Bajaj Housing Finance: Motilal Oswal has initiated coverage on Bajaj Housing Finance with a ‘Neutral’ rating and a target price of Rs 120, implying a potential upside of 7%. The brokerage house values the company at a price-to-book (P/B) of 3.6x for FY27 and expects steady returns over the next three years. While the housing finance sector is growing rapidly, investors are advised to evaluate both growth opportunities and potential pressures on margins, particularly in a competitive environment.
Strong AUM Growth Over the Last Five Years
Bajaj Housing Finance has delivered an annualized 29% growth in assets under management (AUM) over the past five years. This growth has been supported by a diverse product portfolio and robust asset quality, positioning the company as one of the fastest-growing players in the housing finance sector.
However, Motilal Oswal notes that AUM growth may gradually slow due to the company’s increasing scale and rising competition in the housing finance market. Investors should monitor how Bajaj Housing balances expansion with maintaining healthy margins.
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Strong Asset Quality Compared to Peers
Bajaj Housing Finance maintains one of the lowest Non-Performing Asset (NPA) ratios in the sector, reflecting prudent risk management practices:
- Gross NPA: 0.30–0.35%
- Net NPA: 0.1–0.2%
The company achieves this by focusing on affluent salaried borrowers with high credit scores:
- 77% of home loan customers have a CIBIL score above 750.
- 84% of loans are extended to salaried individuals, resulting in a more predictable and low-risk loan book.
This disciplined lending approach has helped Bajaj Housing Finance maintain stability and resilience even in a highly competitive market.
Competitive Pressure on Net Interest Margins (NIM)
Despite strong fundamentals, intense competition from banks and other housing finance companies is expected to pressure lending yields. This could lead to transitory contractions in Net Interest Income (NII), as Bajaj Housing Finance balances growth momentum with margin sustainability.
Investors should watch for:
- Short-term pressure on NIMs due to rate cuts and competitive pricing
- Strategies adopted by the company to sustain growth without compromising asset quality
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FAQs
1. What rating has Motilal Oswal given to Bajaj Housing Finance?
Motilal Oswal has initiated coverage with a ‘Neutral’ rating and a target price of Rs 120, indicating a potential upside of 7%.
2. How has Bajaj Housing Finance performed in terms of AUM growth?
The company has delivered 29% annualized AUM growth over the last five years, supported by a diversified product suite and robust asset quality.