bajaj Group.

Bajaj Finance plans to hold a majority stake and is willing to continue to infuse capital, after having infused over ₹9,000 crore from fiscal 2017 till date, to support growth requirements over the medium term. The shared name also enhances Bajaj Finance’s moral obligation towards Bajaj Housing.

Conclusion

Bajaj Housing shares are likely to be listed on both BSE and NSE on September 16. The Bajaj Housing Finance IPO presents a growth opportunity for both Bajaj Finance and Bajaj Finserv, with a surge in buying interest among the stocks supported by a special quota for IPO allotment.