Bajaj Housing gets first brokerage report post stellar debut, Phillip Capital sees more steam left

Following a stellar Dalal Street debut on Monday, Bajaj Housing Finance (BHFL) has seen its first brokerage initiation report from Phillip Capital. The brokerage firm believes that the recently listed housing finance company has more steam left and expects a decent upside in the Bajaj Group player from its previous close.

BHFL’s average home loan customers earn a salary of Rs 14 lakh, giving them pricing power and multiple choices in key markets. To sweeten its offerings, BHFL astutely offers top-up home loans in addition to the original home loan, which boosts its yield in this highly competitive market, said Phillip Capital in its IC note.

BHFL sources 40 per cent of its home loans from existing Bajaj Finance customers and gives 90 per cent to salaried customers. This reduces costs and augments its risk-adjusted spreads, leading to higher return ratios. Also, 70 per cent of its LAP loans are for self-occupied residential property. It originates these loans from existing customers, implying a strong focus on opex, it said.

"As BHFL scales up, its AUM per branch is closing in on LICHF and its AUM per employee is at par with Can Fin Homes. Its borrowing cost is better than Can Fin Homes’, risk-adjusted spreads are lower, reflected in RoE," said Phillip Capital.

Shares of Bajaj Housing Finance turned multibagger on its listing on Monday as the stock debuted at Rs 150 apiece, 114.29 per cent above its issue price of Rs 70 apiece. The stock hit an upper circuit of 10 per cent on its maiden trading session to settle at Rs 165, zooming 135.71 per cent over the issue price.

"We believe BHFL is in a league of its own, with its focus on the ‘desirable’ sweet spot for many home loan aspirants – a ticket size of Rs 50 lakh. This way, it addresses 65 per cent of home-loan originations in India. It is increasingly focusing on lease rental discounting (LRD), a high-yield segment. In three years, BHFL is likely to have a balance sheet of Rs 2 lakh crore," Phillip said.

BHFL has scope to improve its expense ratios, implying an improvement in return ratios, it said. "We would look favourably at BHFL for its acute focus on salaried HL, steady expense ratio, and benign credit costs, manifesting strong return ratios. We value Bajaj Housing Finance at 6.5 times September 2026 BV at Rs 210, implying 27 per cent upside," it added with a 'buy' tag.