Bajaj Housing Finance Ltd.’s shares more than doubled in their trading debut after India’s biggest new listing of the year, reflecting a surge of local enthusiasm toward initial public offerings that continue to fuel concern about gush of liquidity pushing up valuations.
Shares of the home-loan unit of India’s largest shadow lender climbed as much as 136% to 165 rupees versus an offer price of 70 rupees, set for the best ever first-day gains for IPOs that raised more than $500 million. The company’s 65.6-billion rupee ($781 million) IPO drew bids of over $39 billion last week.
India has been a bright spot globally for capital raising, with investors drawn to first-day gains of more than 30% on average this year. A study by the market regulator published this month showed that most retail investors end up selling half of their holdings in IPOs within a week, underscoring the frenzy that is making authorities nervous.
“Domestic investors are looking for IPO investments as this segment has some valuation comfort versus other parts of the market that remain overheated,” said Pranav Bhavsar, a co-founder of Trudence Capital Advisors Pvt. “The market is flushed with liquidity.”
The buoyant demand from local retail investors and institutions have led to new listings in India raising $8.6 billion in 2024, exceeding proceeds for each of the last two years, data compiled by Bloomberg show. The rush has been driven in part by the rich valuations for listed stocks that are among the world’s most expensive.
Bajaj Housing’s IPO debut is also benefiting from its parent’s strong brand recall and a history of stellar returns. Bajaj Finance, part of India’s oldest conglomerates, is straddles all segments of financial services, and has also forayed into asset management. The company’s shares have returned about 40% annually over the past 10 years, more than double the NSE Nifty 50 Index.
“The group has a proven track record of wealth creation,” Bhavsar said. “They have come out with a public offering after a long gap, a factor investors had in mind while bidding” despite the higher valuation compared with peers, he said.
Bajaj Housing also enjoys access to low-cost funds due to its strong parentage, which gives it an edge over peers, Mumbai-based brokerage Sharekhan said in a note before the IPO. “The company continues to outperform the industry in the last five years with a ~29% CAGR and the growth outlook remains strong.”
The company’s shares held the initial advance, joining the other large listings in India this year that have built on their first-day gains. Last month, Ola Electric Mobility Ltd. raised more than $730 million, and baby-products retailer Brainbees Solutions Ltd. garnered about $500 million. Shares of both companies are trading more than 35% above their issue prices.
More major IPOs are expected — Hyundai Motor Co. will likely raise as much as $3.5 billion from the listing of its Indian unit in the coming months, Bloomberg News reported in July. South Korea’s LG Electronics Inc. has picked banks for a potential IPO of its Indian business that could raise as much as $1.5 billion, according to people familiar with the matter.
Separately, Indian food-delivery platform Swiggy Ltd. is also said to be considering filing publicly for a listing as soon as this week, according to people familiar with the matter, who added that the firm may seek to raise more than $1 billion.
Bajaj Housing’s IPO included sale of new shares worth as much as 35.6 billion rupees, while founder Bajaj Finance offered shares worth 30 billion rupees. The IPO was managed by Kotak Mahindra Capital Co., Bank of America Corp, Axis Capital Ltd., Goldman Sachs Group, SBI Capital Markets Ltd., JM Financial Ltd. and IIFL Securities Ltd.
Bloomberg