BHFL, a wholly-owned subsidiary of Bajaj Finance Limited, is a prominent player in the Indian financial sector. BHFL, headquartered in Pune, specialises in offering a wide range of financial solutions for home purchases, renovations, and commercial space financing.
The decision for Bajaj Housing Finance to become a publicly traded company is a strategic move that aligns with the RBI’s regulations for ‘upper layer’ NBFCs. These regulations require such companies to be listed on stock exchanges by September 2025.
This article provides readers with a comprehensive understanding of the significance of the Bajaj Housing Finance IPO in the Indian financial landscape, aiming to demystify its intricacies.
Bajaj Housing Finance Ltd IPO details
Bajaj Housing Finance Limited (BHFL), a subsidiary of the esteemed Bajaj Finance, has made headlines with its announcement to launch an Initial Public Offering (IPO) aiming to raise a substantial amount of ₹7,000 crore. This move marks a significant milestone for the company and is poised to be one of the largest IPOs in the Indian market since the Life Insurance Corporation of India’s offering in May 2022.
The IPO is structured to include a fresh issue of Bajaj Housing Finance shares, a price amounting to ₹4,000 crore, which will serve to bolster the company’s capital base and support its onward lending and business requirements.
In addition to the fresh issue, there will be an offer for sale (OFS) of up to ₹3,000 crore, where Bajaj Finance will offload its shares. This strategic distribution of fresh issues and OFS is designed to optimise the company’s equity structure and provide a lucrative opportunity for investors.
The IPO includes a reservation of equity shares for subscription by eligible employees and shareholders of promoters, ensuring that those who have contributed to the company’s success have an opportunity to participate in its growth.
Bajaj Housing Finance IPO reservation
| Investor category | Shares offered |
| Qualified institutional buyers (QIBs) | Up to 50% (may increase to 60% for anchor investors) |
| Non-institutional investors (NIIs) | Up to 15% |
| Retail investors | Up to 35% |
Source: DRHP – Bajaj Housing Finance Limited
The shares of Bajaj Housing Finance will be available for trading on the two major stock exchanges in India, the BSE and the NSE, ensuring extensive reach to interested investors across the country.
The IPO for Bajaj Housing Finance is underway to meet the RBI’s directive that necessitates major NBFCs, classified as ‘upper layer’, to be publicly listed by September 2025. Bajaj Housing Finance, with assets exceeding ₹50,000 crore, was included in the RBI’s specified list of significant NBFCs in September 2022.
The arrangement of the IPO is in the hands of a prestigious group of book-running lead managers, comprising of:
- Kotak Mahindra Capital Company Limited
- BofA Securities India Limited
- Axis Capital Limited
- Goldman Sachs (India) Securities Private Limited
- SBI Capital Markets Limited
- JM Financial Limited
- IIFL Securities Limited
The purpose of the Bajaj Housing Finance IPO is to strengthen the company’s capital base in order to fulfil its future business needs, especially for lending and other corporate purposes. The net proceeds from the issuance of new equity will be used to bolster the company’s capital structure and back its growth initiatives.
This strategic move is anticipated to improve the company’s capacity to broaden its services and sustain a strong liquidity profile, guaranteeing its competitiveness in the housing finance market.
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About Bajaj Housing Finance Limited
Bajaj Housing Finance Limited (BHFL), a subsidiary of the renowned Bajaj Finance Limited, is an integral part of the vast Bajaj Group, which holds a significant position in India’s financial services industry.
BHFL has carved a niche for itself as a reliable source of housing finance, serving a wide array of customers throughout India. Its extensive range of services includes providing home loans for both purchasing and renovating properties, as well as financing for commercial real estate.
In addition, BHFL offers property-backed loans for both personal and professional use, along with working capital to aid in the expansion of businesses.
The firm is dedicated to ensuring customer satisfaction and promoting financial inclusivity. This is reflected in BHFL’s customer-first approach, which guarantees that its financial solutions are both accessible and customised to meet the diverse requirements of its customer base.
Financial position of Bajaj Housing Finance
Let’s take a look at a few of the key financials of the company:
| For the FY ended March 31, 2024 (₹ million) | For the FY ended March 31, 2023 (₹ million) | |
| Equity share capital | 67,121.6 | 67,121.6 |
| Net worth | 122,335.0 | 105,031.9 |
| Total revenue | 76,177.1 | 56,654.4 |
| Profit for the year | 17,312.2 | 12,578.0 |
| EPS | 2.6 | 1.9 |
| Net asset value | 18.2 | 15.6 |
Source: DRHP – Bajaj Housing Finance Limited
Also read: A simple guide to understanding NAV in mutual funds
Investment considerations in Bajaj Housing Finance
Potential rewards
- Brand heritage: BHFL’s reputation and customer loyalty are bolstered by the esteemed Bajaj brand, known for its reliability and trust in retail.
- Market position: BHFL, India’s second-largest HFC by AUM, demonstrates strong, consistent growth backed by a varied portfolio addressing a wide range of housing finance needs.
- Omni-channel strategy: The company’s growth is fueled by a multi-channel approach, leveraging digital innovation and technology to improve customer interaction and simplify loan processing.
- Risk management: BHFL stands out for its strong credit evaluation and risk management, achieving the lowest gross non-performing assets (GNPA) and net non-performing assets (NNPA) in Fiscal 2024, showcasing its sound risk control.
- Borrowing sources: The company benefits from varied, low-cost funding due to top credit ratings, which confirm its financial health and allow for borrowing at competitive rates.
- Leadership and workforce: BHFL’s skilled leadership and committed team reflect its robust culture and dedication to excellence, attracting and retaining top talent.
Also read: Understanding AUM: Mastering financial skills
Potential risks
- Loan recovery: BHFL is exposed to the hazard of potentially not recuperating the entire collateral or dues from Bajaj Finance housing loans, which could have a detrimental effect on the company’s operational and financial well-being.
- Debt covenant compliance: BHFL’s performance and finances may be at risk if it fails to meet its debt agreement terms.
- Customer default risk: BHFL’s home loan portfolio, largely made up of loans to salaried and self-employed individuals, is vulnerable to defaults due to economic downturns or personal crises, which could raise non-performing assets and slow loan growth.
- Interest rate volatility: Interest rate fluctuations directly impact Bajaj Finance Housing loan interest rate and could hurt BHFL’s earnings, margins, and fixed income value, negatively impacting its overall business and financial stability.
- Asset-liability mismatch: BHFL risks liquidity issues from future mismatches in interest rates and asset-liability maturities.
- Funding challenges: BHFL’s inability to obtain favourable funding could significantly harm its business operations and financial health.
- Regulatory inspections: BHFL, under regular scrutiny by the National Housing Bank, risks penalties and reputational damage if it fails to comply with inspection findings.
Bottomline
The Bajaj Housing Finance IPO stands as a beacon of growth and potential in the Indian financial sector, promising to be a noteworthy event for the company and a valuable proposition for investors seeking to be part of BHFL’s journey towards continued success and innovation in the housing finance market.
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