Broker’s call: Bajaj Housing Fin (Buy)

Posted on by

Target: ₹166

CMP: ₹131.40

Bajaj Housing Finance (has delivered a strong financial performance in Q2 FY25, with NII growing by 12.9 per cent y-o-y and 7.3 per cent q-o-q, reaching ₹710 crore. Bajaj Housing maintained an impressive cost of funds (COF) at 7.9 per cent, despite a high-cost funding environment. Additionally, yields improved by 10 bps q-o-q to 9.9 per cent, driving a 20 bps rise in net interest margins (NIMs) to 4.1 per cent in Q2 FY25.

Bajaj Housing sources business primarily through developer counters and distribution partners, with staff operating from BAJAJ HSG branches rather than Bajaj Finance Ltd (BFL) branches. Some rural operations share space with BFL, but all sourcing is conducted by Bajaj HF without any overlap between the two companies.

This strategy benefits Bajaj Housing by maintaining a clear operational focus, maximising efficiency, and leveraging partnerships to enhance growth in home loan disbursements.

We continue to remain bullish as Bajaj Houisng FIn’s AUM grew significantly, driven by an strong rise in home loans. LRDs and LAPs also grew at a fast pace, while developer finance saw the most significant expansion.

The bank’s funding mix includes bank borrowings, money market borrowings, and NHB borrowings. Despite rising NCLRs, COF is expected to decline due to repo rate cuts and the maturity of low-cost NCDs. Asset quality remains strong, outperforming peers.