*Bajaj Housing Finance Limited (BHFL)* : CMP: 113 Long Term Gr: 30% | CY Gr: 26% | Q3_fy25 Result Update:
### 1. **Company Overview - Bajaj Housing Finance Limited (BHFL)**
- **Background**: BHFL was originally incorporated as Bajaj Financial Solutions Limited in Pune in 2008. In 2014, it was renamed Bajaj Housing Finance Limited. It is a housing finance company promoted by Bajaj Finance Limited and Bajaj Finserv Limited, and is headquartered in Pune, Maharashtra.
- **Recent IPO**: The recent IPO includes a fresh issue of up to ₹35,600 million and an offer for sale of up to ₹30,000 million, totaling up to ₹65,600 million. This IPO grossed the highest ever collection for any Indian company in history. This was a super successful IPO.
### 2. **Housing Finance Industry Overview and Estimated Growth**
- The housing finance industry in India has experienced steady growth, driven by increasing urbanization, government housing schemes, and favourable interest rates. According to CRISIL MI&A, the sector is expected to continue growing, with a projected compound annual growth rate (CAGR) of around 9-11% from FY24 to FY30. Premium housing is expected to grow by 20% CAGR during the same time.
- The market is highly competitive, with various players such as Housing Development Finance Corporation (HDFC) now merged into HDFC Bank, LIC Housing Finance, and others competing with BHFL.
### 3. **Peer Group Comparison**
- **Major Competitors**: Key players in the housing finance industry include:
- **HDFC Ltd.**: Was The largest housing finance company with a strong portfolio and market share but now we will not count it as a peer company.
- **LIC Housing Finance Ltd.**: One of the oldest players, known for its diversified loan book. Growth is low and GNPA% are high v/s other players.
- **PNB Housing Finance**: Focuses on a mix of retail and corporate lending. Growth is low with high GNPA% v/s other players.
- **Sundaram Home Finance**: A smaller player with a focus on South India.
- **Financial Data Comparison**:
- BHFL's financial performance shows consistent growth, with a focus on expanding its loan book and maintaining low levels of non-performing assets (NPAs).
- HDFC Ltd. was having the highest market share and revenue among the peers, followed by LIC Housing Finance. Now LIC Housing is the leading company in this market after merger of HDFC with HDFCBank. BHFL has a smaller but growing share of the market, with a focus on high-quality customers and profitability.
### 4. **Historical Growth of BHFL**
- **Financial Performance**: BHFL has shown significant growth in its loan book and revenues over the years. Its income from operations increased at a CAGR of approximately 14% over the past three years, while maintaining asset quality.
- **Loan Portfolio Growth**: The company has grown its loan book steadily, with a focus on both residential mortgages and loans against property (LAP). The growth has been facilitated by its strong parentage and risk management practices.
AUM Grew from mere 50000 Cr 4 years back to this year would cross the benchmark of 1 Lakh Cr AUM.
Income of near to 2500 Cr in fy_21 is booming with near to 10000 Cr estimate this year.
Profits of 400 Cr in Fy_21 would cross 2000 Cr Profits this year.
### 5. **Shareholding Pattern**
- **Promoters**: Bajaj Finance Limited and Bajaj Finserv Limited are the main promoters, holding a significant portion of the company’s equity. Post-IPO, the promoters will retain a major share, ensuring control over the company’s operations.
- **Public Shareholding**: The IPO has just introduced public investors to the company, which is expected to enhance transparency and corporate governance.
Bajaj Housing Finance's latest results for Q3 FY25;
🌟 Key Highlights and Performance Metrics:
📈 Assets Under Management (AUM) Growth: Inline growth
AUM increased significantly by 26% YoY, reaching ₹1,08,314 crores in Q3 FY25, compared to ₹85,929 crores in Q3 FY24.
💸 Income Growth: Inline growth
Total Revenue from Operations rose by 25%, with interest income increasing from ₹1,845.47 crore in Q3 FY24 to ₹2,321.96 crore in Q3 FY25.
📉 Gross NPA and Net NPA Ratios: Inline NPA’s
Gross NPA was slightly higher at 0.29% in Q3 FY25 compared to 0.25% in Q3 FY24.
Net NPA also increased marginally from 0.10% in Q3 FY24 to 0.13% in Q3 FY25.
💵 Cost of Borrowing: Inline COF
The cost of funds remained steady at 7.9% for Q3 FY25, consistent with Q2 FY25 but up slightly from 7.7% in Q3 FY24.
📊 Profit Margins: Inline PAT
Profit Before Tax (PBT) and Profit After Tax (PAT) both grew by 25% YoY. PBT increased from ₹572 crore in Q3 FY24 to ₹713 crore in Q3 FY25, while PAT increased from ₹437 crore in Q3 FY24 to ₹548 crore in Q3 FY25.
🔑 Important KPIs:
Loan Losses & Provisions increased dramatically to ₹35 crore in Q3 FY25 from just ₹1 crore in Q3 FY24.
Return on Assets (ROA) and Return on Equity (ROE) were 2.4% and 11.5% respectively for Q3 FY25.
💰 Valuation Ratios at CMP of ₹113:
Based on the closing market price (CMP) and the financial performance, key valuation ratios such as Trail EPS would be 2.54 & Trail Price to Earnings ( Trail P/E) would be 41. Adding the Growth for this year F-EPS could reach 3.2 while F_PE should be 34.
📅 Near Term and Long Term Outlook:
🔍 Near Term: - Continued *AUM growth📈* and focus on maintaining strong *asset quality🛡* and capital adequacy. We may see 25% Income Growth & 23% profit growth this year taking the AUM to 1.2 Lakh Cr
🌱 Long Term: - *Strategic growth📊* in prime housing and lease rental discounting.
- *Digital innovation🖥* for efficient customer acquisition and risk management.
- Expanding geographic footprint to capture housing demand in *tier 2 and 3 cities🏘*.
- **Growth Drivers**: The housing finance industry is expected to grow due to supportive government policies like the Pradhan Mantri Awas Yojana, affordable housing push, and increasing urbanization. BHFL, with its diversified product portfolio, is well-positioned to benefit from these trends.
- **Revenue Projections**: BHFL is expected to grow at a CAGR of 15%-18% over the next 5-10 years, with improvements in operational efficiency and a focus on quality loan disbursement. This can take Company at an AUM of 2.4 Lakh Cr till 2030.
- **Risks**: Risks include regulatory changes, interest rate fluctuations, and competition from both banks and other non-banking financial companies (NBFCs).
- **Investment Remark**: From a long-term perspective, BHFL presents a favourable opportunity given its strong financial performance, backed by Bajaj Group, and expected growth in the housing finance sector. Investors looking for stable growth in the financial sector could consider investing, keeping in mind the inherent risks of the housing finance industry. New buying can be done during the current fall in the whole range of 115 to 102 while the range near term should be 154 this year. Overall multi year rally along with high and consistent profits could be expected.
This analysis gives a comprehensive view of BHFL's prospects, its position in the housing finance industry, its financial performance, and potential for future growth, aiding investors in making informed decisions.
### Disclosure
Do not treat this document as a recommendation of stock, this was created for educational purposes.
