Business
Bajaj Housing Finance , promoted by Bajaj Finance ,engaged in mortgage lending since 2018, is a Housing finance NBFC means Non-deposit taking housing finance company incorporated in 2015 with key focus on prime housing loans. It offers financing for purchasing and renovating residential and commercial properties. Products include Home loans, Loan against property, Lease rental discounting and developer financing. Bajaj finance ltd and Bajaj Finserv ltd are promoters of this company which are also in the Retail financing and Insurance business respectively. Bajaj Housing Finance is the 2nd largest HFC in India with AUM of Rs 97,000 cr.
BHFL has assets under management of Rs 97000 cr, with home loan accounting for 58%, (87% is towards salaried customers), followed by LAP (10%), lease rental discounting (19%), developer finance (11%) and remaining unsecured loans. It operates from 215 branches in 174 locations, which are overseen by six centralized hubs for retail underwriting and seven centralized processing hubs for loan processing.
2 year AUM CAGR of 31%.
Average Ticket size for Home loans is approx Rs 46 lakh and for LAP its Rs 59 lakh. Average Loan-to-Value is 69.3%.
Bajaj Housing finance primarily cater to the mass affluent customers with an average age of 35-40 years and with an average annual salary of Rs 13 lakhs.
75.5% of home loan AUM were from customers with a CIBIL score above 750.
They use direct and indirect channels for origination of loans. For example, Bajaj Housing finance sources direct business through strategic partnerships with developers, self-sourcing by customer engagement, leveraging leads from digital ecosystem and partnership with digital players. Under indirect sourcing channels, they originate business through a distribution network of intermediaries such as channel partners, aggregators, direct selling agents, third party agents and connectors.
Their recently implemented DIY Home Loan platform provides an online portal where customers, partners, and salesforce can apply for home loans, upload documents, verify bank details, and check eligibility with ease. They have also launched a dedicated customer portal and mobile application, empowering clients with the ability to access loan details, download statements, utilize self-service options, and make online payments at their convenience without the requirement to visit the branch.
Over 35% of Home loan originates from intermediaries which was 46% in (FY-22).
Home Loans
BHFL offers home loans to salaried, professional and self-employed individuals. They primarily cater to the mass affluent customers with an average age of 35-40 years and with an average annual salary of Rs 1.3 million. Their services extend across 174 locations across India, with home loans contributing 57.5% to our total loan portfolio.
Average ticket size of Rs 46 lakhs. Average loan to value ratio of 69.3%.
Customer mix with more than 750 CIBIL score of 75.5%.
Loans Against Property
BHFL provides LAP to customers across 74 locations in India, utilizing both dedicated in-house teams and intermediaries. The primary purpose of offering this kind of loan is to extend credit based on the assessment of the borrower’s cash flow , rather than solely on the value of the collateral.
Average ticket size of Rs 59 lakhs. Average loan to value ratio of 53%. Self-occupied residential property mix of 71.4% of total book.
Lease Rental Discounting
BHFL provides lease rental discounting solutions to HNIs and developers, offering loan amounts tailored to meet their commercial real estate financing requirements. Their lease rental discounting product is designed to finance commercial properties with established lease rental cash flows from reputable tenants engaged in long-term lease agreements.
Average ticket size of Rs 102 cr, with a total of 249 customers.
Developer financing
BHFL offers financing to developers for both residential and commercial real estate development projects, adopting a D2C approach. Our strategy emphasizes cultivating a granular loan book by extending construction finance to developers with a proven record of on-time project completion.
Average ticket size of Rs 46 cr. , 669 active funded projects.
Industry overview
The Indian housing finance market grew at 13.5% CAGR in last 4 years on account of rise in disposable incomes, healthy demand, more players entering the segment. Since 4 years, affordability increased owing to steady property rates and increasing income. The total housing finance segment credit outstanding is Rs 33lakh crores as of March 2024. The top 50 districts in the country accounted for 63% of the housing loan outstanding in the country in FY23 ( 73% in FY19), implying more housing loans are being distributed outside top 50 districts. Housing loan market is projected to grow at 13-15% for next 3 years.
Region wise Distribution of housing loan market
South 36%
West 31%
North 15%
Central 11%
East 6%
NE 1%
Top 5 housing finance markets
Maharastra 23%
Karnataka 10%
Tamil nadu 9%
Gujarat 8%
Telengana 8%
Share of housing loans
PSU Banks 40%
HFCs 34%
Private Banks 20%
NBFCs 2%
Others 4%
Primary housing (ticket size above Rs 50 Lakh) grew fastest at 20.2% CAGR representing 35% market share in Housing Finance followed by Mass market (ticket size Rs 25 to 50 lakh) at 16% CAGR having 32% market share followed by Affordable housing having 33% market share grew 6% for last 5 years.
Demand drivers
[1.]Rise in disposable income- India’s per capita income grew at a 10% CAGR between FY12-20,which will aid housing finance demand.
2. Increasing Urbanization ( 31% in 2011, 35% in 2021, 39-40% in 2031)
3. Govt initiatives- PM Aavas Yojana, Relaation of ECB norms for easier access to credit, increase in PSL threshold.
4. Young population
5. Rise in Nuclear family trend.
6. Affordable housing
Top housing finance companies are LIC Housing finance, Can Fin Homes, PNB Housing finance.
Operating metrics
Loan book composition as on FY24
Home loans 58%
LAP 10%
LRD 19%
Developer finance 11%
Total AUM 97000cr. Top 5 states constitute 85% of AUM.
Loan to value for housing loans 69% , LAP 53%
Borrowing mix
Term loans 51%
NHB 10%
NCD 35%
Others 4%
Crisil rating AAA
Financial ratios ( FY24)
Credit cost 0.1% ( Homefirst 0.4%, Aavas 0.1%)
CRAR 21.2%
Provision coverage ratio 63.7%
Leverage (Total Assets/ Total Equity) 6 times.
NIM 4.1% in FY24 vs 4.5% last year.
Rest as per table below.
ROA 2.4% vs 2.3% LY(LIC Housing 1.67%, PNB housing 2.2%, Aavas 3.3%, Homefirst 3.9%)
ROE 15.2% vs 14.6% LY (LIC Housing 16.2%, PNB housing 11.8%)
Cost to income ratio 24% ( LIC Housing 13%, PNB Housing 22.4%, Can fin homes 19.9%
Financials
Total FY24 revenues of 7620cr .( Revenue CAGR 2 years 42%).Net Worth Rs 44,660 cr vs Rs 34,340 cr LY
PAT Rs 1,730 cr vs Rs 1,260 cr LY (up 38% YoY )Impairments 60cr.
Comparable peers are LIC Housing finance, PNB Housing finance, Can Fin homes.
Gross NPA is 0.27% in FY24 ( peers LIC Housing 3.55%,PNB Housing 1.5%, Aavas 1.74% Homefirst 1.74%)NNPA 0.10% ( peers LIC Housing 1.9%, PNB Housing 0.95%, Aavas 0.76%, Homefirst 1.2%
Points to consider
Top 5 states Maharashtra, Karnataka, Telengana, Gujarat, Delhi constitute 85% of AUM, any adverse calamity in these states would negatively affect the company.
Large exposure in residential and commercial real estate hence any downturn in this sector might affect Bajaj housing finance negatively.
As it is non-deposit taking NBFCs, it relies on borrowings and hence any impact on interest rate might affect them negatively. 44% of borrowings are at fixed interest rates, 56% of borrowings at floating interest rates whereas 99.8% of loans advanced are in floating interest rates.
Their key business strengths lie in strong parentage , diversified funding sources , vast network and risk management (one of the best HFC’s in capital & profitability ratios).
Bajaj finance holds 100% of BHFL, wherein just 1 year before RHP filing they invested approx Rs 2,000 cr as an equity by acquiring 110,74,19,709 shares at Rs 18.1
Average ticket size being 46 lakhs, BHFL caters to premium housing customers, which is growing at 13-15% CAGR. Also it is easy to lend being high ticket vs Affordable housing finance cos with 10 lakh ticket size.
BHFL has grown at stellar speed, just in 8 years AUM of 97000cr, last 2 year AUM CAGR of 31% and PAT CAGR of 56%- all because of huge customer database of Bajaj Finance. It is said data is the most important moat for Bajaj Finance.
IPO size /Promoter holding/ Market cap
Total offer 6560cr
Offer for Sale 3000cr
Fresh issue 3560cr
QIB- 50%
NII 15%
Retail 35%
Post listing promoter holding 88.75%
Price band- 66-70
Market cap post listing ~ 58300 cr
OFS seller is promoter Bajaj Finance
Purpose of IPO
Augmenting capital base for future lending
Valuation
Bajaj Housing Finance is valued at Price/ Book ratio 3.2
Peers LIC Housing at P/B 1.22 , PNB Housing 1.88, Can fin homes 2.63, Aavas Financiers at P/B 3.86 , Aptus at 4.19
Disclaimer: Not a sebi registered advisor. Kindly do your own research. I found these datas online and pasted them together.
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