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.
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