Bajaj Housing Finance shares up 10% after ending 136% higher on listing day, PhillipCapital sees another 27% upside potential

After ending its listing day 136% higher than the issue price of Rs 70 per share, Bajaj Housing Finance (BHFL) shares rallied another 10% today to Rs 181.48 on BSE. Post-listing, domestic brokerage firm PhillipCapital has also initiated coverage on the stock with a target price of Rs 210.

PhillipCapital is the first brokerage to initiate coverage on the stock after its listing, signalling an upside of 27% from Monday’s closing price.

“We believe BHFL is in a league of its own, with its focus on the ‘desirable’ sweet

spot for many home loan (HL) aspirants – a ticket size of Rs 5mn. This addresses 65% of home-loan originations in India. It is increasingly focusing on Lease Rental Discounting (LRD), a high-yield segment that provides operating leverage with scale,” said PhillipCapital in its report.

PhillipCapital also believes that the construction finance (CF) book will be range-bound at 8-10% of its total book and in three years, BHFL is likely to have a balance sheet of more than Rs 2 lakh crore. In the near-term, credit costs will remain benign and this, along with its focus on building a low-risk balance sheet, will lead to RoA/RoE of 2%+/12%+.

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“With scale, BHFL has scope to improve its expense ratios, implying an improvement in return ratios. Hence, we would look favourably at BHFL for its acute focus on salaried HL, steady expense ratio, and benign credit costs, manifesting strong return ratios,” said Shubhranshu Mishra, Research Analyst at PhillipCapital.

Ahead of the listing, the company’s shares traded with a GMP of 120% to the issue price.

The Rs 6,560 crore IPO of Bajaj Housing Finance was the biggest of the year so far and received a subscription of nearly 67 times the shares on offer.

Later during the session, the stock witnessed some profit booking and was trading 7% higher at Rs 176.47 around 9:30 am.

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