Bajaj Housing Finance Shares Soar to New Heights, Analyst Predicts 3X Surge from IPO Price
Bajaj Housing Finance (BHF), a subsidiary of India’s largest non-banking financial company, has been making headlines since its stellar debut on the stock market. The company’s shares surged to new heights, with a brokerage firm PhillipCapital initiating coverage with a “buy” recommendation and a price target of ₹210, which is 3 times its initial public offering (IPO) price of ₹70 per share.
Main Points
Bajaj Housing Finance’s Impressive Listing Performance
Bajaj Housing Finance became the fourth best listing of 2024, behind BLS E-Services, Premier Energies and Unicommerce e-solutions, when it listed on the bourses on Monday at a 114% premium to its IPO price. The stock eventually closed at ₹165, a gain of 135% from its IPO price.
Analyst’s Perspective on Bajaj Housing Finance’s Growth Potential
Phillip Capital believes that Bajaj Housing Finance is in a “league of its own” with a ticket size of ₹50 lakh being the “sweet spot for many home loan aspirants.” With that ticket size, Bajaj Housing Finance addresses nearly 65% of all home loan originations in India.
The brokerage also highlighted Bajaj Housing Finance’s increased focus on lease rental discounting (LRD), which is a positive move as it is a high-yield segment that provides operating leverage with scale. PhillipCapital expects Bajaj Housing Finance to have a balance sheet of ₹2 lakh crore in the next three years, with construction financing remaining rangebound between 8% to 10% of the total book.
Robust Demand and Listing Gains
Bajaj Housing Finance’s IPO was the biggest of the year so far in terms of size and also became the issue which received the highest demand in history. The three-day IPO received bids worth ₹3.24 lakh crore, compared to its IPO size of ₹6,560 crore.
The remarkable interest highlights a robust demand for new equity offerings in India, which stands out as a vibrant market for capital raising globally. Fueled by strong retail investor enthusiasm, new listings in the South Asian country have amassed ₹8.6 billion in 2024, surpassing the total raised in each of the previous two years.
Comparison to Peers and Valuation
In comparison to its listing day closing price, PhillipCapital’s price target of ₹210 for Bajaj Housing Finance implies a potential upside of 27%. The company’s market capitalization stood at ₹1.37 trillion on the debut day, making it the most valuable housing finance company in India.
Other listed housing finance company (HFC) peers trade in the range of 0.9x and 3.5x despite a similar or better return on asset profile. Bajaj Housing Finance’s increased focus on building a low-risk balance sheet is expected to lead to a Return on Assets (RoA) of over 2% and Return on Equity (RoE) of around 12% in the near-term.
