Bajaj Housing Finance IPO: Are you planning to invest? Complete information including the company’s strengths, weaknesses and risks

Bajaj Housing Finance IPO: Complete information including the Company’s strengths, Weaknesses and Risks

Bajaj Housing Finance IPO analysis: The company intends to raise Rs. 6560 crore through IPO. This includes a fresh issue of ₹ 3560 crore and an offer for sale (OFS) of ₹ 3000 crore. After the IPO, the company’s market cap is expected to be between ₹ 54965.8 crore to ₹ 58297 crore.

Bajaj Housing Finance IPO: Bajaj Housing Finance (BHF)’s IPO is set to open today i.e. on September 9. Investors will have the opportunity to invest in it till September 11. The price band for the issue has been fixed at ₹ 66 to ₹ 70 per share. The company intends to raise Rs. 6560 crore through IPO. This includes a fresh issue of ₹3560 crore and an offer for sale (OFS) of ₹3000 crore. The company’s market cap after the IPO is expected to be ₹54965.8 crore to ₹58297 crore.

According to a report by CNBC TV18, the company’s valuation is based on a price-to-book value (P/BV) ratio of 3.01x to 3.19x for the lower and upper price bands. The promoter’s stake will reduce from 100% to 88.75% after the IPO. Here we have done a SWOT analysis of this IPO, which explains its strengths, weaknesses, opportunities, and threats.

Also read… Bajaj Housing Finance IPO Review and Detailed analysis

Strengths of Bajaj Housing Finance

Best-in-class asset quality: BHF has a strong portfolio, with an AAA rating reflecting its strong financial health.

Strong brand identity: The company benefits from the reputation and stability of the Bajaj brand.

Diverse and low-cost funding sources: BHF has access to cost-effective borrowing, which supports its operational efficiency.

Stable risk management: The risk-weighted assets (RWA) to assets under management (AUM) ratio has remained stable despite a decline in traditional home finance loans.

Weaknesses of Bajaj Housing Finance

Declining net interest margin (NIM): Despite the growth in the high-yield portfolio in recent quarters, the NIM is declining due to rising funding costs.

Regional concentration: A significant portion (69.5%) of BHF’s AUM comes from just three states, making it vulnerable to regional economic risks.

Compliance issues: The company has faced issues of non-compliance with RBI regulations and internal audit gaps in the past.

Bajaj Housing Finance has these opportunities

Reducing the cost of funds through IPO: Funds raised can reduce BHF’s borrowing cost, thereby improving margins.

Growing housing finance sector: India’s housing finance market is still underpenetrated, which has potential for growth.

Increase in developer loans: BHF has doubled its developer loan portfolio in the last 27 months without any significant asset quality deterioration.

Risk factors of Bajaj Housing Finance

Too much competition: With competitors like LIC Housing Finance (LIC HF) and Canfin Homes in the market, BHF will have to continue innovation and cost management to maintain its market position.

Financial details of Bajaj Housing Finance

Bajaj Housing Finance’s AUM grew from ₹53,321.72 crore in FY22 to ₹97,071.33 crore in Q1FY25, indicating strong loan book expansion. The RWA to AUM ratio has been between 62% and 66%, which shows BHF’s ability to diversify its loan portfolio as well as maintain risk management.

The company’s NIM has declined from 4.1% in FY22 to 3.9% in Q1FY25 due to rising interest expenses, although its return on assets (ROA) remains strong at 2.3 percent. BHF has maintained a low level of non-performing assets, with a gross NPA at 0.28% and net NPA at 0.11% in Q1FY25, which reflects its superior asset quality. In terms of NIM, ROA, and return on equity (ROE), BHF has outperformed competitors like LIC HF and PNB Housing Finance.

Overall, it can be said that Bajaj Housing Finance’s upcoming IPO is strong due to its solid fundamentals, diversified loan portfolio, and strong asset quality. The company has growth opportunities, especially in the housing finance space, but it needs to remain mindful of competition and compliance.