Bajaj Housing Finance Ltd (BHFL) is the second largest housing finance company (HFC) in India with an AUM of Rs 97,071 cr as of 1QFY25. The company was registered as a non-deposit taking HFC with the National Housing Bank (NHB) since 24th Sep, 2015 and is engaged in mortgage lending since FY18. BHFL offers financial solutions to individuals and corporate entities for the purchase & renovation of homes and commercial spaces. The company’s mortgage product suite comprises of i) home loans, ii) loans against property, iii) lease rental discounting and iv) developer financing. The primary emphasis of the business is on individual retail housing loans which are complemented by a diversified collection of lease rental discounting and developer loans. BHFL operates through a network of 215 branches spread across 174 locations in 20 states and 3 union territories as of 1QFY25.
Key Highlights:
1. Widespread recognition of the ‘Bajaj’ brand: The company is a wholly owned subsidiary of Bajaj Finance Ltd (one of the largest NBFCs in India), which is a financial services subsidiary of Bajaj Finserv Ltd. BHFL carries out its operations under ‘Bajaj Finserv’ brand leveraging the strong brand recognition and heritage of the ‘Bajaj’ brand to grow its business.
2. Diversified portfolio driving growth: The company is the second largest HFC in India with an Asset under Management (AUM) of Rs 97,071 cr as of 1QFY25. The company is also the fourth fastest-growing HFC/NBFC in India as of FY24. The company’s strength lies in strategic diversification by offering an extensive array of financial solutions catering to the needs of both retail and commercial clients. As of 1QFY25, Home Loans/Loan against Property/Lease Rental Discounting/Developer Financing/Others stood at 57.5%/10.0%/19.5%/ 11.2%/1.8% of AUM respectively. BHFL’s diversified portfolio has allowed the company to deepen its customer base and benefit from the growth in the overall industry.
3. Well-defined credit evaluation and risk management practices has led to lowest GNPA among peers: The company has a well-defined credit evaluation framework and underwriting processes to ensure risk performance across all products is well within the defined thresholds. The company maintains a comprehensive risk management framework supported by digitized processes tailored to each product offering, ensuring early warning systems that track key indicators, such as bounce rates and overdue positions. BHFL also has well established processes and a strong in-house four-tier collections infrastructure comprising touch-free collection (tele-calling), field collection, legal recovery and settlement to help with loan collections. Through the credit and risk management framework, the company maintains the lowest GNPA and NNPA among its peers.
4. Proactive Liability management: BHFL prioritizes longer-tenor floating rate borrowings and actively rebalances its borrowings towards money market borrowings to optimize its risk exposure and enhance financial agility. The company’s approach to managing costs of funds and strong credit ratings enables it to borrow funds at competitive rates from varied sources.
Valuation: The company is valued at 1QFY25 annualised P/BV multiple of 3.2x based on the upper price band on the post-issue capital. It is the second largest HFC in India having an AUM of Rs 97,071 cr with lowest GNPA ratio of 0.28% and NNPA ratio of 0.11% among large HFCs. The company has witnessed an AUM growth of 30.9% and profit growth of 56.2% over FY22-24 period. The company’s association with the brand ‘Bajaj’ helps it to enjoy a strong brand equity. Going forward, we expect the housing finance industry to grow in the range of 13-15% for the next 3 years and Bajaj Housing Finance Ltd is well placed to capitalize the growth in the housing finance sector.
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