Company Profile
Set up in 1987, Bajaj Finance Limited (BFL) is a subsidiary of Bajaj Finserv (52.7%
ownership), the financial services arm of the Bajaj group. Bajaj Finance has a diversified
product suite comprising of key businesses such as vehicle loans, consumer durable
loans, personal loans, mortgage loans, small business loans, loans against securities,
commercial finance, and rural finance. Bajaj Finance is the largest financier of
2-wheelers and consumer durables in India.
BFL is present in 2988 locations across the country, including 1690 locations in rural/smaller towns and villages as on March 31,2021. It has two 100% subsidiaries: (i) Bajaj Housing Finance Ltd. (‘BHFL’), which is registered with National Housing Bank as a Housing Finance Company (HFC); and (ii) Bajaj Financial Securities Ltd. (‘Bfinsec’), which is registered with the Securities and Exchange Board of India (SEBI).
Strong market presence in the Indian retail finance operations
Bajaj Finance has emerged as one of the largest retail asset financing NBFCs in
India and continues with its two-pronged strategy of building scale and maximising
profit. The company has demonstrated track record of profitable growth with segments
such as mortgages, small business loans, and commercial lending through building
scale, while consumer durable loans, personal loans, and 2- and 3-wheeler financing
are focused on maximising profit.
Consistent Growth in Consumer Finance Business
The company is amongst the largest personal loan lenders in India and continued
to be the dominant lender for consumer electronics, furniture and digital products.
Consumer financing business constitutes 36% of the Loan book as on March 2021. The
company’s growth has been sustained by an expanding distribution reach, innovative
credit outreach and cross-selling opportunities. The company also extended its loan
offerings in the healthcare segment by introducing a ‘Healthcare EMI Card’
SME financing form sustainable scale builders while partnerships drive granular
fee income
SME financing and commercial lending now comprise 13% and 9% of consolidated AUM
respectively as on March 2021. It launched used-car financing and small-ticket secured
SME loans in FY19. The Company’s co-branded credit cards business in partnership
with RBL Bank continued to grow in a robust manner and its co-branded credit cards
stood at 2.05 million cards-in-force (CIF). The company’s co-branded wallet
business in partnership with Mobikwik continued to grow by offering EMI cards in
digital format and it had 19.8 million users as on March 2021. Both partnerships
augur well to generate granular and sticky fee income.
Focus on Analytics & technology modernisation
Productivity has increased due to the effective use of technology and analytics.
The company has invested deeply in data analytics, machine learning models and artificial
intelligence (AI) to better service customers and drive the business. Facial recognition
technology has been deployed in offices and some branches on pilot basis, with the
aim of providing a differentiated and frictionless customer service experience.
We expect the company to capitalize on growth opportunities supported by healthy capitalization, surplus liquidity on its balance sheet and resilient asset quality. Further we expect the company to invest in distribution & expand its geographic footprint and it has multiple levers to reduce cost, given its multiple product lines. Further disbursements have been picking up gradually month on month which will enable stable earnings growth going forward. The stock is currently trading at 6.4x FY23E P/BV and we initiate our coverage on Bajaj Finance with a Buy Rating.
DESCRIPTION | Mar-18 | Mar-19 | Mar-20 | Mar-21 | Mar-22E | Mar-23E |
---|---|---|---|---|---|---|
Interest income | 11586.00 | 16349.00 | 22970.00 | 23303.00 | 29291.00 | 36782.00 |
Interest Expense | 4696.00 | 6723.00 | 9608.00 | 9414.00 | 12570.00 | 16207.00 |
Net Interest Income | 6889.00 | 9626.00 | 13363.00 | 13889.00 | 16722.00 | 20575.00 |
Growth% | 34.00% | 40.00% | 39.00% | 4.00% | 20.00% | 23.00% |
Other Income | 1213.00 | 2151.00 | 3415.00 | 3380.00 | 4109.00 | 5106.00 |
Total Income | 8102.00 | 11778.00 | 16778.00 | 17269.00 | 20831.00 | 25681.00 |
Total Operating Expenses | 3228.00 | 4097.00 | 5526.00 | 5308.00 | 6288.00 | 7955.00 |
PPOP | 4874.00 | 7681.00 | 11252.00 | 11961.00 | 14543.00 | 17726.00 |
Provisions and Contingencies | 1030.00 | 1501.00 | 3929.00 | 5969.00 | 4043.00 | 4741.00 |
Profit Before Tax | 3843.00 | 6179.00 | 7322.00 | 5992.00 | 10500.00 | 12985.00 |
Provision for Tax | 1347.00 | 2184.00 | 2058.00 | 1572.00 | 2646.00 | 3272.00 |
Tax Rate% | 35.00% | 35.00% | 28.00% | 26.00% | 25.00% | 25.00% |
Profit After Tax | 2496.00 | 3995.00 | 5264.00 | 4420.00 | 7854.00 | 9712.00 |
Earnings Per Share | 43.00 | 69.00 | 88.00 | 73.00 | 130.00 | 161.00 |
DESCRIPTION | Mar-18 | Mar-19 | Mar-20 | Mar-21 | Mar-22E | Mar-23E |
---|---|---|---|---|---|---|
EQUITY AND LIABILITIES | ||||||
Share Capital | 115.00 | 115.00 | 120.00 | 120.00 | 120.00 | 120.00 |
Reserves & Surplus | 15733.00 | 19582.00 | 32208.00 | 36798.00 | 43259.00 | 52671.00 |
Borrowings | 66109.00 | 101588.00 | 129806.00 | 131783.00 | 160073.00 | 183839.00 |
Current Liabilities | 2074.00 | 2948.00 | 2257.00 | 2825.00 | 2879.00 | 3591.00 |
Total Liabilities | 84031.00 | 123563.00 | 164391.00 | 171526.00 | 205418.00 | 239222.00 |
ASSETS | ||||||
Non-Current Assets | ||||||
Net Advances | 79103.00 | 112513.00 | 141376.00 | 146687.00 | 180876.00 | 210475.00 |
Net Block | 470.00 | 695.00 | 1321.00 | 1367.00 | 1629.00 | 2038.00 |
Investments | 3139.00 | 8599.00 | 17544.00 | 18397.00 | 18684.00 | 21401.00 |
Sundry Debtors | 639.00 | 809.00 | 952.00 | 1107.00 | 1279.00 | 1701.00 |
Cash and Bank | 340.00 | 349.00 | 1383.00 | 2176.00 | 1702.00 | 2209.00 |
Other Current Assets | 340.00 | 599.00 | 1815.00 | 1792.00 | 1249.00 | 1397.00 |
Total Assets | 84031.00 | 123563.00 | 164391.00 | 171526.00 | 205418.00 | 239222.00 |