Bajaj Housing Finance IPO: A Promising Debut with Cautionary Advice

The Bajaj Housing Finance IPO has generated significant buzz in the market, with the company's shares trading at a premium in the grey market. However, experts caution that the listing price may not fully reflect the company's fundamentals, advising investors to exercise prudence and consider long-term strategies.

Unlocking Potential: Bajaj Housing Finance's Promising Debut

Anticipating the Listing Date

The Bajaj Housing Finance IPO is set to list on the stock exchanges on Monday, September 16th, 2024, following the announcement of the share allotment to applicants. The grey market has responded positively to this news, with the company's shares trading at a premium of ₹79 today.

Analyzing the Grey Market Sentiment

According to market observers, the Bajaj Housing Finance IPO Grey Market Premium (GMP) has increased to ₹79 today, up from ₹77 on Friday. This bullish sentiment in the grey market suggests that the listing price could be around ₹149, which would represent a significant 110% gain for the IPO allottees.

Evaluating the Valuation Expectations

Experts have cautioned that the Bajaj Housing Finance IPO listing price may not fully justify the company's fundamentals. The expected listing price of ₹145 to ₹150 is around 110% higher than the upper price range of the public issue. This could result in the company's book value being around 6 to 6.50 times, significantly higher than its nearest peer, PNB Housing Finance, which has a book value of around 2.

Advising Caution for Investors

While the grey market sentiment is bullish, stock market experts advise fresh investors to remain cautious post-listing. They suggest that the Bajaj Housing Finance IPO listing price may not align with the company's fundamentals, and investors should consider a "buy, hold and forget" strategy, booking partial profits and holding the stock for the long term.

Exploring Bajaj Housing Finance's Financials

Bajaj Housing Finance Limited is the largest non-deposit-taking Housing Finance Company (HFC) promoted by Bajaj Finance Ltd. The company has demonstrated strong financial performance, with an AUM of ₹971 billion as of Q1FY25 and a CAGR of 30.9% between FY22 and FY24. The company's credit and risk management policies have helped it maintain the lowest Gross NPA and Net NPA among its industry peers.

Highlighting the Company's Competitive Advantages

Bajaj Housing Finance has a strong in-house four-tier collections infrastructure, including touch-free collection, field collection, legal recovery, and settlement. This has helped the company maintain a high collection efficiency, improving from 98.4% in FY22 to 99.5% in FY24. The company's strategic focus on direct home loan origination and increasing average ticket size across its product suite has also improved its Opex/Asset ratio in recent years.

Cautioning Investors on Valuation Concerns

While the Bajaj Housing Finance IPO has generated significant market buzz, experts advise investors to exercise caution. The company's listing price may not fully reflect its fundamentals, and its book value is expected to be significantly higher than its peers. Investors are advised to consider a long-term investment strategy, booking partial profits and holding the stock for the long term, as it is expected to become a portfolio stock for long-term investors.