Top 5 Reasons for Bajaj Housing Finance Limited Stock Downfall & The Way Ahead

Get ready to uncover the top five reasons behind the downfall of Bajaj Housing Finance Limited, a non-deposit taking Housing Finance company that more than doubled in value just days after its IPO, only to see its stock decline over 40% from its peak.

  • Here are 22 clean bullet points summarizing the video:
  • * Bajaj Housing Finance Limited (BHFL) listed at a price of ₹150, more than double its issue price of ₹70
  • * The company's stock price has since declined by over 40% from its peak
  • * Today's video will discuss the top five reasons for the downfall and what lies ahead
  • What does the company do?
  • * BHFL is a non-deposit taking Housing Finance Company, operating as a subsidiary of Bajaj Finance Limited
  • * The company focuses on mortgage lending services, with four main types:
  • + Loan Against Property (LAP)
  • + Lease Rental Discounting (LRD)
  • * BHFL's P/BV ratio is high compared to its peers (4.93 vs. HUDCO - 2.04, LIC Housing Finance - 0.95, and PNB Housing Finance - 1.41)
  • * The company's key parameters are good:
  • Reason 2: End of Anchor Investor Lock-in Period
  • * Anchor investors typically hold their shares for a certain period before selling
  • * When the lock-in period ends, anchor investors may sell their shares, contributing to market volatility
  • * On October 12, 2024, the stock fell by almost 6% after the first 30-day lock-in period ended
  • Reason 3: Sector-wide Selloff
  • * The entire NBFC sector is down:
  • + LIC Housing Finance -31%
  • + PNB Housing Finance -28%
  • + Aadhar Housing Finance -25%
  • + APTUS Value Housing Finance -20%
  • Reason 4: Market Sentiment
  • * The overall market sentiment is negative, with the economy experiencing a slowdown:
  • + GDP actual growth rate is lower than expected
  • + Housing and auto sales are declining
  • Reason 5: Q3 FY25 Results (Question Mark)
  • * BHFL's Q3 FY25 results were good:
  • + Assets under management up by 26% YoY
  • + Loan assets up by 31% YoY
  • + Net total income up by 25% YoY
  • * However, the company's ROE dropped due to an increase in the number of shares
  • * Management plans to focus on affordable housing, digital transformation, and lease rental discounting
  • * Long-term performance has been good:
  • + Revenue growth: 28% CAGR over 4-5 years
  • + Net profit growth: 36% CAGR over 4-5 years

Source: CA Rachana Phadke Ranade via YouTube

❓ What do you think? What are the long-term implications of a stock's valuation being higher than its peers, but still experiencing a decline in value due to market conditions? Feel free to share your thoughts in the comments!