Bajaj Finserv hits 52-week high; Finance soars 4% ahead of mortgage arm IPO

Bajaj Finserv hit a 52-week high of Rs 1,771.50, up 3.3 per cent in intra-day trade amid heavy volumes, rallied 16 per cent in past two weeks

Shares of Bajaj Finserv and Bajaj Finance rallied as much as 4 per cent on the BSE in Thursday’s intra-day trade, extending their past three days gain. The stock prices moved up ahead of the group's Rs 7,000 crore initial public offering (IPO) announcement of its mortgage lending arm Bajaj Housing Finance. 

According to reports, the IPO is expected to hit the market during the first half of September. The IPO will have a special quota for shareholders of Bajaj Finserv and Bajaj Finance, both of whom are classified as ‘promoters’. Bajaj Housing’s IPO will comprise Rs 3,000 crore share sale by Bajaj Finance and fresh fundraise of Rs 4,000 crore, Business Standard reported earlier.

 

Shares of Bajaj Finance have rallied 4 per cent to Rs 7,158.30 on the BSE in intra-day trade today. In past four trading days, the stock has gained 6 per cent. The shares had hit a 52-week high of Rs 8,190 on October 6, 2023 and a 52-week low of Rs 6,190 on March 6, 2024.

Meanwhile, Bajaj Finserv stock also edged up 3.3 per cent, hitting a 52-week high of Rs 1,771.50 intra-day amid heavy volumes. In past two weeks, the stock of holding company has surged 16 per cent. It has surpassed its previous high of Rs 1,741.85 touched on December 15, 2023.

Bajaj Finance is a consumer finance and lending business, in which Bajaj Finserv holds 51.34 per cent stake and its unlisted 100 per cent subsidiary, Bajaj Housing Finance (BHFL).

BHFL offers a complete product suite of mortgages to home loans, loans against property, lease rental discounting, developers financing and rural mortgages. It has a dedicated vertical offering home loans and loans against property to the rural sector and MSME customers under rural mortgages.

BHFL’s asset under management (AUM) has grown over 25 times in 6 years. In this short span, it has grown its profit after tax (PAT) to Rs 1,731 crore from just Rs 10 crore in FY2018. It is today one of the largest private sector housing finance companies.

During FY2024, BHFL’s AUM increased by 32 per cent to Rs 91,370 crore. Net total income grew by 19 per cent to Rs 2,925 crore and PAT increased by 38 per cent to Rs 1,731 crore.

CRISIL Ratings notes that BHFL is required to be mandatorily listed on or before September 30, 2025. With regards to the same, the Board of Directors of BHFL undertook a discussion and considered various options based on the prevailing market conditions, including through a potential IPO at its meeting scheduled on April 24, 2024. The board has also set up a committee to undertake various steps for the same.

"BHFL plans to get listed by September 2025 as per regulatory requirement, and there would be a capital raise of Rs 4,000 crore during an IPO. Considering the growth, the company plans to operate at a steady-state leverage of 7.0x–8.0x. From the perspective of absorbing the asset-side stress, BHFL has enough capital buffers to cushion any stress-induced spike in delinquencies," said India Ratings and Research (Ind-Ra).

Further, CRISIL Ratings believes BHFL is strategically important to Bajaj Finance, being its vehicle for growing the mortgage business, which is amongst the key focus areas for Bajaj group.

Bajaj Finance plans to hold a majority stake and is willing to continue to infuse capital, after having infused over Rs 9,000 crore from fiscal 2017 till date, to support growth requirements over the medium term. The shared name also enhances Bajaj Finance’s moral obligation to support BHFL, the rating agency said in report.