Published: 20th Sep 2024
By: Value Research
After a stellar IPO (initial public offering), Bajaj Housing Finance’s share price jumped by a massive 135% on September 16, 2024. With this, its market cap leapt to Rs 1.51 lakh crore, outstripping the combined market cap of other players, which totals Rs 1.48 lakh crore.
While IPO investors are currently reaping the fruits of such humongous returns, Bajaj Housing’s valuations raise questions on whether it’s a worthwhile investment or not for new investors. The next few slides explain why.
Bajaj Housing’s P/B ratio is currently eight times, more than double its peers’ average P/B ratio of three times
While Bajaj Housing reported an impressive three-year AUM (assets under management) growth at a CAGR of 30%, it is highly doubtful if a similar rate of growth is sustainable in the future, considering its gargantuan AUM.
Investing in Bajaj Housing solely due to its brand name may not be wise. We saw what happened with Tata Technologies. Like Bajaj Housing, Tata Tech also gave a bumper listing with more than 100% gains. But since then, it has failed to breach its listing day high, with the share price tanking by 8% in the last 12 months.
If you are keen on getting exposure to the housing finance industry, you can consider investing in other players, which are available at better valuations than Bajaj Housing.
For instance, LIC Housing, the second-largest company in terms of market cap, dropped nearly 6%, while the share prices of Can Fin Homes, PNB Housing and Avas tanked 3%, 7%, and 2%, respectively. This inadvertently improved the valuations of several housing finance companies, as seen in the table.
Investors should not construe this story as a Value Research recommendation. Please do your due diligence before making an investment decision.