The upcoming IPO of Bajaj Housing Finance, a 100% subsidiary of Bajaj Finance, is expected to have a positive impact on Bajaj Finance’s share price, potentially boosting it by up to 5%, according to analysts at Macquarie. The IPO will open for public subscription on September 9 and close on September 11, with the shares expected to list on September 16. Early indications from the grey market suggest a strong debut for Bajaj Housing Finance shares.
Bajaj Housing Finance, which is entirely owned by Bajaj Finance, has set the IPO price band between ₹66 and ₹70 per share. At the higher end of this range, the company would be valued at around ₹58,000 crore, making it India’s most valuable housing finance company.
In the last month, Bajaj Finance’s share price has increased by over 8%, compared to a nearly 2% gain for the Nifty 50 index. Analysts at Macquarie believe that the current share price of Bajaj Finance already reflects the positive expectations surrounding the IPO. They also noted that Bajaj Housing Finance trades at 2.6 times its expected FY26 price-to-book value (P/BV) at the top of the IPO price band, which is based on a 2.5% return on assets (ROA). They expect the return on equity (ROE) to decrease from 15% to 12% due to the new capital raised in the IPO.
Macquarie analysts also suggested that if Bajaj Housing Finance achieves a strong listing, other housing finance companies could see their valuations improve as well. Currently, the grey market premium (GMP) for Bajaj Housing Finance is about ₹56 per share, indicating a potential listing price of ₹116 per share—nearly 66% higher than the IPO price of ₹70.
Despite the positive outlook, Macquarie maintains an “Underperform” rating on Bajaj Finance shares, with a 12-month target price of ₹6,300 per share, which implies a 14% downside from the current trading price.
In comparison to its peers, Bajaj Housing Finance’s valuation is on the higher side. At the upper IPO price band, it is valued at approximately 3.2 times its trailing book value as of June 2024, post-dilution and adjustments. This is more expensive than peers like LIC Housing Finance (1.2x), PNB Housing Finance (1.7x), and Can Fin Homes (2.7x). However, the premium valuation is justified by the company’s strong and diversified growth in assets under management (AUM), which has seen a 30% compound annual growth rate (CAGR), excellent asset quality with non-performing assets (NPAs) under 1%, and a superior technology platform.
Bajaj Housing Finance IPO Details
The Bajaj Housing Finance IPO will begin on Monday, September 9, and will close on Wednesday, September 11. The IPO aims to raise ₹6,560 crore through a combination of a fresh issue of equity shares worth ₹3,560 crore and an offer-for-sale (OFS) of 42.86 crore equity shares totaling ₹3,000 crore by the promoter, Bajaj Finance Ltd.
Kotak Mahindra Capital Company Ltd, BofA Securities India, Axis Capital, Goldman Sachs (India) Securities Pvt Ltd, SBI Capital Markets, JM Financial, and IIFL Securities are the lead managers of the IPO, while Kfin Technologies is the registrar.
As of 3:15 PM, Bajaj Finance shares were trading slightly lower, down 0.68%, at ₹7,301.20 on the BSE.
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