Bajaj Housing Finance IPO Review | Shareholder Quota? | CA Rachana Ranade #Finance

Hey folks CA Rachana Ranade here and I welcome you all to yet another shoot and release CashNews.co of BAJAJ Housing Finance limited IPO you might be like Rachana what’s the

matter these days you are doing a lot of shoot and releases the point is that it’s raining IPOs and that is the reason why I have to you know I think that I should cover at least the important ones which people would really want to know about because again the same old problem the IPO runs

into like 500 600 pages and no retail individual investor I feel has the time to go through all these pages so I just try my best to summarize it in like around 10 to 15 minutes CashNews.co and because it’s a shoot and release CashNews.co I may fumble upon something so please check out the

pinned comment and description box below right so today we are going to talk about this company we’re going to understand all the basic points something right from business model to Industry analysis to risks to financials everything right so first let’s get started what is BAJAJ

Housing Finance limited the name itself tells us it’s a Housing Finance

company so the name itself tells it right but it’s a non- deposit taking Housing Finance Company so basically they will not ask for deposits how how will they raise money in that case

they can issue Bonds they can issue debentures that’s how they can raise money and whatever money is raised out of that they can lend money okay now lend for what lend for it could be purchasing or renovating residential or commercial house properties okay so or commercial

properties basically so what are they into they are into number one home Loans number two Loan against property number three lease rental discounting as well as developer financing so I’ll quickly go through them one by one first of all they’re into

home Loans very simple right no need for me to even explain what could be a Loan against property so just to give you an example let’s say a person wants to renovate his house for renovating the house some collateral will be required can they offer their home

as a collateral for that yes that could fall under Loan against property number three is lease rental discounting so if if some person wants some money against the future lease rentals that the person may receive then that sort of lending also is what BAJAJ Housing

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance does and number four it’s about developer financing so assume that I am a construction so I basically construct houses right in that case as a builder as a builder also I may need

financing that would be called as a developer Finance okay but out of these where is their major focus primary focus is on housing Loans and why do I say

that reason is very simple if you have a look at the product segment for 2024 out of the total AUM which is around 9,30,000 Millions which is 91,000 crores I’m rounding it off out of 100% 57.8% goes to home Loan category so clearcut it’s their focus Home

Loans second highest is lease rental discounting the point that I mentioned against future Cash Flows they may give a home Loan so they may give a Loan sorry so that would amount to almost 19% 10 10% 10.5% for Loan

against property and developer Finance Chiller here and there others would amount to Max 2% okay that’s how their product segment looks like and one more important point is that this

company has been categorized as an upper layer NBFC by RBI what do I mean by this it’s an NBFC which could fall under a too big to fail category and that is the reason why RBI also wants to ensure that these companies these big housing

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance companies do not fail and for that obviously they’re going to put them through more stringent more strict norms okay so that nothing goes wrong so unfortunately if something goes wrong that it would be like

J but to avoid that they put on more stringent norms and that is why they treat that classify that as an upper layer NBFC now why I’m saying very big company so for that let’s have a look at some stats it’s the second largest HFC Housing

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance Company in India with an AUM of just now I mentioned around 97,000 CR rupees then question is which is the largest Housing none;">Finance Company if you know about it just press pause let me know the answer in the comment section if you don’t know the answer it’s okay in another 3 4 minutes I’ll tell that answer okay second important point is the second highest Profit making

Housing Finance Corporation in India lowest GNPA lowest NNPA it’s just 0.28% 0.11% sorry and it also has the highest possible Credit rating in India both for long-term

as well as for short-term boring program now very important to also understand about the overall industry analysis if the industry is set to grow then obviously companies in this space will benefit out of it it has been mentioned again in their RHP that from 2019 to 2023 the industry grew at around

13.1% CAGR and it is expected that from 24 to 27 it will grow at CAGR of 13 to 15% the same point you can also see in this graph where the same point that I mentioned right 13 sorry this one 13.1% CAGR and 13 to 15% CAGR then what is this chart about this is about overall NBFC’s and this one

is only about Housing Finance NBFC’s okay now going back why why is there one more positive point that even though the CAGR is good the overall penetration for Housing

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance if I were to compare in India with other countries India is still pretty much low penetration as far as housing color: #1a73e8; text-decoration: none;">Finance is concerned and that is the reason why a lot of Headroom is left for any Housing Finance Company in India is government also

boosting this process answer is yes everyone knows about PRADHAN MANTRI AAWAS yojana be it an urban one be it a gramin in one in both the cases there are certain Credit link subsidies so that the overall demand is stimulated right till now we have talked about all the positive

points any risks yes of course of course all these risks are also taken from there RHP this company operates in a pretty much regulated environment so be it government be it RBI be NHB they have a lot of stringent they have a lot of policies basically right and if there is a change in any of these

policy policies if there is a change in incentive structure it may impact the company okay plus one more point is that they’re holding company BAJAJ Finance Limited it is also engaged

in the LAP business which is the Loan against property business and that is the reason why because it’s a similar line of business the company has mentioned in their RHP that there is no assurance that conflict of interest will not occur so holding company and subsidiary

company both are into the same business of LAP but if you remember LAP was not their key point it was amounting to if I am not mistaken barely 10-10.5% right otherwise major is only Housing none;">Finance for this company housing Loans so okay okay kind of risk okay what about pending litigations you can see the amount of pending litigations but not a big deal according to me why even if I total up all the litigations against the company against the promoters

against the directors all amounts to roughly 1.38% of the total net Profit of the company so not a big deal per say moving on to the financials if I’m talking about the Top Line net interest Income it is growing it has grown from 13,000 Millions to almost

25,000 Millions from 22 to 24 and if I’m talking about Revenue from operations that is also steadily grown at a CAGR of almost 42.2% if I’m talking about net Profit margin that has also seen a steady growth the only pain point that I see here be it NIM

be it spreads both were initially increasing from 22 to 23 it has increased from 4% to 4.5% but down to 4.1% and spread also has gone up from 2.8% to 3% but down to 2.6% always remember be it NIM or be it spread the thumb rule is higher the better by the way I also have my pro- investor membership

if you go to the membership tab in our website you’ll find that we have a pro investor membership in that I make a sincere effort to you know educate people around companies which belong to different different sectors and this month’s stock of the month is again an NBFC where I’ve

explained all the terms like GNPA be NNPA be net interest margin be spread all these concept have have been you know explained in absolute depth so if you want to to build upon your knowledge definitely you can consider enrolling for our Pro investor membership right now going back to the

financials talking about the peer comparison nothing much to be discussed here only one point if you remember I told that this is the second largest which is the highest highest is LIC Housing none;">Finance limited okay backy return on Net Worth criteria if I check for BAJAJ Housing it’s 15.2% but if I take the average of all these it’s around 15.9% so nothing much to be discussed here to be honest even if I’m talking about the regulatory

requirement peer peer comparison I feel rather than peer comparison I would go ahead with checking what is the regulatory requirement what is the minimum requirement as per law and how much is the company maintaining so if I were to talk about CRAR the law the regulatory requirement is 15% company

has it at 21.28% about LCR which is the Liquidity coverage ratio the regulatory requirement is 85% for this company it’s 192.31% and even if it is about principal business criteria PBC regulatory requirement is 60% company 61.43% all in all in all areas they are maintaining

the ratio in fact they’re they have a slight higher ratio which is good as far as the if I if I were to compare it with the regulatory requirement question what is the company going to do with the money that there is they’re going to use it uh to increase their Capital

base and they’re going to use this money for onward lending basically whatever money is received from the IPO from the fresh issue a lot of that could be used for further lending and of course one of the object of the issue is benefits of listing BAJAJ

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance BAJAJ Finserve both these are like their holding companies right in that case it will be a value unlocking opportunity for the holding companies and that is one of the biggest benefit of listing for the holding company as

well and of course a basic brand name building for the entity which is Bajaj Housing Finance limited total issues of 6,560 crores out of which fresh issue is 3560 crores offer for sale is

3,000 Rec now one one question which so many people have been asking me and that was the reason why I thought of doing this IPO CashNews.co many people were asking me that if we buy the Shares of BAJAJ text-decoration: none;">Finance or BAJAJ Finserve now will we be eligible to apply from the shareholder quota answer is no because the cut off date for that was 30th of August so as on 30th of August you needed to have these Shares in your demat account then only you’ll

be eligible to apply from the shareholders quota so what would be the last date for buying in that case the last date would have been 29th of August because we have a t + 1 settlement mechanism so if if someone would have bought the Shares on 29th of August which

Shares either BAJAJ Finserv or Bajaj Finance either or any of these on 29th August then in their demat account they would have gotten these Shares by 30th of

August and that is where they would have been eligible to you know apply through the shareholders category now if I take my own case I would want to apply from the shareholders category assume and plus also from the retail individual investor category if I were to do from the both from both these

categories would that be allowed answer is yes you can apply from both these categories obviously you will have to put two applications and which would mean twice the money okay so if I were to apply for one lot which typically costs around 14 to 15,000 then I would have to have around 28 to 30,000

rupees because I’ll have to put two separate applications if I were to apply for this issue okay but again as I mentioned if someone wants to put only from either or of the categories that is also okay question what is the price band unfortunately it has not been announced as I shoot the

CashNews.co but when the price band gets announced I will update that in the pinned comment in the description box also I’ll update that on our WhatsApp channel the link of the WhatsApp channel is there again in the pinned comment and in the description box well that was an honest effort from

my side to sum up this whole IPO in like what 14-15 minutes I’m not sure what is the total time duration maximum 14-15 I think it’s around 12-13 only great I hope you enjoyed this 400 500 pager of summary plus IPO RHP summary into a small CashNews.co that’s my intent to summarize

things for you you I hope you enjoy these CashNews.cos I hope you find value in these CashNews.cos if you did please don’t forget to smash the like button if you have not yet subscribed to the channel please do that as well don’t forget to share this CashNews.co as well I’ll see

you in the next one till then take care JAI HIND and bye-bye