Top Indian Companies: Bajaj Finance Ltd

Bajaj Finance Limited, a subsidiary of Bajaj Finserv, is an Indian non- banking financial company. The company deals in consumer finance, SME (small and medium-sized enterprises) and commercial lending, and wealth management.

Headquartered in Pune, Maharashtra, the company has 294 consumer branches and 497 rural locations with over 33,000+ distribution points.

Originally incorporated as Bajaj Auto Finance Limited on March 25, 1987, the non-bank singularly focused on providing two and three wheeler finance.

At the turn of the 20th century, the company ventured into the durables finance sector. In the subsequent years, Bajaj Auto Finance diversified into business and property loans as well.

In the year 2006, the company's assets under management hit the Rs.1,000 crore mark and is currently at Rs.52,332 crore.

The parent company, Bajaj Finserv Limited, holds 57.28% of the total shares and has a controlling stake in the subsidiary.

Shareholding Pattern

The shareholding pattern page of Bajaj Finance Ltd. presents the Promoter's holding, FII's holding, DII's Holding, and Share holding by general public etc.

Shareholding Pattern - Bajaj Finance Ltd.

Holder's Name No of Shares % Share Holding

No Of Shares 603594345 100%

Promoters 338216134 56.03%

Foreign Institutions 137894695 22.85%

Banks Mutual Funds 44875407 7.43%

Others 13160169 2.18%

GeneralPublic 52683564 8.73%

Financial Institutions 16167737 2.68%

GDR 596639 0.1%

FY2023 Q4 and full Year Results

Bajaj Finance posted a net profit of ₹2,837 crore for Q4 FY23, up 25 per cent YoY led by strong growth in net interest income (NII) to Rs 7,104 crore — also higher by 25 per cent.

For FY23, the retail NBFC posted a 62 per cent rise in the profit after tax to ₹10,290 crore led by 30 per cent NII growth to ₹26,401 crore. AUM was up 28 per cent YoY at ₹1.8-lakh crore, and the company held management and macro-economic overlay of ₹723 crore as of March 31.

Growth areas

In the post earnings investor call, MD Rajeev Jain said 11 verticals of the advances saw strong growth. The product mix has remained largely steady from the previous year and is not expected to change significantly going forward, he said, adding that the NBFC will be able to grow comfortable while maintaining this mix.

Pegging AUM growth at 20 per cent, Jain said the company should be able to dispense about 350 lakh loans in FY24.

While retail growth is strong in line with the industry, Bajaj Finance is cautious on unsecured assets, where it has a market share of 7-8 per cent, as unsecured personal loans are “basically a risk business and a not balance sheet business”, he said.

While on a net basis there no impact on NIM (net interest margins) in FY23, there will be gradual moderation in margins in FY24, Jain said, pegging the NIM impact for FY24 40-50 bps assuming one more rate hike by the RBI.

“Part of it will get mitigated, if we take an overall P&L view, by peaking of opex metrics, best ever credit metrics, will partially mitigate that as well. So it should overall have a low impact on the RoA and RoE profile,” Jain said.

Housing arm

Wholly-owned subsidiary Bajaj Housing’s AUM grew 30 per cent YoY to ₹69,228 crore, with developer finance seeing the highest growth at 92 per cent. The vertical, which currently comprises 9 per cent of the portfolio, will rise and stabilise at 12-14 per cent as per industry standards, Jain said.

He added that while there is some normalisation in growth, demand in the luxury and medium segment remains strong and the small size of the book gives the company sufficient headroom to grow even if there is some slowdown.

Bajaj Finance disbursed 296 lakh loans in FY23, adding a record 116 lakh new customers, of which 31 lakh customers were added in Q4.

The surge in customer acquisition in Q4 was led by more capacity planning by the company in the last 120 days as business conditions picked up. This includes increasing the staff at stores and management level over the last 60-75 days, which has shown significant results.

Bajaj Finance Ltd’s (BFL-Standalone) Q3FY22 net profit grew by 84.4% YoY to Rs 19.3bn due to standalone loan growth picking up to 21.3% YoY and improved asset quality.

Considering the company’s comfortable asset quality (except in the auto finance business), the company’s revamped digital and collection infrastructure and its business transformation initiatives to revive growth, are factors which give us confidence for earnings revival in the coming quarters.

The stock is trading at 45.8x FY23E EPS and 8.8x FY23E ABV.Quantum Securities, brokerage maintain a ‘Hold’ rating on BFL.

ESG and Sustainability

Bajaj Finance is guided by the sustainable development dimensions of ESG in all its business operations. Our Stron ESG proposition has led to a higher value creation in 5 essential ways.

a) Reaching millions of Indians with our financial services

b) Empowering Societies

c) Preserving and protecting environment

d) Providing sustainable and safe products

e) Corporate governance.