Bajaj Housing Finance Limited IPO

Bajaj Housing Finance Limited IPO plans to launch its Initial Public Offering, IPO worth ₹6,560 crore. The IPO will consist of a fresh issue of ₹3,560 crore and an offer-for-sale (OFS) of ₹3,000 crore. Additionally, ₹500 crore is reserved for promoter shareholders, with the eligibility record date set for August 30, 2024. The shares are priced between ₹66 and ₹70 each, with a minimum bid size of 214 shares, up to ₹2 lakh. The IPO will open on September 9, 2024, and close on September 11, 2024, with listing expected on September 16, 2024, on both BSE and NSE.

Company Overview: 

(BHFL) is a subsidiary of Bajaj Finance Limited, a non-banking financial company in India. BHFL is designated as an ‘Upper-Layer NBFC’ by the Reserve Bank of India under Scale Based Regulations. It offers a wide range of financial products and services for both individual and corporate clients.

Based in Pune, BHFL specialises in providing financing solutions for buying homes, renovating properties, and investing in commercial real estate. It also offers property-backed loans for personal and business needs and working capital loans to support business growth. Additionally, BHFL provides financial support to real estate developers for residential and commercial projects and offers lease rental discounting services to developers and high-net-worth individuals.

Backed by Bajaj Finance Limited, an institution serving more than 88 million customers across the country, BHFL has established a strong reputation in the industry. The company’s long-term debt is rated AAA with a Stable outlook, and its short-term debt is assigned an A1+ rating by CRISIL and India Ratings, reflecting its financial stability and standing in the market.

Here are the key things you should know about this IPO

IPO Size: The total size of the Bajaj Housing Finance IPO is ₹6,560 crore.

Fresh Issue: The fresh issuance will be ₹3,560 crore.

Offer-for-Sale (OFS): The offer-for-sale component will be ₹3,000 crore.

Shareholders’ Quota: ₹500 crore worth of equity shares have been reserved for promoter shareholders (those holding shares in Bajaj Finance Ltd or Bajaj Finserv Ltd).

Eligibility Record Date: Investors holding shares of Bajaj Finance or Bajaj Finserv as of August 30, 2024, are eligible to apply under the shareholders’ quota.

Bid Size: The minimum bid is for 214 shares, and the total bid amount under the reserved portion should not exceed ₹2 lakh.

Price Band: The price band is set at ₹66 to ₹70 per share.

Listing Date: The shares are expected to be listed on September 16, 2024.

Stock Exchanges: The stock will be listed on both BSE and NSE.

The company raises capital by issuing bonds and debentures. The capital is then used to provide loans for acquiring or refurbishing residential and commercial properties.

Leading the Housing Finance Sector in India

Industry Standing:

 Bajaj Housing Finance stands as the second-largest Housing Finance Company in India and manages assets worth around ₹93,000 crores. The company boasts of the second-highest profit margins in the housing finance industry. Additionally, it holds the esteemed classification of being an “upper layer NBFC” by the Reserve Bank of India (RBI), which signifies that it is viewed as “too big to fail.

Core Product Offerings and Industry Classification

Product Focus:

Bajaj Housing Finance stands as the second-largest Housing Finance Company in India and manages assets worth around ₹93,000 crores. The company boasts of the second-highest profit margins in the housing finance industry. Additionally, it holds the esteemed classification of being an “upper layer NBFC” by the Reserve Bank of India (RBI), which signifies that it is viewed as “too big to fail.

Projected Growth in the Housing Finance Industry

Industry Growth: Between 2019 and 2023, the housing finance sector experienced a remarkable compound annual growth rate (CAGR) of 13.1%. Looking ahead, experts anticipate continued robust growth, with projections indicating a further expansion of 13-15% from 2024 to 2027.

Risks and Regulatory Considerations

Risks: The company operates within a heavily regulated industry, indicating that any alterations in government or RBI policies may significantly affect its activities. Moreover, its parent company, Bajaj Finance Limited, is engaged in the loan-against-property sector, potentially giving rise to conflicts of interest.

Regulatory Considerations: Bajaj Housing Finance operates in a highly regulated industry, which presents both opportunities and challenges. The company’s unwavering commitment to regulatory standards is mirrored in its capital adequacy ratio (CAR) of 21.28%, significantly surpassing the required 15%. This resilient adherence highlights the company’s financial stability and regulatory resilience.

However, the regulatory landscape within the sector means that any alterations in government policies or Reserve Bank of India (RBI) regulations could have a substantial impact on the company’s operations. Furthermore, potential conflicts of interest may stem from its parent company, Bajaj Finance Limited, which is active in the loan-against-property sector. These regulatory intricacies are essential for investors to take into account, as they have the potential to shape the company’s market performance and operational approaches.

Financial Performance and Key Metrics

Financials: The company has experienced a significant increase in its net interest income and revenue from operations. However, there have been recent declines in its net interest margin (NIM) and spread, which is a cause for concern since higher values in both are typically more favorable. Additionally, the company boasts one of the lowest gross and net non-performing asset (NPA) ratios in the industry, at 0.28% and 0.11% respectively.

Regulatory Compliance and Capital Strength

Regulatory Compliance: Bajaj Housing Finance not only meets but also surpasses multiple regulatory requirements. One of the key indicators of its financial strength is its capital adequacy ratio (CAR) of 21.28%, well above the mandated 15%.

Purpose and Objectives of the Initial Public Offering

IPO Purpose: Bajaj Housing Finance not only meets but also surpasses multiple regulatory requirements. One of the key indicators of its financial strength is its capital adequacy ratio (CAR) of 21.28%, well above the mandated 15%.
Shareholder Quota: To be eligible to apply for shares from the shareholder quota, investors must have held Bajaj Finance or Bajaj Finserv shares as of August 30th

Bajaj housing Finance IPO Details