The stock of mortgage lender Bajaj Housing Finance Ltd hit a new 52-week low of ₹75 on Friday. It is now just 9% higher than its public issue price of ₹70 in September 2024. The issue was oversubscribed by about 64x of its offer size driven by huge investor appetite, with chairman Sanjiv Bajaj seeing the company as the contender for becoming the “next HDFC”.
The post-listing frenzy pushed it to a peak of ₹188.5 on 18 September 2024. But since then, its fortune has drastically reversed. Has Bajaj Housing Finance become a case of stock mispricing due to misplaced expectations?
Valuation gap
Mispricing can be understood through two valuation comparisons: with HDFC and with its listed peers.
HDFC, before its merger with HDFC Bank, traded at ₹2,724 apiece on its last trading day on 12 July 2023. If the market value per share of HDFC’s investments in various group companies was deducted from its market price, then HDFC was valued at ₹1,200 with standalone earnings per share (EPS) of ₹89 for FY23—translating into a price-to-earnings (P/E) multiple of nearly 14x.
Despite the steep correction, Bajaj Housing Finance is trading at FY26 P/E of 25x, showed Bloomberg data. PNB Housing Finance and LIC Housing Finance are trading at FY26 P/E of 9x and 5x, respectively.
The valuation gap between Bajaj and its peers appears wide, though part of it may be justified by stronger loan book growth.
Growth premium
Bajaj’s assets under management (AUM) grew 23% in 9MFY26. PNB Housing Finance and LIC Housing Finance reported relatively modest AUM growth of 12% and 5%, respectively. Bajaj remains on course to achieve its FY26 AUM growth guidance of 21–23%.
The current AUM growth rate is being affected as there are many requests from borrowers of Bajaj to transfer their outstanding loans to other lenders that are offering lower rates, the management said. This is known as balance transfer (BT) out in industry parlance.
To offset AUM attrition, Bajaj is chasing higher growth in its Sambhav Housing segment. This refers to the near-prime and affordable housing category, while the prime segment comprises top-rated salaried and self-employed borrowers with high CIBIL scores.
Sambhav shift
Bajaj’s home loan AUM stood at ₹72,769 crore at the end of Q3FY26. Of this, Sambhav AUM was just ₹5,000 crore, underscoring the dominance of the prime segment.
Bajaj intends to double the rate of loan disbursements in Sambhav from ₹300 crore per month in the next one year.
Another potential benefit of scaling Sambhav is easing pressure on net interest spread—the difference between yield on advances and cost of borrowing, which differs from net interest margin. Management has indicated that competitive pricing pressure in the prime segment remains intense and is likely to persist. Sambhav loans face relatively lower pricing pressure, even as more competitors eye entry into the segment.
The downside of focusing on Sambhav lies in asset quality risk, as the borrower category is relatively riskier. While management believes the risk-reward equation in this segment is favourable, sustaining AUM and net profit growth will be critical as the strategy evolves.
For now, the stock’s slump has shifted the narrative. Bajaj Housing Finance may no longer be growth at a superlative price—but growth at a reasonable one.