Being backed by Bajaj Finance, Bajaj Housing Finance has found it comfortable raising growth capital as and when required. Its parent Bajaj Finance has infused Rs 9,500 crore cumulatively spread over regular intervals since inception, with the most recent being a sum of Rs 2,000 crore infused in April 2024, InCred Equities said as the Bajaj Finance arm filed draft papers with Sebi for Rs 7,000 crore IPO.
"After the recent capital raising, the Tier-1 ratio is estimated at 24 per cent, which will be further augmented after the IPO. Hence, there is no dearth of capital support," the brokerage said.
InCred Equities said an aggressive AUM CAGR of 39 per cent logged by Bajaj Housing Finance over FY19-FY24 is the highest among peers, which has catapulted it to the second-largest HFC position in India.
"The growth is led by secured, salaried and high-ticket home loans in hand, with healthy diversifications to LRD, LAP and project finance. Return ratios are gradually improving, after being weighed down by high expansion costs and low NIM, although supported by lower credit costs," it said.
Asset quality
InCred said BHFL has maintained an impeccable asset quality, with most of its customers (76 per cent) having a CIBIL score of over 750. The same has also been creditably well contained in the non-housing segments, it said,
Portfolio-level peak gross non-performing assets or GNPAs have been less than 40 bps since inception. Consequently, credit costs have been well controlled, the domestic brokerage said.
Margin profile InCred Equities said BHFL has one the highest average loan ticket sizes of Rs 46 lakh, which indicates a higher concentration in that segment.
Yields rise with lower ticket sizes and even more in the self-employed segment. "However, competitive yields place the company at par with banks while enjoying an edge over smaller players, thus aiding AUM growth. On the contrary, the cost of funds is always higher than banks in the absence of access to low-cost deposits. Thus, the margin profile for BHFL is relatively weak compared to standalone Bajaj Finance, but at par with large HFCs and banks," InCred Equities said.
Elevated costs The domestic brokerage said although BHFL has the highest average loan ticket size among HFCs, it has a relatively high cost-to-income ratio compared with other larger peers. This is largely due to the HFC being under expansion mode with relatively high commission payouts when compared with other HFCs.
"The company is in an expansion mode, which leads to high costs till these markets mature. Mature and established large HFCs like LIC Housing Finance have a comparatively lower cost-to-income ratio, at around 13 per cent," it said.
Return ratios InCred Equities said Bajaj Housing Finance has return ratios on the lower side due to its focus on the more secured, low-yielding higher-ticket size salaried segment and higher operating costs.
The company, it said, is in an expansion mode by entering newer markets and investing heavily in strengthening external networks. There is also a higher focus on digitization in order to offer superior customer service, InCred Equities said.