Bajaj Housing Finance Ltd IPO - Offer Structure and Company’s Business Strategies
Bajaj Housing Finance Ltd is all set to launch its initial public offer, whose bid opens on September 9. The IPO is a 100% book-built offer with an issue size of ₹6560 crores in the price range of ₹66 to ₹70. Like any other IPO, the company has allocated portions of the offer to various categories of investors. It has also outlined its business strategies it seeks to pursue in the coming days. What are these? Let’s find out.
Offer structure of Bajaj Housing Finance Ltd
The table outlines the offer structure of the Bajaj Housing Finance Ltd IPO for different kinds of investors:
| Investor category | Offer percentage |
|---|---|
Qualified institutional bidders (QIBs) | Not more than 50% of the net offer |
Non-institutional bidders (NIBs) | Not less than 15% of the net offer |
Retail individual bidders | Not less than 35% of the net offer |
Business strategies of Bajaj Housing Finance Ltd
As per its red herring prospectus, Bajaj Housing Finance Ltd intends to capitalise on India’s growth opportunities by leveraging its competitive strengths and pursuing the following strategies:
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Leverage technology and analytics to enhance productivity and improve customer experience
The company plans to continue to leverage technology and analytics capabilities to improve its productivity, increase process automation, and reduce operating expenses. It also intends to continue using technology to:
➔ Refine its underwriting processes
➔ Employ data analytics to identify patterns and assess risks more accurately, leading to a more informed decision-making
The company is already leveraging tech-driven early warning systems to proactively manage potential risks, ensuring prompt detection and mitigation to maintain its loan portfolio's health. It has embraced various digital initiatives designed to modernise the home loan journey from start to finish, such as E-Agreements and DIY Home Loan platform.
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Diversifying and strengthening market presence with strategic customer focus and comprehensive risk management
The home loan business strategy of Bajaj Housing Finance Ltd is predicated on a micro-market approach. It aims to deepen market penetration by capitalising on the company's developer finance-funded projects and nurturing existing developer finance relationships.
The company has launched a specialised strategic business unit (SBU) to broaden its market reach further. The SBU is aimed at the near-prime and affordable housing customer segment, offering customised financial products to individuals with marginally higher credit risk than traditional prime borrowers.
The company has also come up with Sambhav Home Loans, a new near prime and affordable home loan option for first-time buyers from the lower income segment. Through this strategic expansion, it aims to secure a wider customer base and effectively manage credit risk.
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Continue diversifying its borrowing profile to optimise borrowings costs
The company aims to continue diversifying its borrowing mix. For instance, through NHB refinance, it further diversified its borrowing mix with a longer-tenor source of funds. Its focus remains on maintaining a low cost of borrowings, even as it extends the duration of its borrowings.
The company also plans to strategically increase its activity in the money markets, capitalising on its strong operational and financial track record supported by the highest possible credit ratings. This expansion will enable it to tap into diverse funding sources, optimise the cost of funds, and reduce operating expenses.
Wrapping it up
Bajaj Housing Finance Ltd is the second-most profitable housing finance company (HFC) in India, with strong returns on average assets and on average equity for fiscal 2024 and the three months ended June 30, 2024. The impact of these business strategies will be known in the coming days. Meanwhile, if you intend to apply for this IPO, talk to your broker and move ahead after due diligence.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.
Investments in securities market are subject to market risks, read all the related documents carefully before investing. Please read the SEBI prescribed Combined Risk Disclosure Document prior to investing. Brokerage will not exceed SEBI prescribed limit.
