Recommendation from BAJAJ FINANCE

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

POSTING SEAMLESS GROWTH IN NUMBERS 

HERE IS WHY
✓ Strong order book with upward revenue curve
✓ Efficient use of capital and sustained growth
✓ Expertise in the domain of artificial intelligence

Non-banking financial companies (NBFCs) remain an important constituent of India’s financial sector and continue to leverage their superior understanding of regional dynamics and customised products and services to expedite financial inclusion in India. Considering the growth of NBFCs in India, we recommended Bajaj Finance Limited, which is a subsidiary of Bajaj Finserv. 

This includes major product innovations such as EMI card and Flexi. The company has a significant presence across urban and rural India and their products include consumer loans, personal loans, rural loans, loan against securities, SME and commercial loans, and public and corporate deposits. It is transforming into a customer-centric digital-first enterprise through omnipresence across physical, mobile and web media, led by a payment platform. 

Bajaj Finance has two wholly owned subsidiary companies, Bajaj Housing Finance, a housing finance company, and Bajaj Financial Securities, an all-in-one digital stockbroker that combines demat, broking and margin trade financing for retail and HNI clients. In Q3FY25, on a consolidated basis, the company’s revenue increased by 26.88 per cent YoY to ₹17,629.57 crore compared to ₹13,894.59 crore from the previous year’s same quarter. On a sequential basis, its revenue increased by 5.39 per cent. The PBIDT excluding other income increased by 24.26 per cent to ₹12,343.95 crore YoY as compared to ₹9,934.26 crore from the previous year’s same quarter, while sequentially it increased by 5.03 per cent. The net profit stood at ₹4,305.17 crore compared to ₹3,637.3 crore, a YoY increase of 18.36 per cent. For Q3FY25, the company’s asset under management (AUM) was up 28 per cent at ₹3,98,043 crore as against ₹3,10,968 crore as of December 31, 2023. 

The AUM grew by ₹24,119 crore in Q3FY25, marking the highest quarterly delivery. In Q3, the company added a record 5.03 million customers to its franchise. In the first nine months, it has added 13.48 million customers and estimates new customer addition to be 17 million in FY25. The company’s liquidity buffer stood at ₹13,656 crore as of December 31, 2024 and in Q3FY25 the cost of funds was 7.96 per cent, a decrease of 1 bps over Q2FY25. 

In Q3FY25, the deposits book growth was ₹2,666 crore. Deposits contributed to 20 per cent of consolidated borrowings as of December, 31 2024. The GNPA and NNPA stood at 1.12 per cent and 0.48 per cent, respectively, as of December 31, 2024 as against 0.95 per cent and 0.37 per cent as of December 31, 2023, which is among the lowest in the industry. The company has a partnership with Bharti Airtel where the latter offers Bajaj Finance’s retail and MSME products on its Airtel Thanks app and its nationwide network of stores in a seamless and secured manner. 

Recently, the Reserve Bank of India (RBI) has eased the lending rules for small borrowers and NBFCs. It has also reduced the risk weight requirement for banks on consumer microfinance loans by 25 per cent, which now stands at 100 per cent. This relaxation aims to enhance liquidity for NBFCs. The company’s price to book value stands at 6.09 against the industry PBV of 1.48 and return on assets stands at 4.44 per cent. Considering the company’s business and its market, we recommend BUY.