India’s mortgage IPO builds on many riches

Prime bet. Is India's equities rally built to last? Shares of Bajaj Housing Finance surged 125% on their first day of trading in Mumbai on Monday , handing the mortgage lender a nearly $16 billion market capitalisation. While there is plenty to cheer about the debutant, the price dynamic offers a warning on valuations in the country.
Bajaj was bound to be an investor darling, much like its $56 billion parent Bajaj Finance. The float helps the market leader in loans for consumer goods comply with a regulatory mandate to list large shadow banks. Mortgages too are in hot demand in the world's fifth-largest economy, a stark contrast to China where the market is shrinking.

Steady urbanisation and rising incomes are leading more Indians to buy homes. The value of Bajaj's outstanding home loans rose 24% to more than $6 billion in the year to March. It focuses on borrowers in their late thirties who draw annual salaries of around $15,500, seven times India’s per capita income. Applying Bajaj's average loan-to-value ratio of 70% to its mean ticket size, the price of the typical home it finances is over $78,000. Loans for homes in this top end of the mid-priced category are growing 24% year-on-year.

It helps that Bajaj logs exceptionally low default rates: sour loans make up less than 0.3% of its book. The $800 million IPO valued the company nearly three times its book value for financial year 2026, per Macquarie, less than its parent. Following the merger of HDFC with HDFC Bank in 2023, Bajaj emerges as the top publicly listed specialist mortgage lender by assets under management, excluding state-backed rivals.

For all Bajaj's qualities though, the share price surge deserves scrutiny. Cautious pricing helped to reel in anchor investors including Singapore's GIC and Abu Dhabi Investment Authority. It also implies the family, the parent company and its bankers, including Kotak and Bank of America, chose to leave money on the table at a time when overall equity market valuations appear stretched: MSCI India trades at 24 times one-year forward earnings. That may be hard to build on, whether or not demand for home loans is robust.