The Bajaj Housing Finance share price has declined almost 33% in the last 12 months, but is the worst over? JM Financial initiated coverage on the stock, with an ‘Add’ rating. The brokerage house said that the company is well-supported by the Bajaj group, providing financial stability and strong parentage, ensuring growth potential in the competitive housing finance sector.
As a result, JM Financial has set a target price of Rs 88 per share. This implies an upside of 8% from the current market price.
Diversified mortgage franchise with superior growth
The company has established a well-diversified portfolio consisting of home loans, which is 55% of AUM. Its Lease Rental Discounting makes 22% of AUM, developer finance 12%, and Loans Against Property is 11%.
As per JM Financial, this strategy allowed the company to deliver a 28% AUM CAGR between FY20 and Q3 FY26, making it one of the fastest-growing prime housing finance companies (HFCs) in India.
The ‘Sambhav’ platform as a growth lever
The company’s expansion into near-prime and affordable housing through its “Sambhav” Special Business Unit (SBU) is a major driver for future growth.
These segments offer yields that are 125–150 basis points higher than prime home loans, which helps offset yield compression in competitive prime markets and supports overall NIM stability.
Resilient margins and strong liability management
Supported by its AAA credit rating and strong parentage from the Bajaj Group, Bajaj Housing Finance utilises a diversified borrowing mix to maintain stable margins. It is well-positioned to protect its cost of funds by refinancing maturing high-cost Non-Convertible Debentures (NCDs) at lower market yields and increasing its reliance on lower-cost commercial paper.
Structural cost efficiencies and operating leverage
Bajaj Housing Finance has seen a significant improvement in operating efficiency, with its cost-to-income ratio declining from 29% in FY22 to 19% in Q3 FY26. JM Financial believes this trend is driven by scale benefits, improving employee productivity, and sustained digital investments, with the ratio expected to trend toward 17% over the medium term.
Best-in-class asset quality
The company maintains superior asset quality metrics, featuring a Gross Stage-3 (GS-3) ratio of 0.3% and a total stressed pool (30+ DPD) of approximately 0.6%. This is attributed to a tech-enabled underwriting framework and a portfolio primarily skewed toward low-risk, salaried borrowers with conservative Loan-to-Value (LTV) ratios.
Conclusion
However, JM Financial noted that while Bajaj Housing Finance’s fundamentals are robust, its current “rich” valuation may factor in most positives and limit near-term upside.