• Date 08^th Sept 2024
• IPO Opens Sep 9^th-11^th, at ₹ 66-70 /share
• IPO of ₹ 6,560 cr., Large Cap with ₹ 58,300 cr. Mkt cap
• Sector – Housing Finance
• Valuations: P/E – 33.7 , P/B 3.83 times post IPO
• Opinion: It is a BUY. Investors can SUBSCRIBE for the Long term

Summary:

• Bajaj Finance Ltd. has transferred its mortgage loans business to BHFL. Growth in Home loans AUM has been excellent over 3 years at 42% CAGR. As the #2 largest HFC NBFC, BHFL looks set to grow and expand this market with competitive and innovative offerings. The BHFL vision is to build a reputation in mortgages on par with HDFC group. Its systems look excellent as its loans have the lowest GNPA & NNPA in this sector. It’s adopted the digital path with mobile applications, website and loan processing apps, which should drive new business. The IPO valuations look reasonable adjusted for growth, quality and top notch Bajaj Group backing, as the P/B of BHFL is 3.8 times versus Bajaj Finance-5.6. The leadership & brand of Bajaj Finance should rub off on BHFL.
• Risks: 1) Regulatory risk and control of RBI 2) Economic & cyclical risk – we can expect a Real Estate slowdown in 4-6 years 3) mortgage loan competition from banks, NBFCs & fintechs 4) Deterioration of asset quality 5) interest rate sensitive sector 6) Some overlap in business with BajFin.
• Opinion: The BHFL IPO is a BUY, and Investors can SUBSCRIBE for Long term.
• Disclosure: JMI and Punit Jain have analyzed and tracked Bajaj Finance since Feb 2012, see reports Bajaj Finance, Automatic Growth and Bajaj Finance – a Firm you can Bank on and NBFC Sector

Here is a note on Bajaj Housing Finance Ltd – BHFL.

IPO highlights

• The IPO opens from 9-11^th Sep’24 in a Price Band of ₹ 66-70 per share.
• The IPO is a Fresh Issue of ₹ 3,560 cr. and ₹ 3,000 cr. of Offer for Sale totalling ₹ 6,560 cr.
• The main reasons and objects of the IPO are:  
  • RBI identified BHFL as an “upper layer” NBFC, and mandated it to list by Sep’25. It is early in this.
  • BajFin will use the IPO to boost BHFL’s capital base, enabling it to fund expansion of lending operations and capitalize on future growth opportunities in the housing finance sector.
  • BajFin too in the OFS will raise funds that will help in future growth.
• The lot size is 214 shares and Face Value is ₹ 10 per share.
• The IPO share quotas are QIBs: Non-Institutional Investors: Retail is 50:35:15%. In addition, BHFL has reserved shares worth ₹ 200 cr. for eligible employees, and shares worth ₹ 500 cr. for shareholders of BajFin and Bajaj Finserv. (The Record Date was 30 Aug’24.)
• The unofficial/grey market premium of BHFL is ₹ 50/share over the IPO price. This is a positive.
• The IPO allotment is likely to be finalized on 12^th Sep., refunds will be on 13^th Sep., and also crediting of shares to eligible allottees. BHFL shares will be listed on BSE and NSE, on 16^th Sep.

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Disclaimers and Disclosures

• JMI and Punit Jain have analyzed and tracked Bajaj Finance since Feb 2012, see reports Bajaj Finance, Automatic Growth and Bajaj Finance – a Firm you can Bank on and NBFC Sector
• Punit Jain discloses that he has shareholding in Bajaj Finance since April 2003 (<1% stake). Other than this, he has no financial interest or transactions with Bajaj Finance, or any group company. In addition, JMI and its promoters/ employees have no direct or financial interest in these companies, and no known material conflict of interest as on date of publication of this report. Punit Jain intends to apply in this IPO in line with this research note opinion.
• This document has been prepared by JainMatrix Investments Bangalore (JMI), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. This report should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JMI has not independently verified the accuracy or completeness of the same. Neither JMI nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Investment in the securities market are subject to market risks. Read all the related documents carefully before investing. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from a RIA Registered Investment Advisor. JMI has been an equity investment adviser commercially since Nov 2012, and a SEBI certified and registered since 2016, under SEBI (Research Analysts) Regulations. Registration granted by SEBI, and certification from NISM in no way guarantee the performance of the Research Analyst or provide any assurance of returns to investors.
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