Bajaj Finance Ltd. share price target

Professor Krishnamurthy Subramanian released his first Economic Survey in which he has outlined an investment driven path to US$ 5tn economy by 2025. The reforms undertaken in the last 5 years along with new set of reforms outlined in the report will go a long way in achieving the ambitious target. Notably, the Survey also reiterates that fiscal prudence will drive real interest rates lower and thus lead to higher savings rate to achieve the virtuous cycle of...

New products, stable spreads and tech-led throughput increase Key takeaways from our analysis of Bajaj Finance's (BAF) FY19 Annual Report: (1) Strong traction in consumer finance makes ~40% of the book high-yield and high-churn, aiding faster repricing. (2) SME financing and commercial lending form sustainable scale builders, while partnerships drive granular fee income. (3) Increased fixed-rate borrowings and a prudent ALM strategy support stable spreads. (4) Productivity has increased due to the effective use of technology and analytics....

The zero cost EMI financing segment is witnessing strong competition with private banks entering the space aggressively. Though growth momentum remained strong for Bajaj Finance (41% in FY19), we believe growth and margin in this high yield segment can face headwinds, as current liquidity environment favours banks with rich CASA. Share of consumer business (low risk - high NIM) has been moderating from ~45% of AUM in FY17 to 39% of AUM in FY19, as the company tries to build portfolios of mortgage, SME, etc. Hence, margins seems difficult to sustain over 10% in the medium...

Business momentum (AUM up 41% YoY) continued to be strong, driven by consumer/SME segments at 56/36%. Better pricing power, growth in high-yielding loans and controlled cost of funds led to sequential NIM improvement. Operating leverage has played a key role in achieving high profitability.

Robust results again; no visible hiccups. Maintain Accumulate With a PAT growth of 57% YoY, Bajaj Finance witnessed another highly commendable quarter. The AUM grew 41% YoY, with secular and granular growth in key businesses. It appears to have gained market share in autos, but remained steady in other segments. This is partly due to it being a dominant player in most other segments. While there is a risk of slowing consumption (and lower economic growth), we believe that 1) its market position; 2) inability of competitors to replicate its scale and model; 3) consolidation...

Bajaj Finance continued its all-round strong performance with loan and earnings growth momentum remaining unabated. Consolidated AUM including housing saw growth of 41% YoY to | 115888 crore in line with our estimate. It was largely led by SME and consumer segment. SME grew 38% YoY to |15759 crore and consumer by 45% YoY to | 44989 crore. Rural segment, on a small base, surged 69% YoY while housing subsidiary credit increased 43% QoQ to | 17030 crore. Standalone AUM mix of consumer: rural: SME: commercial: mortgage (residual) was at 45%: 9%: 16%: 12%:...

lending, BAF financed 44% of Bajaj Auto's 2W sales, as against its runrate average of 35%, as competitive intensity weakened. For FY19, fee income more than doubled YoY to INR16.8b, while PAT grew 60% YoY to INR40b. RoE for the year increased 260bp to 22.9% Margins (calc.) were sequentially stable at 12%, with cost of funds relatively low at 8.3%. The borrowing mix remained largely stable QoQ, with the share of bank/market borrowings at 37%/50% respectively. With operational efficiency, with opex/AUM declining 30bp YoY to 4.2%. Asset quality remained stable, with a GNPL ratio of 1.54% and a PCR of...

Men to be separated from boys: The NBFC segment is undergoing a significant shift in market approach. Courtesy recent events such as defaults (and subsequent bankruptcy in several cases) of the debt paper of several toprated corporates, we find that risk tolerance and appetite have been tempered across money markets. We believe this may lead to a possible shift in market approach, giving more...

Strong Consumer Finance (CF) performance, Robust AUM CAGR to sustain, Stellar Q3 despite ALM overhang on NBFCs

ICICI Securities Ltd | Retail Equity Research Consolidated AUM including housing saw growth of 41% YoY to | 109930 crore, higher than our estimate. It was largely led by consumer segment growing 42% YoY, 13% QoQ to | 43826 crore. Also, rural segment on small base surged 73% YoY while housing subsidiary credit increased 31% QoQ to | 14040 crore. Standalone Bajaj Finance AUM grew reasonably at 26% YoY to | 96248 crore Headline asset quality saw marginal deterioration QoQ but was...