Bajaj Housing Finance: IPO review and detailed analysis #Finance

in the union budget for fi25 the Finance Minister mentioned Urban Development as a key priority and housing is an integral part of urban development now under the pmas yoga Urban 2.0

an investment of 10 lakh CR has been proposed to fulfill the housing needs of 1 CR Urban poor and middle class families this makes housing a hot theme which we discussed in a recent CashNews.co now one way of Profiting from the housing theme is to bet on housing

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance companies now until July 2023 sdfc limited was the big daddy of the sector but then it merged with sdfc bank now more than a year later another big Housing

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance company is set to debut on the Stock Exchanges the company is Bajaj Housing text-decoration: none;">Finance the IPO opens on 9th September and closes on September 11th at the Upper price band Bajaj Housing Finance will have a market cap of over 58,000 CR this

makes it the largest Housing Finance Company in India in terms of market cap now baj housing is Raising around 6500 crores which makes it the biggest IPO in 2024 so far by issue size so

should you invest in this IPO before or after listing this CashNews.co will help you decide that but before I start something important successful IPO investing requires not just analysis but also knowing some secret IPO hacks we discussed them in a CashNews.co earlier so after you have watched

this CashNews.co do watch that one as well now divided this CashNews.co in certain sections which are on your screen let’s start with understanding Bajaj housing none;">Finances business headquartered in Pune Bajaj Housing Finance is a non-deposit taking Housing #1a73e8; text-decoration: none;">Finance Company it started its operation only in F18 so it’s a relatively new company in the sector now in terms of its a with an a of over 97,000 CR it is the second largest Housing #1a73e8; text-decoration: none;">Finance Company in India after LC Housing Finance whose a stands at 2.89 lakh CR now baj Housing bold; color: #1a73e8; text-decoration: none;">Finance is a 100% subsidiary of baj Finance which is already a listed nbfc with a market cap of 4.58 lakh CR and Assets of

3.76 lakh CR as of June 2024 now baj Housing Finance deals in home Loans Loans against property lease rental discounting and developer financing lease rental

discounting is a Loan offered on rent generating properties now as of June 2024 about 58% of the company’s a was home Loans followed by lease rental discounting Loans of 20% now the company has direct and indirect channels for the origination

of its Loans under its direct Channel it generates business through strategic partnership with developers Direct Customer engagement and digital channels under its indirect Channel Channel it gets business through a distribution network of intermediaries such as Channel Partners

aggregators direct selling agents and third party agents now since this company doesn’t accept deposits it relies on external sources for its fund requirements as of June 2024 47% of the company’s borrowings originated from Banks and 38% through ncds the company enjoys the highest

Credit rating chrysal AAA and chrysle A1 Plus for both its long-term and shortterm borrowings this allows it to borrow funds at competitive rates all right let’s now take a look at the industry Outlook the growth of housing is directly connected to the growth in the economy

and this puts Bajaj Housing Finance in a Sweet Spot India is expected to be one of the fastest growing economies for the years to come in projected terms the economy is expected to grow by

6.8% in fi25 until f 29 the projected growth rate is expected to be in the 6 to 7% range now repo rates which directly influence the rate of interest to be paid on home Loans have remained stable in India over the last few quarters as Inflation moderates they can

very well fall as well this is expected to boost demand for Home Loans now many government initiatives are also providing Tailwinds for the Housing Industry this includes the estimated 11.1 lakh CR Capital expenditure by the government in fi2 5 also 2.2 lakh CR

have been allocated to Major rural schemes such as PM kissan saman nidi manrega PM grh Sak yoga and PM AAS yoga rural this is 12.6% higher as compared to fy2 24 allocation plus as we saw at the start of this CashNews.co under the PM AAS yoga Urban 2.0 an investment of 10 lakh CR has been proposed

to fulfill the housing needs of 1 CR Urban poor and middle class families now other key growth drivers include India’s population which is the largest in the world and is expected to keep growing a rising share of the urban population as a percentage of the total population a rising GDP per

capita a low percentage of the population borrows from the formal sources so it is expected to rise Indians prefer physical Assets as Savings Revenues over Financial Assets and so on so the Housing Industry does seem to be quite

well placed if you would like to know more about the sectors and stocks that will benefit from the housing tee you can watch our CashNews.co on the stocks for the next 5 years the link is in the description all right let’s move on to the company’s financials now let’s first check

the Revenue and Profit growth Bajaj Housing Finance has had Stellar Revenue and Profit growth of 42% and 56% perom over the

last 2 years let’s compare it with the Revenue and Profit growth of the top three listed housing Finance companies by

Revenues Bajaj Housing Finance does better than its peers but note that even the peers growth rate are quite attractive that’s again a Testament of the growth potential

in this industry next let’s check the return on Equity of baj Housing Finance versus its peers now baj Housing bold; color: #1a73e8; text-decoration: none;">Finance is ahead of LIC housing and pnb housing but it lags behind Canin homes next comes net interest margins or Nim net interest margin is the equivalent of Profit margin for

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance companies the higher the N the better here also Bajaj Housing Finance does well only P&B Housing

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance matches its n next let’s check the bad Loan picture of baj housing Wier it spear the lower the bad Loans the better here baj housing does

significantly better than its peers especially LIC Housing Finance whose gross non-performing Assets are over 3% so overall key financial suggest that baj housing is

fundamentally quite strong but fundamental strength alone doesn’t guarantee success in the Stock Market Valuations matter too so let’s check Bajaj housing’s Valuation wither its peers for

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance companies The Price to Book Ratio or the PB ratio is the go-to measure to assess Valuations it is derived by dividing the stock price by the book value per

share now as of June 2024 Bajaj housing’s book value per share is 18 .8 at the Upper price band of 70 the PB ratio comes out to be 3.72 now let’s compare this with the PB ratios of its listed peers Bajaj Housing #1a73e8; text-decoration: none;">Finance has a steeper Valuation as compared to its peers and the industry median let’s check some key IPO details now but before that let me ask you to subscribe to this channel if you aren’t already a subscriber and don’t

forget to press the Bell icon so you never miss a CashNews.co from us on your screen are the key details of the baj Housing Finance IPO the total IPO size of baj Housing

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance is 6560 crores which makes it the largest IPO of 2024 by issue size the second position comes ol electric which rais 61,000 cror in August 2024 now the IPO comprises both a fresh issue

as well an offer for sale or offs in a fresh issue new Shares are issued and in an offs existing shareholders sell their stake if an IPO just offs you should be careful as the company is not going to benefit from it on the contrary its existing shareholders are parting with their

stake so that requires some scrutiny now the existing shareholder selling the stake in the offs is the promoter of baj Finance itself the IPO opens on 9th September and closes on 11th

September as we discussed at the start of the CashNews.co the IPO price ban is 66 to 70 if you apply for this IPO and want to increase your chances of getting an a lot M you should apply at the cut of price or the Upper price band the minimum investment by retail investor in this IPO is about

15,000 rupees the total shareholding preissue is 780 Crow Shares it will increase to 833 Crow Shares post the IPO that’s the change of 51 Crow Shares now there’s also a quota for the shareholders of baj

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance and Bajaj fin serve in this IPO under this quota a shareholder can make an application of a maximum of 2 lakh all right let’s now try to evaluate this IPO through some

critical IPO related criteria we discussed this in our CashNews.co on how to analyze IPOs so do watch that CashNews.co for more details the first is the fresh issue versus offs now this IPO has both in the ratio of 54% to 46% the significant offs portion indicates that apart from Raising

Capital for the company the promoter is also looking at Monetary benefits for itself the second is the use of IPO proceeds now the offs proceeds will go to Bajaj none;">Finance and the stated reason for the proceeds from the Fresh issue is to meet the future business requirements of Bajaj Housing Finance now that’s fair enough now

one should be cautious if IPO proceeds are meant only for managing a crisis such as Debt repayment it’s good when IPO proceeds will be used for business growth the third criteria is if the company’s issued Shares in the past that are below the IPO price

now Bajaj Finance the promoter has has acquired 111 CR Shares in Bajaj Housing text-decoration: none;">Finance in the last year at the weightage average price of 18.1 that’s far below the IPO price band of 66 to 70 in fact the IPO price is almost four times higher than the acquisition price that’s a potential red flag secondly the promoter itself is selling

about 43 cr Shares via the offs when it acquired 111 CR Shares in the last year that might hint at opportunistic behavior on the part of the promoter given that the Indian Stock Market is booming the next criteria is litigations against the company

and promoters against the company there are litigations involving an amount of 24 crores against the promoters Bajaj Finance and Bajaj finv the amount is staggering 4,171

crores there are 23 criminal proceedings against the company and 47 against the promoters going on this could be a sign of worry fortunately contingent Liabilities against the company are quite lower Just 4 crores a contingent liability is a possible obligation that may or may not

occur depending on a future event so low to nail contingent Liabilities are a good thing let’s also see some of the key risk factors mentioned by the company in its RHP there are as many as 76 risk factors mentioned by the company in its RHP but most of them are kind of

disclaimers a few do stand out though these include the company’s a is concentrated in just four states and the union territory of New Delhi and in any adverse development in these regions can have adverse impact on the business the company has admitted that it has issued

Shares to its promoters NFI 23 at a price lower than the IPO issue price the company mentions the litigations against it and its promoters as a matter of concern the company’s promoters promoter group entities group companies and directors are engaged in business similar to

the company’s business and hence it can lead to a conflict of interest the company’s Loans are concentrated on certain customers its top 10 customers account for 6.2% of its Loans you can read the list of full 76 risk factors in the company’s RHP

okay so given all this information should you invest in baj Finance IPO let’s see rapid growth fundamental strength and a promising industry are all positives for baj

Housing Finance but the biggest plus is the baj parentage the Bajaj group is among India’s biggest and most reputed business groups and has multiple wealth creating companies the

strength of its promoters and the group sets baj Housing Finance apart from the rest in its industry but the IPO seems to have an opportunity stick B too the promoters are selling the stake

at a steep premium when they acquired Shares in the last year at a much lower price this premium is reflected in IPO Valuations too the litigations against the company and promoters are a cause of concern so is the concentrated risk of company’s business then

comes the competition not just from housing Finance companies but also from other n bfc’s that offer home Loans and certainly from Banks from an

investor standpoint there is no dirth of listed companies in the Housing Finance space and if you want to play the housing theme there are lot more options anyways so it remains to be seen

how worthy an option baj housing proves to be for investors over the long term as always if there are POS positives there are challenges too do let us know in the comment section whether you would invest in baj Housing text-decoration: none;">Finance and why and with this we have come to the end of this CashNews.co I hope you found this CashNews.co useful and if it did please share it with your friends and family I’ll be back soon with another CashNews.co till then take care investment in

Securities Market are subject to Market risks read all the related documents carefully before investing