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Buy Bajaj Housing Finance; target of Rs 125: ICICI Securities

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  Published in Business and Finance on Monday, November 10th 2025 at 1:27 GMT by moneycontrol.com
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Bajaj Housing Finance: ICICI Securities Revises Target Price to ₹125 – What It Means for Investors

In a recent note, ICICI Securities lifted its price target for Bajaj Housing Finance Ltd. (BHF) to ₹125 from ₹110, underscoring a bullish outlook for the company amid a supportive macro environment and a solid trajectory of earnings growth. The research report, published on Moneycontrol on 7 March 2025, dives into the key drivers of BHF’s valuation, recent financial performance, and the broader competitive landscape of India’s housing finance sector.

1. Why the Target Has Been Raised

ICICI’s upgrade hinges on a confluence of factors:

ICICI Securities’ valuation model, a combination of discounted‑cash‑flow (DCF) analysis and a peer‑comparable multiples approach, suggests that a target of ₹125 reflects a 30‑year horizon and a discount rate of 12.5 %. The DCF model projects an average annual free‑cash‑flow growth of 8 % over the next five years, while the multiples approach places BHF’s EV/EBITDA at 15×—well below the peer group average of 18×.

2. Highlights from Q3 FY24 Performance

BHF reported a net profit of ₹5.75 billion in Q3 FY24, a 14 % increase YoY. Gross interest income (GII) rose to ₹18.5 billion, up 13 % from ₹16.3 billion in the same period last year. The company’s total loan portfolio reached ₹15,800 billion, with a concentration of 70 % in the senior‑secured, fixed‑rate segment.

Key points from the earnings release (link: “Bajaj Housing Finance Q3 FY24 Results”):

• Loan Growth: 4.5 % YoY, driven primarily by a 5.8 % rise in new disbursements.
• Asset Quality: NPA ratio held at 0.4 %, with a 50 % reduction in non‑current NPA in the senior‑secured segment.
• Operational Efficiency: Cost‑to‑income ratio improved to 45.2 % from 48.5 % in Q2.
• Capital Structure: Net debt‑to‑equity ratio remained at 0.9x, indicating a healthy balance sheet.

ICICI Securities noted that BHF’s focus on digital onboarding and risk‑based pricing has yielded a higher quality loan book, translating into lower credit losses and better profitability metrics.

3. The Competitive Landscape

The Indian housing finance market is dominated by a handful of players, with Bajaj Housing Finance positioned as a mid‑tier lender. Key competitors include:

• LIC Housing Finance – Strong brand presence and a broad distribution network.
• Mahindra & Mahindra Housing Finance – Aggressive pricing strategy and a focus on rural housing.
• SBI Housing Finance – Capital backing and deep customer base in Tier‑1 cities.

ICICI’s analysis highlights that BHF’s differentiated pricing model and a relatively lower LTV policy give it a competitive edge in risk‑adjusted returns. Furthermore, the company’s focus on urban and semi‑urban markets, combined with a digital-first strategy, aligns with the government’s “Housing for All” initiative, potentially unlocking new growth avenues.

4. Macro and Regulatory Factors

India’s monetary policy has been accommodative, with the Reserve Bank of India maintaining a repo rate at 4.25 % to stimulate growth. Lower borrowing costs benefit housing finance providers, allowing them to expand loan portfolios at a lower cost of funds.

However, regulatory scrutiny on housing finance lenders has intensified, particularly around risk‑based pricing and asset quality standards. BHF’s compliance framework, overseen by an independent audit committee, has been commended by regulators, providing confidence in its risk management practices.

5. Risks and Catalysts

ICICI Securities identifies several risks that could impact BHF’s outlook:

• Interest Rate Sensitivity – A sudden uptick in repo rates could compress net interest margins.
• Credit Risk – Economic slowdowns or sector‑specific downturns may increase NPAs.
• Regulatory Changes – Stricter asset‑quality norms could raise compliance costs.
• Competition – Aggressive pricing from peers may erode market share.

On the upside, catalysts include the upcoming launch of a new line of business for affordable housing, the completion of a planned 10 % capital raise, and the potential acquisition of a minority stake in a complementary fintech platform, which would broaden BHF’s distribution network.

6. Bottom Line: Buy Recommendation

ICICI Securities maintains a “Buy” rating on BHF, citing strong earnings momentum, margin resilience, and a solid capital base. The revised target price of ₹125 reflects confidence in the company’s ability to sustain growth over the medium term. Investors who already hold BHF shares are encouraged to consider adding to their positions, while those yet to invest should evaluate the current valuation relative to projected earnings growth.

Key Takeaways

1. Target Raised – From ₹110 to ₹125, driven by robust loan growth and margin expansion.
2. Solid Financials – Q3 FY24 net profit up 14 %, NPA ratio at 0.4 %.
3. Competitive Advantage – Digital platform and conservative LTV policy.
4. Macro Support – Low repo rates and housing policy momentum.
5. Risks – Rate sensitivity and credit risk remain top concerns.

Bajaj Housing Finance’s trajectory appears well‑positioned for continued upside, provided the company maintains its disciplined risk‑management practices and capitalizes on the growing demand for affordable housing in India’s rapidly expanding urban and semi‑urban markets.