Bajaj Housing Finance IPO Listing: Stock lists at 114% premium over IPO price

Bajaj Housing Finance IPO Listing

Bajaj Housing Finance IPO Listing: A Record-Breaking Debut with Impressive Gains

The Bajaj Housing Finance IPO, one of the most eagerly anticipated listings of the year, has made a spectacular debut on the stock exchanges.

Following its subscription window from September 9 to 11, the IPO has delivered remarkable gains to its investors.

This article delves into the IPO’s performance, expert opinions, and the broader implications for investors and the company.

IPO Details and Performance:

The Bajaj Housing Finance IPO, which raised ₹6,560 crore, was priced in the range of ₹66 to ₹70 per share. The offering was met with unprecedented demand, reflecting a record-breaking bid of ₹3.15 lakh crore.

This extraordinary response highlights the significant investor interest and confidence in the company’s future prospects.

On its listing day, Bajaj Housing Finance made a remarkable entry, with its shares debuting at ₹150 on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

This represented an impressive 114.28% gain over the issue price. The stock did not stop there; it surged to the upper circuit limit of ₹164.99 on the BSE and closed at this level, marking a substantial 135.70% gain by the end of the first trading day.

This strong performance underscores the market’s enthusiasm and the positive sentiment surrounding the IPO.

Expert Opinions and Recommendations:

• Narendra Solanki, Head of Equity Research at Anand Rathi Shares and Stock Brokers, offers a positive outlook for long-term investors. Solanki suggests that despite the high premium valuation, Bajaj Housing Finance’s strategy to strengthen existing customer relationships and expand its market presence will support its growth trajectory. The company’s rapid increase in assets under management (AUM) is seen as a key growth driver, providing a solid foundation for future performance. Solanki advises investors to hold their positions, given the company’s strong fundamentals and growth prospects.
• Rajesh Agarwal, Research Head at AUM Capital, recommends a more cautious approach. He suggests that investors consider booking some profits, given the significant initial gains. This advice reflects a strategy of capitalizing on the early profit while maintaining some exposure to the stock for potential future gains.
• VLA Ambala, co-founder and SEBI-registered research analyst at SMT, echoes a similar sentiment. Ambala advises investors to withdraw half of their profits from the IPO and retain the remaining shares for long-term growth. This balanced approach allows investors to secure some immediate gains while still benefiting from potential future appreciation.
• Prashant Tapase, Senior Vice President of Research at Mehta Equity, provides guidance tailored to different investor profiles. He suggests that conservative investors consider booking profits at this stage to avoid potential volatility, while long-term investors may choose to hold their shares to benefit from future growth. Tapase’s advice aligns with a prudent investment strategy that considers both short-term gains and long-term potential.
• SMIFS, a prominent brokerage, remains bullish on Bajaj Housing Finance. The brokerage highlights the company’s low gross and net non-performing assets (NPAs) compared to its peers, indicating strong asset quality and effective risk management. SMIFS expects the company’s growth trajectory to continue, supported by its solid financial performance and market position.

IPO Subscription Details:

The Bajaj Housing Finance IPO was offered between September 9 and 11, with a price band of ₹66 to ₹70 per share. The issue attracted significant attention from various investor categories.

The Qualified Institutional Buyers (QIBs) segment was oversubscribed by 222.05 times, reflecting strong institutional confidence.

Non-Institutional Investors (NIIs) subscribed 43.98 times, while Retail Investors participated with a subscription rate of 7.41 times. The employee portion was subscribed 2.13 times, and the shareholder quota was filled 18.54 times.

The IPO comprised the issuance of new shares worth ₹3,560 crore and an Offer for Sale (OFS) of 42,85,71,429 shares by Bajaj Finance.

The proceeds from the OFS were received by the selling shareholders, while the funds raised through the issuance of new shares are earmarked for strengthening Bajaj Housing Finance’s capital base.

This capital infusion is expected to support the company’s growth initiatives and expansion plans.

Company Background and Financials:

Bajaj Housing Finance, established in 2008, operates as a non-deposit-taking housing finance company. It has been registered with the National Housing Bank (NHB) since 2015 and began offering mortgage loans in the financial year 2018.

Recognized as an upper layer Non-Banking Financial Company (NBFC) by the Reserve Bank of India (RBI), Bajaj Housing Finance is required to list its shares within three years of this designation, with the deadline set for September 2025.

The company offers a range of financial products, including home loans, loans against property (LAP), rent concession, and developer finance.

As of March 2024, Bajaj Housing Finance served 3,08,693 active customers, with 81.7% holding home loans. It operates through 215 branches across 20 states and 3 union territories, supported by six centralized retail loan review centers and seven central loan processing centers.

The financial health of Bajaj Housing Finance has shown consistent improvement. In the financial year 2022, the company reported a net profit of ₹709.62 crore, which increased to ₹1,257.8 crore in FY 2023 and reached ₹1,731.22 crore in FY 2024.

The company’s revenue has grown at a compound annual growth rate (CAGR) of over 42%, reaching ₹7,617.71 crore.

For the first quarter of FY 2024-25, Bajaj Housing Finance posted a net profit of ₹482.61 crore and revenue of ₹2,208.73 crore, further highlighting its strong financial performance.

Final Remarks:

The Bajaj Housing Finance IPO has delivered a spectacular debut, with significant gains for initial investors and robust market interest.

While the initial performance has been highly positive, experts recommend a nuanced approach for current investors.

Short-term profit-taking may be advisable for those looking to capitalize on immediate gains, while long-term investors are encouraged to maintain their positions to benefit from the company’s growth potential.

Overall, Bajaj Housing Finance’s successful IPO and strong market debut underscore the company’s solid financial foundation and growth prospects.

As the company continues to expand and strengthen its market presence, it remains well-positioned for future success, making it an attractive prospect for both short-term and long-term investors.