Bajaj Housing Finance IPO: Can BHFL Deliver on its Premium Valuation?
BHFL plans to increase its market share through deepening relationship with existing customers, onboarding new customers and expanding to newer geographies to build granular portfolio with reduced concentration risk.
Bajaj Housing Finance IpoBhfl ValuationHfc PeersMarket ShareGrowth ExecutionReal Estate NewsSep 04, 2024
A significant value could get added over next 12-15 months as 25-30 per cent asset under management (AUM) and earnings growth; and 14-15 per cent return on equity (RoE) is likely from BHFL in the next couple of years, YES Secuirties said.
Key strengths of BHFL are its growth execution, risk management and operating efficiencies, the brokerage added.
BHFL is valued at a premium to most HFC peers which, we believe, is justified given its robust growth, sturdy asset quality & superior tech-enabled platform. Though the margin profile is relatively vulnerable, there is enough headroom to improve operating efficiency which may drive RoE outperformance, said InCred Equities.
Being focused on prime salaried customers, competitive yields have placed the BHFL at par with banks while enjoying an edge over smaller players, thus aiding AUM growth. However, with the cost of funds being relatively expensive to banks, the margin profile of BHFL is relatively weak.
However, we believe that with diversity in the AUM profile (a balanced mix of superior-yield loans against property, lease rental discounting & developer loans), management does have room to manage yields. Also, there is enough headroom to improve operating efficiency (C/I ratio at 24 per cent) which can drive RoE outperformance, InCred Equities said.
BHFL plans to increase its market share through deepening relationship with existing customers, onboarding new customers and expanding to newer geographies to build granular portfolio with reduced concentration risk.
YES Securities said a strong growth along with focus on improving direct sourcing of Home Loans and increase in ATS across products has bettered Opex/Asset ratio for BHFL in recent years.
The shift in product mix helped BHFL in limiting the impact of a sharp rise in funding cost on the portfolio spread. Prudent customer selection and robust underwriting, risk management and collection framework underpins a marginal delinquent pool (which is the lowest among HFCs) and a negligible credit cost (even as Stage 2/3 coverage was strengthened), it said.
About Bajaj Housing Finance Ltd
Bajaj Housing Finance Ltd is a subsidiary of Bajaj Finance Ltd, one of the leading non-banking financial companies in India.
About InCred Equities
InCred Equities is a leading financial services company that provides investment banking, securities, and wealth management services.
About YES Securities
YES Securities is a leading investment banking and securities firm that provides a range of financial services to corporate and institutional clients.
Frequently Asked Questions
What is the price band of the Bajaj Housing Finance IPO?
The price band of the Bajaj Housing Finance IPO is Rs 66-70 apiece.
What is the size of the Bajaj Housing Finance IPO?
The size of the Bajaj Housing Finance IPO is Rs 6,560 crore.
Who is the parent company of Bajaj Housing Finance Ltd?
The parent company of Bajaj Housing Finance Ltd is Bajaj Finance Ltd.
What is the expected return on equity (RoE) from BHFL in the next couple of years?
The expected return on equity (RoE) from BHFL in the next couple of years is 14-15 per cent.
What is the key strength of BHFL according to YES Securities?
The key strength of BHFL is its growth execution, risk management and operating efficiencies.
Related News Articles
India Ranks 5th in Cross-Border Real Estate Investments in Asia Pacific Region
The Indian real estate market has attracted significant global capital, with Mumbai and Delhi-NCR emerging as top destinations for cross-border investments.
Tax Planning for Property Sellers: Choosing Between 12.5% and 20% LTCG Rates
The government's amendment to the long-term capital gains tax provision on immovable properties gives homeowners a choice between a lower tax rate of 12.5% without indexation or a higher rate of 20% with indexation. Here's a detailed guide to help you dec
Aaditya Thackeray Criticizes Maharashtra Government's MoUs Signed in Davos
Aaditya Thackeray, a prominent political figure, has criticized the Maharashtra government for signing a majority of Memorandums of Understanding (MoUs) with Indian companies, particularly in the real estate sector, during the World Economic Forum in Davo
State Budget Unlikely to Include Ladki Bahin Hike: Sources
According to sources, the upcoming state budget is unlikely to include a hike in the Ladki Bahin scheme, which provides financial assistance to girls and women in Karnataka. The government is focusing on other priority areas.
Uncovering the $730 Million Real Estate Commission Settlement of 2025
If you sold a home between 2017 and 2024, you may be eligible for a portion of the $730 million real estate commission settlement. Discover how to claim your share.
Birla Estates Achieves Rs 80 Billion Booking Value in FY25: A Significant Milestone
Birla Estates Private Limited, a wholly owned subsidiary of Aditya Birla Real Estate, has successfully achieved a booking value of Rs 80 billion in the financial year 2023-2024. This remarkable feat is a testament to the company's strategic focus and robust market presence, particularly in the Pune market, which recorded its biggest quarter sales.