Bajaj Housing Finance shares crash 57% from all-time high; why JM sees limited upside?

Bajaj Finance Ltd subsidiary Bajaj Housing Finance (BHFL) is among India’s fastest-growing housing finance companies. Founded in 2008 and starting lending operations in FY18, BHFL was classified as an 'upper Layer' non-banking financial company (NBFC) by the Reserve Bank of India in FY23. By December 2025, the company’s assets under management (AUM) reached Rs 1.33 trillion, making it the second-largest housing finance company (HFC) in India after LIC Housing Finance.

According to a recent report by JM Financial, which initiated coverage on it, BHFL has recorded a compound annual growth rate (CAGR) of 28 per cent in AUM between FY20 and the third quarter of FY26. The company offers a diverse range of mortgage products, including home loans, loan against property (LAP), lease rental discounting (LRD), and developer financing.

BHFL has also expanded into near-prime and affordable housing segments through its Sambhav platform, aiming to widen its borrower base and improve portfolio yields. JM Financial highlights that BHFL operates 221 branches across 178 locations and has developed a strong digital presence supported by a multi-channel sourcing model.

To recall, shares of Bajaj Housing Finance were listed in September 2025, when the company raised a total of Rs 6,560 crore via IPO by selling its shares for Rs 70 apiece. The stock delivered multibagger returns to the investors in the early days, zooming nearly 160 per cent over its IPO price to Rs 181, but gave up gains later.

However, the stock plunged more than 4.2 per cent on Monday, hitting its 52-week and post-listing lows. The total market capitalization of the company slipped below Rs 65,000 crore. The stock is only 10 per cent above from its IPO price, while it has crashed nearly 57 per cent from its all time highs.

The company has significantly improved its cost-to-income (C/I) ratio, reducing it to around 19 per cent by the third quarter of FY26 from approximately 29 per cent in FY22. This reflects enhanced operational efficiency and strong operating leverage. BHFL benefits from strong parentage that offers financial stability and growth potential in the competitive housing finance sector.

JM Financial notes that the company’s focus on prime customers and low-risk home loans, along with its diversified business model, positions it well for sustained growth. BHFL’s AUM and profit are projected to grow at CAGRs of about 22 per cent and 20 per cent, respectively, between FY26 and FY28.

Despite the positive outlook, JM Financial points out that BHFL’s stock trades at a relatively high valuation of approximately 2.3 times its FY28 estimated book value per share (BVPS). This is higher compared to valuations of 0.5 to 0.9 times for prime HFCs and 1.3 to 1.9 times for affordable housing finance companies (AHFCs), indicating limited upside potential in the near term.

Key risks for BHFL include increased competition, a broad economic slowdown, supply challenges, and potential deterioration in asset quality. However, JM Financial observes that the company has maintained best-in-class asset quality, with an average credit cost of 14 basis points from FY23 to the first nine months of FY25.

JM Financial further highlights BHFL’s strong operating efficiency, supported by declining employee costs, rapid AUM growth, and strategic technology investments that enhance productivity. The diversified mortgage franchise and the emerging Sambhav platform, which offers yields 1.25 to 1.5 percentage points higher than prime loans, are expected to drive incremental growth and margins.

JM Financial has assigned an 'ADD' rating to Bajaj Housing Finance with a target price of Rs 88, valuing the stock at 2.5 times FY28E BVPS. The company’s stable margins, improving cost ratios, and effective credit cost management are expected to support a consistent return on assets above 2 per cent and return on equity of 13-14 per cent by FY28.