When Bajaj Housing Finance Limited (BHFL) hit the stock market in September 2024, it made quite the splash. It was valued at nearly 10 times its book value, and its market cap shot up to ₹1.5 lakh crore—more than most other housing finance companies combined. Naturally, investors wondered: Is this for real? Or just hype?
Fast forward to today, and the stock has cooled off a bit. It’s now priced around 5.7 times book value. But even at this “discount,” is it still too pricey—or is it a hidden gem?
See the three things that really matter for any housing finance company: asset quality, profitability, and growth.
First, the Risk Factor: How Safe Are Their Loans?
BHFL’s asset quality is outstanding on paper. Its Gross NPA (non-performing assets) have stayed under 0.35%, even when the industry average spiked in FY21. That’s better than some of the most respected players like Can Fin Homes.
But here’s the catch: a huge chunk of BHFL’s loan book is brand new—most of it is just 2-3 years old. That’s risky. Why? Because loans don’t usually go bad immediately. If problems crop up, it’ll be later. That’s why experts say the portfolio is “unseasoned.”
Plus, we’ve seen this story before: finance companies grow super fast, then crash when things get rough. Let’s just hope BHFL avoids that fate.
Next, Profitability: Is the Business Making Enough Money?
BHFL’s Return on Equity (ROE) has been falling. Not because the company is mismanaged—but mostly due to rising borrowing costs and a large chunk of new capital raised during the IPO. More money raised means more equity, which drags down ROE temporarily.
But there’s some good news. The RBI has eased up on interest rates, and BHFL’s management expects borrowing costs to come down. They’re also shifting toward high-yield areas like lease rental discounting and affordable housing, which could boost profits.
The target? A medium-term ROE of 13–15%, backed by a Return on Assets (ROA) of 2–2.2% and a leverage ratio of 7–8x. Solid, if they pull it off.
Now, Let’s Talk Growth
Growth isn’t a problem here. BHFL’s Assets Under Management (AUM) grew at a mind-blowing 72% CAGR over the last 7 years, hitting over ₹1 lakh crore by December 2024. That’s serious expansion.
Their business includes five segments: housing loans, LAP (loan against property), lease rental discounting, developer funding, and more. But what’s catching attention now is their push into affordable housing.
This shift could open up big opportunities—especially in states like Maharashtra, Tamil Nadu, and Karnataka. But it’s also a new territory. Affordable housing brings higher costs and potentially more NPAs, so it won’t be smooth sailing.
So, Is BHFL Undervalued Right Now?
On paper, it’s not cheap. At 5.7x book value, it still commands a premium compared to smaller or mid-tier housing finance companies.
But here’s the thing: if BHFL can maintain low NPAs, keep ROE stable, and grow earnings at 24–26%, its book value per share could double in 3 years. That would bring its future valuation to a much more reasonable 2.75x book value—which is attractive.
Of course, this all depends on execution. If growth slows or NPAs rise, the stock could stay flat for years. Just ask investors in Bajaj Finance or Kotak Mahindra Bank.
Fairly Valued, With a Catch
BHFL isn’t too expensive. But it isn’t a bargain either.
You’re paying for quality, growth, and the trust that comes from being part of the Bajaj group. The question is—can they live up to that legacy?
If yes, this could be a long-term compounder. If not, investors might end up disappointed. Either way, don’t expect miracles overnight—this is one for the patient and the watchful.
Disclaimer: This blog is for educational purposes only. It is not investment advice. Always consult your financial advisor before making any investment decisions.