Bajaj Housing Finance, a subsidiary of Bajaj Finance, will be launching its IPO to raise Rs 6,560 crore from investors. The IPO will open for bidding on September 09 and close on September 11. The company kept the IPO price band in a range of Rs 66 to 70 per equity share. Here’s a list of risks to look for before bidding for the IPO, which the company outlined in its red herring prospectus (RHP).
Bajaj Housing Finance Key Risks
Not recovering collateral value fully
If the company is unable to fetch the full amount from collateral on the defaulted loan promptly or entirely. This could happen due to various factors like a fall in real estate prices, changes in monetary policy by RBI, a decrease in customers’ disposable income, and many others.
Rise in gross NPA
If the company is unable to control the level of Gross Non-Performing Assets, which is also known as Stage 3 assets, the company’s credit ratings will come down. It will further translate to an increase in the cost of funds for provisioning purposes.
Concentration of AUM
The company’s assets under management are concentrated in four states and the union territory of New Delhi. Any adverse developments in these regions can hurt its business, results of operations, cash flows, and financial condition. The company’s AUM is 32% located in Maharashtra followed by Karnataka with 22.7%, and thereafter.
Mismatch in assets interest rates to liabilities
The company may face interest rate and maturity mismatches between its assets and liabilities in the future, including in the near term, which may cause liquidity concerns. Further, Bajaj Housing Finance can have a material effect on its business, if it is unable to secure funding on acceptable terms or at competitive rates when needed.