About Bajaj Finance- Bajaj Finance was originally incorporated as Bajaj Auto Finance on March 25 1987 and focuses on landing two-wheeler and three-wheeler Finance. After 11 years in the auto finance market company launched its initial public offer and was listed in the Bombay Stock Exchange and National Stock Exchange. In the early 2000s companies started consumer durable loans and property loans.
In 2006, Company assets under management crossed Rs. 1000 crore and the current AUM is crossed Rs. 2,90,264 Crore. In 2010 company’s registered name changed from Bajaj Auto Finance Limited to Bajaj Finance Limited.
The company engages in consumer lending, small and medium-sized enterprises lending, commercial lending, rural lending, deposits, and wealth management. Present in 1,469 locations with 128.9K+ active distribution points of sale as of 30 September 2023Largest consumer electronics, digital products & lifestyle products lender in India.
Bajaj Finance has been partnering with RBL Bank and DBS Bank to issue credit cards. Co-branded credit card CIF stood at 3.82 MM as of 30 September 2023.
New car financing is ahead of plan and is now present in 85 locations. Microfinance pilot was launched on 01 September with presence in 12 locations and 100 locations are on track to go live by March 2024.
Bajaj Group Structure
Focus on mass affluent-
- Total customer franchise of 76.56 MM.
- Consolidated lending AUM mix for Urban: Rural: SME: and Commercial: Mortgages stood at 34% : 9% : 13% : 13% : 31%. Consolidated borrowing mix for Money Markets: Banks: Deposits: ECB stood at 46% : 32% : 21% : 1%.
- Highly data-oriented. Deep data talent bench and technology architecture to enable cross-selling.
Asset Quality, Capital Adequacy and Liquidity Buffer
- The company has maintained a Capital Adequacy ratio (CAR) at 26.6% which is a very healthy sign.
- GNPA and NNPA as of 30 September 2023 stood at 1.14% and 0.39% respectively.
- ROE up at 5.3% YoY from 3.3%.
- Bajaj Finance’s P/E ratio is at 10.7.05 while its P/B ratio is at 12.82, both of which are highest in the sector.
Financial Results:
- Bajaj Finance Ltd reported Revenues for Q2FY24 of ₹13,378.00 Crores up from ₹9,970.00 Crore year on year, a rise of 34.18%.
- Total Expenses for Q2FY24 of ₹8,625.00 Crores up from ₹6,222.00 Crores year on year, a rise of 38.62%.
- Consolidated Net Profit of ₹3,551.00 Crores up 27.69% from ₹2,781.00 Crores in the same quarter of the previous year.
- The Earnings per Share is ₹58.60, up 27.59% from ₹45.93 in the same quarter of the previous year.
- AUM was up 33% at ₹2,90,264 crore as against ₹2,18,366 crore as of 30 September 2022.
- In Q2, B2B disbursements were up 31%at ₹18,610 crore as against ₹14,234 crore in Q2 FY23.
- GNPA and NNPA as of 30 September 2023 stood at 1.14% and 0.39% respectively
Shareholding Pattern:
Promoter and promoter group Holding is 55.91%, FIIs hold 17.15%, DIIs hold 15.93%, Public 9.80% and the remaining other holding is 1.21%.
Brokerage firm review on Bajaj Finance Ltd-
Jefferies “Buy” recommendation with a target price increase to Rs 9470. They highlight a robust 28% year-on-year profit increase to Rs 36 billion, slightly below estimates. Bajaj Finance’s asset under management (AUM) growth of 33% is considered strong. Although net interest margins (NIMs) might compress by 25-30 basis points over the next 2-3 quarters, it is expected the stronger growth and operating leverage.
HSBC “Buy” is recommended with an adjusted target price of Rs 9620. They note that the second quarter of FY24 saw broad-based loan growth, a healthy profitability future outlook, and intact earnings growth prospects. HSBC has raised its earnings per share (EPS) estimates for FY24-26 by 0.1-2.5% to reflect a more optimistic AUM growth outlook.
CLSA recommends a “Buy” with a Target price of Rs 9500 with the company’s strong growth and profitability, as well as the normalization of asset quality.
Goldman Sachs recommends a “Sell” with a Target price of Rs 7205 with mixed performance in Q2 2023.
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