Bajaj Housing Finance’s sharp stock correction has raised questions about valuation, growth sustainability, and future strategy in India’s competitive housing finance market.
The post-IPO enthusiasm has vanished as Bajaj Housing Finance has fallen to a 52-week low. It continues to trade at a premium to peers even after the decline, creating concerns about growth, strategy, and valuation.
Bajaj Housing Finance Stock Correction Raises Valuation Concerns
📉 Stock Performance Snapshot
- 52-Week Low: ₹75
- IPO Price: ₹70
- Peak Price: ₹188.5
- Current Premium: ~9% above IPO
- Oversubscription: 64x
- Investor Sentiment: Weakening
On Friday, the stock of mortgage lender Bajaj Housing Finance Ltd. fell to a new 52-week low of ₹75. Compared to its September 2024 public issue price of ₹70, it is currently only 9% higher. Due to strong investor demand and chairman Sanjiv Bajaj’s belief that the company may become the “next HDFC,” the issue was oversubscribed by around 64 times its offer size.
It reached a top of ₹188.5 on September 18, 2024, due to the post-listing frenzy. However, its fortunes have radically changed since then. Has mistaken expectations led to stock mispricing at Bajaj Housing Finance?
Valuation Comparison With Peers
Two valuation comparisons—with HDFC and its listed peers—help explain mispricing.
On its final trading day, July 12, 2023, HDFC was trading at ₹2,724 per share before to its merger with HDFC Bank. HDFC was valued at ₹1,200 with standalone profits per share (EPS) of ₹89 for FY23 if the market value per share of its investments in various group firms was subtracted from its market price. This translates into a price-to-earnings (P/E) multiple of about 14x.
According to Bloomberg statistics, Bajaj Housing Finance is trading at FY26 P/E of 25x despite the sharp fall. The FY26 P/E ratios for PNB Housing Finance and LIC Housing Finance are 9x and 5x, respectively. Stronger loan book growth may partially account for the seeming large valuation differential between Bajaj and its peers.
Growth vs Valuation Trade-Off
📊 Growth & Strategy Highlights
- AUM Growth: 23%
- Peer Growth: 12% & 5%
- Target: 21–23% AUM growth
- Challenge: Balance transfer (BT)
- Focus: Sambhav Housing segment
- Risk: Higher credit risk
In 9MFY26, Bajaj’s assets under management (AUM) increased by 23%. AUM growth for PNB Housing Finance and LIC Housing Finance was very moderate, at 12% and 5%, respectively. Bajaj is still on track to meet its 21–23% AUM growth target for FY26.
The management stated that numerous requests from Bajaj borrowers to transfer their outstanding loans to other lenders that are offering lower rates are having an impact on the current AUM growth rate. The industrial term for this is balance transfer, or BT.
Shift Towards Sambhav Housing Segment
Bajaj is pursuing greater expansion in its Sambhav Housing division in order to counteract AUM attrition. In contrast to the prime segment, which is made up of highly regarded salaried and independent contractors with strong CIBIL scores, this refers to the near-prime and cheap housing category.
At the end of Q3FY26, Bajaj’s home loan AUM was ₹72,769 crore. Sambhav AUM was only ₹5,000 crore of this, highlighting the prime segment’s dominance. In the coming year, Bajaj plans to treble the monthly loan distribution rate in Sambhav from ₹300 crore.
Scaling Sambhav may also help reduce pressure on net interest spread, which is different from net interest margin and is the difference between yield on advances and borrowing costs. According to management, there is still a lot of competitive pricing pressure in the prime market, and this pressure is probably going to continue. Even if more competitors are considering entering the market, Sambhav loans are subject to comparatively less pricing pressure.
Risks and Future Outlook
Because the borrower category is comparatively riskier, concentrating on Sambhav has the drawback of increasing asset quality risk. Maintaining AUM and net profit growth will be crucial as the strategy develops, even though management thinks the risk-reward equation in this market is favorable.
For the time being, the story has changed due to the stock’s decline. It is possible that Bajaj Housing Finance is now growing at a fair price rather than a superlative one.
Disclaimer: This content is for informational purposes only and should not be considered financial or investment advice. Market conditions may change rapidly.
