Bajaj Housing Finance IPO analysis

Bajaj Housing Finance IPO will open for subscription on September 9, 2024 and close on September 12, 2024. Here's a breakdown of the housing financier's strengths, weaknesses, and growth prospects to help investors make an informed decision. Bajaj Housing Finance IPO in a nutshell Quality: It reported a three-year average ROE of nearly 14 per cent during FY22-24. It recorded an average gross NPA (non-performing assets) of 0.3 per cent over the same period. Growth: During FY22-24, its AUM (assets under management) and profit after tax grew 31 per cent and 56 per cent per annum. Valuation: The stock will be valued at a P/E and P/B ratio of 33 and 3.2 times, respectively, compared to its peers' median P/E and average P/B of nearly 24 and 3 times. Overview: Housing demand is expected to remain buoyant backed by increasing disposable income, the nuclearisation of families, and government aid. This in turn will make credit demand for housing strong and benefit financiers like Bajaj Housing Finance. About Bajaj Housing Finance Bajaj Housing Finance is engaged in mortgage lending since FY18. It provides home loans and loans against property with a primary focus on individual retail housing loans. But its customers range from individual home buyers to large-scale developers. Its average loan ticket size of Rs 46 lakh is the highest in the industry. Strengths of Bajaj Housing Finance Prudent lending norms: Bajaj Housing Finance has the highest share of salaried customers at 87 per cent in its customer mix, underlining its cautious approach to lending. Its average GNPA (gross non-performing assets) ratio was as low as 0.3 per cent during FY22-24. Diversified products and presence: It is the most diversified player in the industry in terms of its offerings and market presence. The company has a comprehensive mortgage lending product suite, which includes home loans, loans against property and those for developer finance, among others. With 215 branches, it is present in 20 states and three union territories spread across 174 locations. Weaknesses of Bajaj Housing Finance High loan-to-value ratio (LTV): Bajaj Housing Finance has a high LTV ratio (70 per cent as of Q1 FY25) as compared to its peers. LTV ratio is the proportion of the collateral's value that the lender is financing through the loan. A high LTV means that the lender has higher risk in case the asset price (collateral) declines. IPO details Total IPO size (Rs cr) 6,560 Offer for sale (Rs cr) 3,000 Fresh issue (Rs cr) 3,560 Price band (Rs) 66-70 Subscription dates September 9-11, 2024 Purpose of issue To meet regulatory mandate Post-IPO M-cap (Rs cr) 58,297 Net worth (Rs cr) 18,280 Promoter holding (%) 88.7 Price/earnings ratio (P/E) 33.3 Price/book ratio (P/B) 3.2 Financial history Key financials 2Y CAGR (%) 12-months ending June 2024 FY24 FY23 FY22 NII (Rs cr) 37.6 2,570 2,510 2,058 1,326 PAT (Rs cr) 56.1