Bajaj Housing Finance (BHFL) continues its remarkable rise following a blockbuster debut on Monday. Shares of the company, which opened 114% higher than the issue price and surged to settle 136% higher on the BSE and NSE, climbed another 10% on Tuesday, reaching a record high of Rs 181.48 per share.
With a market capitalisation of Rs 1.51 trillion, BHFL is now the largest housing finance company in India, more than 2.5 times its initial public offering (IPO) valuation of Rs 58,300 crore. It has surpassed Housing and Urban Development Corporation (Hudco) and LIC Housing Finance, which have market capitalisations of Rs 49,056 crore and Rs 37,239 crore, respectively.
Investors’ Dilemma: Is it a Buy at current levels?
Bajaj Housing’s strong debut has left many investors, especially those who missed the IPO or didn’t apply, debating their next steps. The big question remains: should they invest in BHFL now, or opt for established alternatives like LIC Housing Finance, the second-largest player by market share?
It’s important to note that Bajaj Housing and Hudco differ significantly. In Q1 of FY25, Hudco’s share of home loans in its total sanctioned loans was zero, and the share of home loans in total disbursements was barely 1%.
Financial Comparison: Bajaj Housing Vs LIC Housing
When comparing financial performance, Bajaj Housing has outpaced LIC Housing Finance in terms of both revenue and profit growth. In Q1FY25, Bajaj Housing reported total revenue from operations of Rs 2,208.65 crore, a 25.26% year-on-year (YoY) increase from Rs 1,763.25 crore in Q1FY24. For the entire FY24, its revenue was Rs 7,617.31 crore.
Meanwhile, LIC Housing’s consolidated total revenue from operations in Q1FY25 rose just 0.55% YoY to Rs 6,796.85 crore, compared to Rs 6,759.13 crore in the same quarter last year. For FY24, its revenue stood at Rs 27,276.97 crore.
In terms of profit, Bajaj Housing’s profit after tax (PAT) for Q1FY25 reached Rs 482.61 crore, marking a 4.50% increase from Rs 461.80 crore in Q1FY24. For FY24, its PAT was Rs 1,731.22 crore. LIC Housing’s PAT for Q1FY25, however, declined by 1.96% to Rs 1,306.40 crore, compared to Rs 1,319.10 crore in the same quarter last year. Its PAT for FY24 stood at RS 4,763.32 crore.
Asset Quality: Bajaj Housing Leads in growth and risk management
Bajaj Housing, backed by the Bajaj Group, has shown exceptional growth in assets under management and profit between FY22 and FY24, according to analysts. Its lower gross non-performing assets (GNPAs) indicate strong risk management.
In contrast, LIC Housing, though a more established player, has experienced slower growth and higher NPAs compared to Bajaj Housing.
Valuation and analyst view
Bajaj Housing’s shares are currently priced at 3.2 times their June 2024 book value, reflecting a premium. LIC Housing, on the other hand, trades at 1.2 times its book value, offering a more attractive entry point for conservative investors seeking steady performance, analysts suggest.
Brokerage firm PhillipCapital has initiated a ‘Buy’ rating for Bajaj Housing, with a target price of Rs 210, implying a 15.7% upside from Tuesday’s closing price. According to the brokerage, BHFL still has significant room to improve performance.
“Bajaj Housing Finance’s focus on loans with an average ticket size of Rs 5 million addresses approximately 65% of home-loan originations in India. With scale, BHFL has scope to improve its expense ratios, implying an improvement in return ratios ahead,” PhillipCapital stated.
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