ICICI Securities has kept its 'Buy' rating on Bajaj Housing Finance with a target price of Rs 125. The brokerage highlighted strong 25% year-on-year AUM growth and a strategic pivot to the affordable housing segment as key drivers for its positive outlook.
ICICI Securities has maintained its 'Buy' rating for Bajaj Housing Finance, setting a target price of Rs 125. The brokerage's positive view follows the company's performance in the second quarter of the 2027 fiscal year, where its Assets Under Management grew by 25% year-on-year. This result exceeded the firm's own growth guidance of 21% to 23%, marking the second consecutive quarter of outperformance.
The company is currently shifting its strategy to focus more on the affordable and near-prime housing segment. This change is being driven through its 'Sambhav' platform. By expanding in this area, the firm aims to offset the intense competition found in the prime home loan market. The company plans to increase the share of this affordable portfolio from 16% to 20% by the end of the 2027 fiscal year, with expectations that this specific segment will maintain a 30% growth rate over the next three to four years.
Financially, the company saw a 7 basis point expansion in its spreads, which is the difference between the interest it earns from borrowers and the interest it pays to banks for funding. This is a significant indicator for investors, as it ends a 12-quarter period where these margins were under pressure. Furthermore, the company managed to keep its credit costs—the amount set aside to cover potential loan losses—steady at 9 basis points. This suggests that the firm's loan quality remains stable despite global economic uncertainty.
From a risk perspective, investors should note that moving into the affordable housing segment involves lending to a different borrower profile, which can come with higher risks compared to the prime housing market. The valuation of 3.8 times the expected price-to-book ratio for September 2027 reflects that the market already holds high expectations for the company's future growth. As interest rates fluctuate, the firm's ability to balance its borrowing costs against loan pricing will remain a key factor. Shareholders may want to track the actual growth and asset quality of the 'Sambhav' portfolio in the upcoming quarterly updates to see if the company can successfully execute this shift.