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Bajaj Housing Finance Ltd (BHFL).

 Bajaj housing has between FY 22 and FY 24 grown exceptionally in terms of asset management and profit. 



Bajaj Housing Finance Ltd (BHFL) continues to impress after a stellar market debut on Monday. The shares, which opened 114 per cent higher than the issue price and marched ahead to settle 136 per cent higher on the BSE and the National Stock Exchange (NSE), soared another 10 per cent to hit a record high of Rs 181.48 apiece on the bourses on Tuesday.


BHFL is now the biggest housing finance company in terms of market capitalisation at Rs 1.51 trillion, more than 2.5 times its initial public offering (IPO) valuation of Rs 58,300 crore. Housing and Urban Deve­lop­ment Corporation (Hudco) and LIC Housing, with market capitalisation of Rs 49,056 crore and Rs 37,239 crore, are ranked next.

 


However, Bajaj Housing’s market debut has left many investors, particularly those who missed the IPO allotment or failed to apply, wondering about their next move: Should they invest now or consider established alternatives like LIC Housing Finance, the second biggest player by market share.

 


To be sure, Bajaj Housing with Hudco are not exactly alike: In the first quarter (Q1) of FY25, the share of home loans in Hudco’s total sanctioned was nil and that in total disbursements barely 1 per cent.


“Both LIC Housing Finance and Bajaj Housing Finance have healthy financials. However, BHFL is currently trading at a premium compared to LIC Housing Finance, reflecting its superior asset quality and higher net profit growth,” said Raj Gaikar, research analyst, SAMCO Securities.

 

Bajaj Housing vs LIC Housing

 

A comparison of the finances shows that Bajaj Housing has an edge over LIC Housing. Bajaj Housing had stronger revenue and profit growth, outpacing LIC Housing Finance in Q1FY25. Bajaj Housing’s total revenue from operations stood at Rs 2,208.65 crore, marking a 25.26 per cent year-on-year (Y-o-Y) jump from Rs 1,763.25 crore in Q1FY24. Revenue was Rs 7,617.31 crore in FY24.

 

LIC Housing’s consolidated total revenue from operations in Q1FY25 increased 0.55 per cent Y-o-Y rise to Rs 6,796.85 crore, compared to Rs 6,759.13 crore in the same quarter last year. It was Rs 27,276.97 crore in FY24.

 



Bajaj Housing’s profit after tax (PAT) in Q1FY25 stood at Rs 482.61 crore, 4.50 per cent higher than Rs 461.80 crore the year before. It was Rs 1,731.22 crore in FY24. LIC Housing Finance’s PAT in Q1FY25 dropped 1.96 per cent to Rs 1,306.40 crore from Rs 1,319.10 crore in the same quarter last year. It was Rs 4,763.32 crore in FY24.

 

Asset quality

 

Bajaj Housing, which is backed by the Bajaj Group, has between FY22 and FY24 grown exceptionally in terms of assets under management and profit, according to analysts. Fewer gross non-performing assets (GNPAs) prove its robust risk management. LIC Housing Finance, a more established player, has had slower growth and higher NPAs compared to Bajaj Housing, 

they said.

 

That said, Bajaj Housing's shares are priced at 3.2x their June 2024 book value, reflecting a premium. LIC Housing Finance is trading at 1.2x book value and offers a more attractive entry point for conservative investors looking for steady performance, according to analysts.

 


“LIC Housing offers a better risk-reward ratio due to its lower valuation and steady performance. It’s more suitable for investors looking for value and stability without paying the premium attached to high-growth stocks like Bajaj Housing,” said Nirav Karkera, head of research at Fisdom.

 

Brokerage firm PhillipCapital, meanwhile, has initiated a ‘buy’ rating for Bajaj Housing, with a target price of Rs 210 — implying a 

15.7 per cent upside from Tuesday’s closing price. The company has room to improve performance, according to the brokerage.


“Bajaj Housing Finance’s focus on loans with average ticket size of Rs 5 million addresses approximately 65 per cent of home-loan originations in India. With scale, BHFL has scope to improve its expense ratios, implying an improvement in return ratios ahead,” said PhillipCapital.

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