Bajaj Housing Finance shares hit 10% upper circuit on Day 2; up 160% in two sessions

After doubling investors’ money on listing, shares of Bajaj Housing Finance were locked in its 10% upper circuit limit on the second day of trading, creating more wealth for its shareholders. The shares of Bajaj Group company made a strong debut on domestic bourses on Monday, with the stock price listing at ₹150 on the BSE and NSE against the issue price of ₹70 per share, with a market capitalisation (m-cap) of ₹1.25 lakh crore, more than double from ₹58,300 crore at the time of the issue. The stock settled the first day of trade at ₹164.99 on the BSE, up 135% over the IPO price.

Continuing its gaining streak for the second day, Bajaj Housing Finance shares opened higher at ₹175.11, up 6.1% against the previous closing price on the BSE. Extending opening gains, the housing finance stock rose as much as 10% to hit its upper circuit limit of ₹181.48, while the m-cap climbed to ₹1.51 lakh crore.

The sentiment was lifted after Phillip Capital assigned a first ‘Buy’ rating to the stock today, with a target price of R₹210, which implies a potential upside of 27%. Bajaj Housing Finance is in a “league of its own" with a ticket size of ₹50 lakh being the "sweet spot for many home loan aspirants", the brokerage says in a note. With this ticket size, the company is catering to around 65% of all home loan originations in India.

The brokerage in its report said Bajaj Housing Finance is likely to have a balance sheet of ₹2 lakh crore in the next three years, adding that credit costs to remain benign in the near-term. The company is expected to focus on building a low-risk balance sheet, which is likely to lead to a Return on Assets (RoA) of over 2% and Return on Equity (RoE) of around 12%, it said.

The ₹6,560 crore issue of the Bajaj Housing Finance, which is the first public offering by Bajaj Group in 20 years, received a record-breaking response from investors. The issue was subscribed 67.43 times, with the IPO receiving the highest-ever number of applications (88.94 lakh) and bids worth ₹3.24 lakh crore at the upper end of the price band of ₹66-70 per share. This is the first time in 16 years that any company has topped ₹2 lakh crore marks in subscription amounts after Coal India in 2008.

The IPO of Bajaj Housing Finance comprised a fresh issue of ₹3,560 crore and an offer for sale of ₹3,000 crore by parent Bajaj Finance. The housing finance company intends to use the net proceeds from the issuance of fresh equities to augment its capital base to meet future business requirements of the company towards onward lending.

Founded in 1926, the firm offers financial solutions such as home loans, loans against property, lease rental discounting, and developer financing to individuals and corporate entities to purchase and renovate homes and commercial spaces. As on March 31, 2024, it had a network of 215 branches spread across 174 locations in 20 states and three union territories, which are overseen by six centralised hubs for retail underwriting and seven centralised processing hubs for loan processing.

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