Bajaj Housing Finance stock's bumper listing: IPO investors double money; should you hold or book profits?

Bajaj Housing Finance has strong fundamentals, with assets growing from Rs 48,527 crores in March 2022 to Rs 81,827 crore in March 2024.

Bajaj Housing Finance shares more than doubled the IPO investors' money with a bumper listing gain on September 16, slightly beating the Street expectations and grey market estimates. The IPO got a record-breaking subscription worth Rs 3.23 lakh crore last week. Bajaj Housing Finance shares were allocated to successful IPO bidders in the wee hours on September 13.

According to the grey market premium (GMP), Bajaj Housing Finance shares were expected to list at nearly 110 percent above the issue price of Rs 70 per share, translating into a potential premium of Rs 77 per share. The excitement surrounding the stock had pegged robust listing gain, which has led many market participants to consider booking profits immediately.

However, market analysts recommend a long-term view on Bajaj Housing Finance, a non-deposit-taking housing finance company. Experts believe the firm’s solid fundamentals, coupled with the overall positive outlook for the housing finance sector, could yield better returns over time. For those who secured allotments, analysts advise holding shares to benefit from the company’s future growth prospects.

Long term investors may hold Bajaj Housing Finance shares, ride on sector's growth

Narendra Solanki - Head - Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers, said Bajaj Housing Finance shares could list at a significant premium to its issue price. He recommended the investors to continue to hold the stock for long term return generation.

He added that the company plans to increase its market share through deepening relationship with existing customers, onboarding new customers and expanding to newer geographies to build granular portfolio with reduced concentration risk.

Growth prospects support Bajaj Housing Finance shares valuation

On the valuation front, Bajaj Housing Finance shares commands a price-to-book (P/BV) multiple of 3.2x on post-issue equity, translating to a market capitalization of Rs 58,297 crore at the upper price band of Rs 70 per share.

The premium valuation is well-supported by the company’s accelerated AUM growth, driven by a diversified product portfolio, lower credit costs, and superior asset quality, all of which the company looks well placed to benefit from growing mortgage penetration in the country, said Solanki.

However, upon listing, the market capitalisation of the company climbed well above Rs 1 lakh crore.

IPO investors may book partial profit if Bajaj Housing Finance listing gains beat expectations

However, Rajesh Agarwal - Head Research - AUM Capital, suggests taking profit in case of bumper listing with a premium of nearly 150 percent. "If the price is around Rs 150 or more, then book profit; if not full, then at least partial profit booking would be a prudent strategy," he told Moneycontrol.

V.L.A. Ambala, SEBI-registered Research Analyst and Co-founder of SMT, said "based on the IPO’s pricing band, brand value, and market reception, I expect its shares to list within the range of Rs 140-152 on both NSE and BSE. Notably, the IPO has a P/E ratio of 31.62, which is expected to surge significantly. So, I advise market participants to book 50 percent of their invested capital and keep the remainder invested for long-term growth, as the stock has the potential to become a multi-bagger."

She further noted Bajaj group stocks have been multi-baggers in the past, and this IPO has leveraged the brand’s past performance and market reputation, as seen from the subscription trend across all categories.

She highlighted that the company has strong fundamentals, and its assets grew from Rs 48,527 crore in March 2022 to Rs 81,827 crore in March 2024. However, its debt also increased to Rs 69,129 crore in the same period, as did its PAT, which grew from Rs 710 crore to Rs 1,731 crore.

Bajaj Housing Finance future prospects bullish, set for strong growth

Prashanth Tapse, Sr VP Research at Mehta Equities Ltd recommends conservative investors to choose booking profit in Bajaj Housing Finance shares, if the listing gain beats expectations. On the other hand, long term investors can continue holding for long term growth, as the sector outlook remains very optimistic given the company's well-positioned business model. "Considering all attributes, we strongly recommend allotted long term investors to 'hold' it for a long term perspective," he said.

Bajaj Housing Finance Ltd is the second largest fastest growing entity in the housing loan segment. The company enjoys the patronage of seasoned management team, strong parentage (part of Bajaj group and 100% subsidiary of Bajaj finance) and highest credit ratings of AAA/Stable.

The company’s primary focus is on individual retail housing loans, complemented by an assortment of lease rental discounting and developer loans, serving a broad customer base from individual homebuyers to large developers.

Brokerage SMIFS Ltd is bullish on the company's future saying the company has the lowest GNPA and NNPA amongst peers in FY24 which is expected to continue in FY25 along with being the second most profit making HFC (Rs 4.8billion) in India with strong return on average assets and return on average equity for the Q1FY25.

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