Bajaj Finance arm Bajaj Housing Finance picks Kotak, Axis, BofA, JM Fin and SBI Caps for mega IPO

In the latest development in the most high-profile equity capital market deal in the financial services space, Bajaj Finance's arm Bajaj Housing Finance has picked 5 investment banks as advisors as the home financier looks to launch a big-bang initial public offer within the next 12-18 months, five people in the know told Moneycontrol.

Moneycontrol was the first to report the firm's listing plans on March 27. The move marks the Bajaj Group's return to the public market after many years.

"Kotak Mahindra Capital, Axis Capital, BofA Securities, JM Financial and SBI Capital have been shortlisted for this IPO," according to the first person cited above.

Four other people confirmed the above syndicate.

They added that the deal has been kicked off and work has commenced on the issue. It wasn't immediately clear if more banks would be added at a later stage.

All the five people above spoke to Moneycontrol on the condition of anonymity.

An email query sent to Bajaj Finance and Bajaj Housing Finance was left unanswered at the time of publishing this article.

Moneycontrol could not elicit an immediate comment from the investment banks.

"The targeted valuation of the firm is between $9bn and $10 bn. These are early days, and the firm is planning to raise $900 million to a billion dollars via the proposed IPO, keeping the minimum dilution and expected valuation range in mind," the March 27 report by Moneycontrol said.

The quantum and plans may change depending on market conditions, it added.

Earlier today, Bajaj Finance disclosed the following communication from its subsidiary Bajaj Housing Finance to the BSE:

"In order for the Company to comply with the regulatory timelines stipulated under the regulations applicable to companies classified as NBFC - Upper Layer, the Board of Directors of the Company will undertake discussions with respect to the mandatory listing requirement, including considering various options based on the prevailing market conditions, at its meeting scheduled on April 24, 2024," the notification said.

In the last month, the share price of parent Bajaj Finance and Bajaj Finserv has risen by nearly 14 percent and 8 percent respectively.

The RBI mandate for upper layer NBFCs

The move by Bajaj Housing Finance is in line with RBI's mandatory requirement for "upper layer" NBFCs to list within three years of being notified. The firm has to list by September 2025 under the current regulatory timeline laid out by the banking regulator.

On September 30, 2022, the RBI announced the list of 16 NBFCs in the Upper Layer under Scale Based Regulation for NBFCs. The framework categorised NBFCs in Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL) and Top Layer (NBFC-TL). It specified that Upper Layer shall comprise of those NBFCs which are specifically identified by the Reserve Bank based on a set of parameters and scoring methodology.

Apart from Bajaj Housing Finance, the Upper Layer list also included Tata Sons, HDB Financial Services, Tata Capital Financial Services, Aditya Birla Finance and Shanghvi Finance.

Earlier this month, listed parent Aditya Birla Capital announced that it would merge its arm, Aditya Birla Finance, with itself.

Bajaj Housing Finance: Business & Stats

Bajaj Housing Finance is a diversified NBFC catering to more than 76.5 million customers across the country, according to its website. Based in Pune, Bajaj Housing Finance Limited offers finance to individuals as well as corporate entities for the purchase and renovation of homes or commercial spaces.

It also provides loans against property for business or personal needs as well as working capital for business expansion purposes. The company also offers finance to developers engaged in the construction of residential and commercial properties, as well as lease rental discounts for developers and high-net-worth individuals.

For the nine months ended December 31, Bajaj Housing Finance had assets under management of Rs 85,929 crore, a 31 percent increase over the year earlier. Disbursements also rose by 31 percent to Rs 25,308 crore, while net profit increased by 41 percent to Rs 1,350 crore.

In February 2024, Aadhar Housing Finance, backed by private equity major Blackstone, refiled its draft initial share sale documents with the markets regulator, the Securities and Exchange Board of India, as the affordable home financier aims to raise as much as Rs 5,000 crore this year. It has secured the Sebi approval.

Earlier in December, private equity firm Westbridge-backed housing finance firm India Shelter Finance launched a Rs 1,200 crore IPO and made its public market debut.