Bajaj Housing Finance Ltd IPO - A Deep Dive into the Company’s Six Competitive Strengths
With Bajaj Housing Finance Ltd all set to launch its initial public offering (IPO), the issue size of which is ₹ 6560 crores , the offer price of the shares in the IPO is rooted deep into the company’s competitive strengths. This blog explores the factors that underpin its offer price.
Bajaj Housing Finance Ltd’s strengths
The six core strengths of the company are:
1. Distinguished heritage of the Bajaj brand
Bajaj Housing Finance Ltd is a wholly-owned subsidiary of Bajaj Finance Limited, which is among India's largest NBFCs, based on assets under management (AUM) as of March 31, 2024. The "Bajaj" group of businesses are retail-focused enterprises that have gained recognition among Indian consumers through:
➔ Two and three-wheelers of Bajaj Auto Limited
➔ Financing products of Bajaj Finance Limited
➔ Insurance products of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited
➔ Mutual fund products of Bajaj Finserv Asset Management Limited
➔ Broking services of Bajaj Financial Securities Limited
The "Bajaj" brand has evolved into a recognised retail brand, which has contributed to the recognition and growth of the company's business. Furthermore, its market position is reflected in its strong credit ratings, underscoring its financial stability and investor confidence.
2. Second largest HFC in India in terms of assets under management
Bajaj Housing has demonstrated a consistent growth trajectory over its seven-year operational history, even amid challenging events such as the NBFC crisis, the downturn of key industry players, and COVID-19. As of March 31, 2024, it had grown to be the second-largest HFC and the eighth-largest NBFC-UL in India (in terms of AUM).
The company has achieved all this within a short period since the commencement of its operations in fiscal 2018. Its AUM has grown at a CAGR of 30.9% from fiscal 2022 to fiscal 2024 and stood at ₹ 97071.33 crore as of June 30, 2024.
3. Strategic presence with omni-channel sourcing strategy
Bajaj Housing Finance Ltd has a strategic presence across mortgage-centric markets with the following key components — branches, centralised hubs and active channel partners. As of June 30, 2024, the company had:
➔ A distribution network of 215 branches
➔ Six centralised hubs for retail underwriting
➔ Seven centralised processing hubs for loan processing
➔ 1,780 active channel partners
It has also adopted an omnichannel sourcing strategy, combining physical presence while accessing digital on boarding functionality to maximise reach. Through this strategy, it is able to cater to different customer preferences, and streamline the loan application process.
4. Well defined credit evaluation and risk management practices
Bajaj Housing Finance Ltd has a well-defined credit evaluation framework and underwriting processes to ensure that risk performance across all products remains well within the defined thresholds. For the retail loan portfolio, its centralised underwriting process, coupled with the adoption of straight-through processing for salaried customers and Approved Project Finance (APF) projects, ensures quicker and more accurate loan evaluations.
The company's risk team tracks early warning signals in accounts with bounce track records and those that are overdue by even a day to monitor cases that show signs of delinquency. It reviews portfolios periodically through credit bureau checks and credit databases. It has set up a system of dashboard monitoring of cases by its risk team where members can review certain information of borrowers, identify areas of concern and initiate prompt action.
Through its credit and risk management policies, the company has maintained the lowest GNPA and NNPA among its peers in the three months ended June 30, 2024 and fiscal 2024.
5. Access to diversified and cost-effective borrowing sources
Bajaj Housing Finance Ltd prioritises longer tenor floating rate borrowings. To this end, it is actively rebalancing its borrowings towards a mix to increase proportion of borrowings from the money market. As on June 30, 2024, the company has established relationships with 23 banks ensuring a diversified borrowing portfolio and reliable access to varied funding sources.
It has adopted a diversified borrowing strategy, moving from reliance on bank loans to a more diverse portfolio that includes bank loans, non-convertible debentures, commercial papers, and NHB refinance.
6. Experienced management team supported by a team of dedicated professionals
Key managerial and senior management personnel of Bajaj Housing Finance Ltd have an average of 11 years of experience in the financial services industry in India. Further, the company's MD and chief financial officer have been associated with the Bajaj Group for over 21 years and are the company's founding members. A dedicated team of professionals manages and supports each of its product verticals.
Wrapping it up
While these are some of Bajaj Housing Finance Ltd's core strengths, remember to do your due diligence before applying for its IPO. Understand the risk factors (available in the RHP) and figure out your risk tolerance before subscribing.
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.
