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Bajaj Finance: CMP: 6610: LT SALES GR: 25% | Q1_FY25_GR: 29% |Q1_fy_25 Results Update
Company Overview 🏢
Bajaj Finance Limited, a diversified financial services company, is a part of the Bajaj Group. It offers consumer, SME, commercial, rural, and mortgage loans. The company has a strong focus on technology and innovation to provide seamless customer experiences and has a robust presence in urban and rural markets. Originally incorporated as Bajaj Auto Finance Limited in 1987, as a non-banking financial company, primarily focused on providing two and three-wheeler finance. After 11 years in the auto finance market, Bajaj Auto Finance Ltd launched its initial public issue, today auto finance is just 6% revenue, this is an e.g. of great & fruitful diversification. At the turn of the 20th century, the company ventured into the consumer durables finance sector and started offering small-size loans at zero interest rates. In the subsequent years, Bajaj Auto Finance diversified into business and property loans as well. The parent company, Bajaj Finserv Limited, holds 57.28% of the total shares and has a controlling stake in the subsidiary. Other major investors include Maharashtra Scooters Limited, Government of Singapore, Smallcap World Fund INC, and AXIS Long Term Equity Fund.
Industry Outlook 🌍
The financial services sector in India is expected to continue growing, driven by increasing digital adoption, rising middle-class income, and regulatory support. The NBFC sector, in particular, is likely to benefit from the continued demand for consumer and SME loans.
Historical Performance 🌍
Fy_2004: Sales & profit of 130 Cr and 40 Cr respectively. Price was Rs 7.
In the year 2006, the company's AUM hit the Rs.1,000 crore mark.
During 2010 the company's registered name changed from Bajaj Auto Finance Limited to Bajaj Finance Limited.
Fy_2014: AUM reached 24000 Cr with Sales & profit of 4000 Cr and 700 Cr respectively. Price reached Rs 180.
Fy_2024: AUM reached 3.3 Lakh Cr with Sales & profit of 55000 Cr and 14000 Cr respectively. Price reached Rs 7000.
A high-growth company and a wealth creator. Thich shows a 500X growth in the last 2 decades. Their AUM during the past 2 decades has grown by 30% plus hence we saw the high effect of Interest Income. Sales grew by 30% while Profits, also due to better management, grew by the same 30%. Hence if Invested 25 years back today the value should be 2200X along with 10X of the invested amount in dividends/year. Today we can say Bajaj Finance is the leading retail finance company of India with the highest market share of 3%.
Peer Group Comparison 🌐
Apart from large banks the NBFC companies like Jio Finance, Chola Finance, Shriram Finance, SBI Card, Muthoot Finance, Sundaram Finance, IIFL etc are significant competitors. However with Size Comparison: Bajaj Finance has a robust AUM and customer base, positioning it competitively among peers. Profitability is highly consistent. Bajaj The Brand Equity: Part of the respected Bajaj Group, the company benefits from strong brand recognition and trust. Better NPA Management: The company's Net NPA ratio of 0.38% in Q1 FY25 is among the lowest in the industry, indicating effective credit risk management.
Key Financial Highlights for Q1 FY25 📊
Sales and Profit Growth 📈
AUM Growth: Up 31% YoY to ₹354,192 crore from ₹270,097 crore as of June 30, 2023.
New Loans Booked: Up 10% to 10.97 million in Q1 FY25.
Net Interest Income: Grew by 25% YoY to ₹8,365 crore.
Profit Before Tax (PBT): Grew by 16% YoY to ₹5,265 crore.
Profit After Tax (PAT): Grew by 14% YoY to ₹3,912 crore.
ROE: 19.86% in Q1 FY25 compared to 24.47% in Q1 FY24.
Segmental Growth 🚀
Consumer: Largest segment with strong growth in new loans booked.
SME: Focused on unsecured working capital and secured loans.
Commercial: Short, medium, and long-term financing to mid-market corporates.
Rural: Diversified lender with 10 loan products.
Mortgages: Significant contributor through Bajaj Housing Finance Limited (BHFL).
Important Financial Ratios 📐
Net NPA: 0.38% in Q1 FY25.
Cost of Funds: 7.94%, an increase of 8 bps over Q4 FY24.
Capital Adequacy Ratio: 21.65% with Tier 1 capital at 20.73%.
Industry Outlook and Company’s Future Outlook 🌟
Company’s Future Outlook 🔮
AUM Growth: Projected in the corridor of 25%-27%.
Profit Growth: Expected to be around 23%-24%.
GNPA and NNPA: To remain among the lowest in the industry.
Technology and Innovation: Continued focus on digital transformation to enhance customer experience and operational efficiency.
Present AUM and AUM Growth 📈
AUM: ₹354,192 crore as of June 30, 2024.
AUM Growth: 31% YoY, driven by increased loan disbursals and new customer acquisitions.
Important Highlights 🌟
Customer Franchise: Added 4.47 million new customers in Q1 FY25. Total customer base at 88.11 million.
Distribution Network: Expanded to 4,202 locations with over 207,000 active distribution points.
Digital Presence: Bajaj Finserv App has 56.79 million net users.
RBI Update: Lifted restrictions on 'eCOM' and 'Insta EMI Card' loans.
Conclusion 🏁
We may see Bajaj Finance grow AUM by 30%, Sales growth by 25% while due to increasing cost of funds as currently there are high interest rates the profits may grow by just 16%. However as further we may see the interest cycle gets reversed the profitability should shoot up. Hence new buying again can be done during any fall near 5943 while target for next year should be 9793 where some 5% profits can be booked.
Bajaj Finance Limited continues to demonstrate strong financial performance and strategic growth. With a focus on innovation, digital transformation, and a diversified portfolio, the company is well-positioned to capitalise on the growth opportunities in the financial services sector.
Long Term: Bajaj Finance Limited 🚀
Overall 20% growth in AUM,sales and profits are expected this decade which can help Bajaj Finance cross the benchmark AUM of 10 Lakh Cr till fy29 with the sales of 2 Lakh cr and Profits near to 45000 Cr. Such a growth can help investors see multiyear rally along with consistent dividends earning.
Positive Industry Outlook 🌍
Growing Financial Services Sector: The sector is poised for growth driven by digital adoption, rising incomes, and regulatory support.
NBFC Growth: Non-banking financial companies (NBFCs) like Bajaj Finance are expected to benefit from the increased demand for credit and financial products.
⚠ Important Note:
The information provided is solely for educational purposes and is not intended as financial advice.
