CMP â 1250, TTM PE â abt 10, (low NPA â 0.12 % as per AR fy 12)
Growth of past 5 yrs has been excellent, more than 30%. The company is having a diverse product portfolio, has good presence in rural markets and has the option to expand to other cities. Also, the company is using the credit history of customers in one segment (auto loan, consumer fin etc) to cross sell other products. I feel that going forward the company should be able to grow at abt 20 - 25%. I consider it as a safe stock with limited downside. Views are biased as I own the stock.
I noticed bajaj finance in safirâs picks and got interested. In present scenario I am little biased towards finance stocks.
**Business **: The company is promoted by Bajaj finserv which is into insurance ( in joint venture with Allianz group Bajaj Allianz life ins and general ins) and lending ( bajaj finance) and other financial verticals â wealth mgmt etc. Though the profit of Bajaj finserv insurance is not growing much but it is still making good profits and has good amount of cash as investments on its books. Some of the cash/investments is to cover liabilities arising from claims and some as policy holderâs investments but even if we exclude these , the company still has good amount of cash.
So fund raising for bajaj finance should not be a problem. Recently â 26 Jan, a right issue has been declared @ Rs 1150 which will lead to equity dilution by abt 16% .
Auto finance : bajaj finance has an advantage of providing finance to customers of bajaj auto. Bajaj auto as we know is a big and high quality company. Here bajaj finance has a small moat of getting access to customers at very low investment.
Loan disbursement is well diversified.
Consumer Finance (deployment 45 %) : auto loans(17%), consumer durables(23%), personal loans, co-branded credit card
SME Finance (deployment 28 %) â Mortgage, business loans, loan against securities
**Commercial lending **(deployment 27 %)â Construction equip finance, Infrastructure fin, vendor financing.
**Management **: for me analyzing the mgmt. is the most difficult part.
Here I ASSUME that mgmt. is of good quality, bajaj is a reputed group , annual report is informative, chairman is Rahul Bajaj which gives some comfort, however nothing can be guaranteed.
**Financials : **For the last 5 yrs growth is very good but we cannot extrapolate it into future. NP margin is abt 18-19%, ROE for last year abt 24%.
Competition : There are so many companies and doing well too. But the other good companies like hdfc, gruh are trading at high valuations. M&M fin is trading at trailing PE of abt 15, the past growth is very good and NP margin is excellent abt 22-23% as compared to bajaj fin 18-19%. But M& M fin is deriving 80% + rev from auto finance and it is more expensive than bajaj fin.
Extracts from AR
The companyâs current provisioning standards are more stringent than RBI prudential norms.
The new initiatives include :
-launch of an Existing Member Identification Card (EMI Card) for its consumer durable customers,
-expansion of unsecured loans to salaried customers,
-launch of a co-branded credit card with Standard Chartered Bank and
-a flexible loan proposition for its SME finance and commercial lending business lines.
-The company also launched an extension of its â0%â interest offering for customers desirous of acquiring lifestyle products such as furniture, home furnishings, fitness equipments, luxury watches etc.
CRISIL has re-affirmed the highest rating of âFAAA/Stableâ for the fixed deposit programme
of the company. The company also enjoys the highest rating of âCRISIL A1+â from CRISIL and â(ICRA) A1+â from ICRA for short term debt programme for
2,000 crore and 1,500 crore respectively. The long term non-convertible debentures have been assigned âCRISIL AA+/Stableâ rating by CRISIL and â[ICRA] AA+(Stable)â rating by ICRA
In FY2012, Bajaj Finance emerged as one of the largest two-wheeler financier in India. It operates at 571 Bajaj Auto dealerships as well as over 1,700 of its sub-dealers across the country.
**Present in the top 79 cities of the country, **Bajaj Finance is now the largest consumer durables financier in India. It helped finance 10% of all consumer electronics sold in the year. The company acquired more than 1.45 million new customers, and is currently present in over 2,500 points of sale across the country.
The company has entered into a strategic partnership with Standard Chartered Bank and
launched a co-branded credit card (âPlatinumâ and âWorld Cardâ) for customers with a good repayment track record.
Same as in finance sector â high interest rates, risk of default â increase in NPA, increase in borrowing cost , any adverse change in RBI policy, decline in GDP growth, decline in consumer spending, decline in auto segment.
DISC : Invested in the stock, views are biased.