Bajaj Housing Finance, a subsidiary of the renowned Bajaj Group, has been the subject of much attention over the past few weeks, especially after its stock fell 6% on December 12, 2024. The drop reached a two-week low, as shares traded at ₹132.80. The primary reason for this sudden downturn is the expiration of the three-month IPO lock-in period, which released 12.5 crore shares, or roughly 2% of the company’s outstanding equity, into the market. In this blog, we’ll take a deeper look at the events that led to this decline, the company’s financial performance, and what investors can expect going forward.
Bajaj Housing Finance’s Stock Performance and Market Dynamics
Bajaj Housing Finance shares have seen huge volatility since their listing in September 2024. The stock had made a great debut on the stock exchanges, listing at ₹150 per share, which is a whopping 114.3% premium over its IPO price of ₹70. This rise in stock price indicated that there was more demand from investors for the equity shares of the company, as their IPO was oversubscribed, with bids reaching a value of ₹3 lakh crore against an issue size of just ₹6,560 crore.
Post-IPO, Bajaj Housing Finance continued to move upwards and reached an all-time high of ₹188 per share. However, this rally was short-lived as broader market volatility set in, dragging the stock price lower. In November, the shares dropped to ₹125, but have since seen a slight recovery, rising by 8% from its low point.
These aside, the most immediate impact of the three-month lock-in period was the expiration, which led to the exit of investors who had been restricted from selling their shares post-IPO. This increased the supply of shares in the market. In conjunction with market sentiment, the sudden rise in available shares led to the 6% dip in the stock price on December 12, 2024.
#1. The Lock-In Period: What Does It Mean for Investors?
A lock-in period is the amount of time in which particular investors are not allowed to sell their shares. Pre-IPO investors generally suffer from restrictions on immediate liquidity after an IPO. This is a limitation that company insiders, venture capitalists, and private equity firms will face after the IPO has taken place.
In Bajaj Housing Finance, the lock-in period ended on December 12, 2024, and 12.5 crore shares were released into the market. This increased the supply of shares, and as a result, the potential was there to put downward pressure on the stock price because there was now more stock available for sale in the secondary market.
This is not unusual in the stock market after an IPO. Once the lock-in period expires, there is usually a temporary price decline as the market adjusts to the increased supply. For Bajaj Housing Finance, this has resulted in a 6% dip, but this is part of the natural price discovery process following the expiration of the lock-in period.
#2. Bajaj Housing Finance: Company Overview
Bajaj Housing Finance is a registered non-deposit-taking housing finance company under the National Housing Bank (NHB). The company is a wholly owned subsidiary of Bajaj Finance, which in turn is majority-owned by Bajaj Finserv. The company offers mortgage loans and other financial products to retail and commercial customers and focuses on affordable housing.
Q2 FY25 saw strong delivery for Bajaj Housing Finance. Its assets under management crossed ₹ 1 lakh crore and continued growing to ₹ 1.02 lakh crore, while it rose ₹ 81,125 crore in the same period the previous year. This clearly reflects scalability, and the ability of a company to grow loans.
The quarter’s disbursements stood at ₹12,014 crore, similar to the ₹12,154 crore seen in the previous quarter. This level of steady disbursements is supported by key transactions in the commercial business segment and highlights how the company can maintain its growth momentum even in the face of challenges in the overall economic environment.
Liquidity and Operational Efficiency
Liquidity wise also, Bajaj Housing Finance has maintained itself sound; having a liquidity buffer worth ₹3,220 crores, its figure as of 30th September 2024 reflects; that the liquidity coverage ratio also appears to be significant to maintain which is at around 220.9% whereas liquidity support purposes are 85%; there is enough reserve through maintaining high liquidity.
In terms of operational efficiency, the company has made substantial improvements. The ratio of Operating Expenses (Opex) to Net Total Income (NTI) reduced to 20.5% in Q2 FY25 from 22.1% in Q2 FY24. For the first half of FY25, this ratio stood at 20.7%, compared to 23.0% in H2 FY24. This reduction in the cost of operations would mean that Bajaj Housing Finance is managing its expenses effectively and improving the cost-to-income ratio, which should improve profitability over time.
Profitability and Growth Prospects
Bajaj Housing Finance reported PAT at ₹546 crore in Q2 FY25. PAT is ₹451 crore from the same quarter last year. Thus, profitability reflects that despite challenges thrown up by market conditions and the sector, the housing finance sector remains capable of giving a fairly steady return on operation.
The company’s strong financial performance, coupled with its growing AUM and improving operational efficiency, makes Bajaj Housing Finance well-positioned for continued growth. Still, the stock’s performance will remain sensitive to the overall market environment, particularly the health of the real estate sector and the cost of borrowing. Interest rate fluctuations and the regulatory environment will continue to be important drivers of the company’s future growth prospects.
Bajaj Housing Finance: Future Outlook
While the recent fall in stock price with the expiry of the lock-in period has created jitters among investors, long-term prospects for Bajaj Housing Finance are very strong. The company has performed well during recent quarters, with growth in AUM, steady disbursements, and improving operational efficiency. Moreover, its liquidity position and profitability reflect the robustness of the entity in withstanding short-term market volatility.
A focus on the housing finance sector is a primary growth driver for the Indian economy and increasing demand for housing and home loans augur well for the company. As the Indian middle class continues to grow and affordable housing continues to be at the forefront of governmental and private sector agendas, Bajaj Housing Finance will not be left untouched by these trends.
The affiliation with the Bajaj Group is, in fact, a financially stable conglomerate with a diverse portfolio of businesses and synergies across its various divisions, which provides the company with greater financial stability for leverage.
Conclusion: Is Bajaj Housing Finance a Good Investment?
Bajaj Housing Finance is a company that has been showing good growth in recent quarters with increasing AUM, steady disbursements, and improving operational efficiency. While the recent decline in stock price due to the expiration of the lock-in period may cause worry among short-term investors, long-term investors should look beyond these temporary fluctuations.
Solid financial foundation, strong liquidity position, and focus on the high-growth housing finance segment make the company a promising investment option for those wishing to gain exposure to Indian financial services and real estate markets. Yet, like with any investment, investors have to keep their risk tolerance, investment horizon, and general market conditions in perspective before making an investment decision.
In conclusion, while Bajaj Housing Finance may face short-term volatility due to market conditions and regulatory factors, its long-term growth prospects, solid financial performance, and strong brand make it an attractive investment for those looking to capitalize on India’s growing housing finance market.
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