Bajaj Housing Finance Rs 7,000 Crore IPO To Hit Dalal Street In September; All Investors Need To Know

As the month of September approaches, all eyes are on the upcoming initial public offering (IPO) of Bajaj Housing Finance, one of India's leading non-deposit-taking housing financiers. A subsidiary of Bajaj Finance Ltd, Bajaj Housing Finance is set to make its much-anticipated debut on the stock exchanges, with market sources suggesting a potential early September listing. This IPO has generated significant buzz in the financial community, as investors await more information about the price band and bidding dates.

Bajaj Housing Finance's decision to go public is not merely a strategic move for raising capital but also a compliance measure in response to the Reserve Bank of India's (RBI) regulatory requirements. The RBI mandates that upper-layer non-banking financial companies (NBFC-UL) must list on the stock exchanges by September 2025. To meet this deadline, Bajaj Housing Finance filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) in June 2024, setting the stage for its Rs 7,000 crore IPO.

The IPO is expected to include both a fresh issue of shares and an offer for sale (OFS) by the parent company, Bajaj Finance Ltd. Specifically, the IPO will comprise a fresh issue of shares worth Rs 4,000 crore, while Bajaj Finance Ltd will offload additional shares worth Rs 3,000 crore through the OFS route. The primary objective of the fresh issue is to boost Bajaj Housing Finance's capital base, enabling it to expand its lending operations and capitalize on future growth opportunities in the housing finance sector.

In addition to strengthening its capital base, Bajaj Housing Finance aims to leverage the IPO to enhance its brand visibility and create a public market for its shares in India. A portion of the proceeds from the fresh issue will also be allocated to cover expenses related to the offering, ensuring that the company maximizes the benefits of going public.

The IPO will feature a reserved portion of equity shares for eligible employees of Bajaj Housing Finance. Additionally, there will be a set-aside for shares with a face value of Rs 10 each for eligible promoters, including individuals and Hindu Undivided Families (HUFs) who are part of the promoters' public equity ownership.

Investors often look to compare the financial metrics of a company with its industry peers to assess its relative valuation. According to the DRHP, Bajaj Housing Finance's listed peers include notable players in the housing finance sector such as PNB Housing Finance, Can Fin Homes, Aadhar Housing Finance, Aavas Financiers, Aptus Value Housing Finance, and Home First Finance.

For instance, PNB Housing Finance and Can Fin Homes have price-to-earnings (P/E) ratios of 12.4 and 12.9, respectively, while Aadhar Housing Finance and Aavas Financiers have P/E ratios of 18.7 and 3.3. LIC Housing Finance, another significant player in the industry, has a P/E ratio of 7.3.

Bajaj Housing Finance's robust financial performance in the fiscal year 2023-24 further underscores the attractiveness of this IPO. The company reported a net profit of Rs 1,731 crore, marking an impressive 38% increase from Rs 1,258 crore in the previous fiscal year.

However, it's worth noting that the proportion of home loans to total assets under management (AUM) for Bajaj Housing Finance saw a slight decline, from 61.7% to 57.8% as of March 31, 2024. This shift may indicate a diversification of the company's loan portfolio, potentially reducing its reliance on home loans while exploring other lending avenues.

The success of an IPO often hinges on the expertise of its lead managers, and Bajaj Housing Finance has partnered with some of the most reputable names in the financial industry. The Book Running Lead Managers for the IPO include Kotak Mahindra Capital Company Ltd, BofA Securities India Ltd, Axis Capital Ltd, Goldman Sachs (India) Securities Private Ltd, SBI Capital Markets Ltd, JM Financial Ltd, and IIFL Securities Ltd.