Shares of Bajaj Housing Finance Ltd (BHFL) surged after a stellar market debut, touching a fresh high on the second day. The stock surpassed the ₹180-mark, hitting ₹181.48 on the BSE, and ₹181.50 on the NSE, up by 10 per cent on Tuesday.

As per the NSE, the company’s market capitalisation climbed to ₹1.51 lakh crore. The stock’s buy quantity stood at 32,52,405, while sell quantity was nil. 

The stock debuted at ₹150 on the NSE and BSE on Monday, at a premium of 114 per cent over the issue price of ₹70, and closed 10 per cent higher at ₹165.

Portfolio and valuation

Brokerage Phillip Capital has initiated coverage on BHFL with a ‘buy’ call’ at a target price of ₹210, implying a potential upside of 27 per cent.

Phillip Capital believes that the company BHFL is in a league of its own, with its focus on home loans - ticket size of ₹50 lakh, and addressing 65 per cent of home loan demand in the country.

The brokerage predicted the company’s balance sheet to exceed ₹2 trillion in three years. “Near-term, credit costs will remain benign; this, along with its focus on building a low-risk balance sheet, will lead to RoA/RoE of around 2 per cent/12 per cent,” it added.

“As BHFL scales up, its AUM per branch is closing in on LIC Housing Finance (LICHF) and its AUM per employee is at par with Can Fin Homes,” Phillips Capital said.

Strong management, robust risk management practices, and superior asset quality (86 per cent of Bajaj Housing Finance home loans’ customer base, which is focused on the mass affluent segment has a 750+ CIBIL score) were the key pointers wherein Bajaj Housing Finance will continue to demand superior valuation, according to Shweta Daptardar, Vice President - Equity Research Analyst, BFSI, of Elara Capital. She emphasised that the company’s portfolio is diversified across housing finance segment.

Daptardar, despite being positive on the stock, observed that the current valuation is expensive.

Krishna Appala, Senior Research Analyst of Capitalmind Research, commented that the stock is trading at 8.2 times the expected book value of 22 per share one year forward, making it considerably expensive compared to its peers. “Even considering Bajaj Housing’s strong parentage, AAA rating, and solid asset quality, the current valuation leaves little room for further upside.”

“Typically, IPO excitement cools off within a few days as the market shifts focus to the next big thing. We may see selling pressure as the lock-in expiry for anchor and pre-IPO investors approaches. While Bajaj Housing’s long-term prospects remain strong, at these current levels, the near-term growth seems fully priced in, and the risk-reward ratio does not appear favourable,” Appala added.

Brokerage Motilal Oswal in its earlier report noted that the company BHFL has robust RoA/RoE of 2.4 per cent/15.2 per cent in FY24 with PAT CAGR of 76 per cent over FY20-FY24. It recorded 31 per cent CAGR in housing loans, 53 per cent in lease rental discounting, and 26 per cent in developer finance loan book over FY22-FY24.

The brokerage added that the company has AAA/Stable from both Crisil & IND for its long-term borrowing and A1+ for short-term borrowing.

Bajaj Housing Finance Ltd, a non-deposit-taking housing finance company registered with the National Housing Bank in September 2015, offers financial solutions for purchasing and renovating residential and commercial properties.

The ₹6,560-crore Bajaj Housing Finance IPO had a fresh issue of equity shares of up to ₹3,560 crore and an offer-for-sale (OFS) of ₹3,000 crore by promoters.

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