Bajaj Housing Finance IPO: Price Band Fixed At Rs 66-70/Share, Subscription To Open On September 9

Bajaj Housing Finance Limited (BHFL), a prominent player in the housing finance sector, is gearing up for its much-anticipated Initial Public Offering (IPO). With a price band set between Rs 66 and Rs 70 per equity share, the IPO is scheduled to open for subscription on Monday, September 9, 2024, and will close on Wednesday, September 11, 2024. This move aligns with the Reserve Bank of India's (RBI) directive, mandating that upper layer non-banking financial companies (NBFCs) be listed on the stock markets by September 2025.

The Bajaj Housing Finance IPO comprises a combination of an Offer for Sale (OFS) by its parent company, Bajaj Finance, and a fresh issue of equity shares. The total size of the IPO is Rs 6,560 crore, with the OFS contributing Rs 3,000 crore and the fresh issue accounting for Rs 3,560 crore. The primary objective of this capital raise is to boost the company's capital base to meet its future capital needs.

The IPO will be allocated in a structured manner to ensure a broad investor base. Not more than 50% of the shares are reserved for Qualified Institutional Buyers (QIBs), at least 15% for Non-Institutional Investors (NIIs), and a minimum of 35% for retail investors.

The IPO journey for Bajaj Housing Finance begins with the allocation to anchor investors on Friday, September 6, 2024. This step sets the tone for the general subscription phase by bringing in substantial early investment. The subscription window for the general public will be open from September 9 to September 11, 2024.

Following the closure of the subscription period, the basis of share allotment will be finalized on Thursday, September 12, 2024. Subsequently, refunds for unallotted shares will be initiated on Friday, September 13, 2024, with the shares being credited to the demat accounts of successful allottees on the same day. Finally, the shares are expected to be listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on Monday, September 16, 2024.

The floor price of Rs 66 and the cap price of Rs 70 per equity share reflect 6.6 times and 7.0 times the face value of Rs 10, respectively. For retail investors, the minimum lot size is set at 214 equity shares, and applications can be made in multiples of 214 shares thereafter. This pricing strategy is designed to be attractive to both retail and institutional investors.

The listed peers of Bajaj Housing Finance, as outlined in the Draft Red Herring Prospectus (DRHP), include established names in the housing finance sector such as PNB Housing Finance (P/E of 12.4), Can Fin Homes (P/E of 12.9), Aadhar Housing Finance (P/E of 18.7), Aavas Financiers (P/E of 3.3), Aptus Value Housing Finance (P/E of 24.6), Home First Finance (P/E of 24.3), and LIC Housing Finance (P/E of 7.3). The P/E ratios of these companies provide a comparative valuation framework.

The listing of Bajaj Housing Finance is a strategic move driven by regulatory requirements as well as the company's ambition to fortify its capital structure. As a 100% subsidiary of Bajaj Finance and a part of the Bajaj Group, Bajaj Housing Finance has been a key player in the mortgage loan sector since its inception in the fiscal year 2018. The company has shown consistent growth, leveraging the strong brand reputation of its parent companies, Bajaj Finance Ltd and Bajaj Finserv Ltd.

Bajaj Finserv holds a 51.34% stake in Bajaj Finance, making this IPO a significant event not only for the housing finance company but also for its parent entities. The proceeds from the IPO will enable Bajaj Housing Finance to meet its regulatory obligations and pursue growth opportunities.