Bajaj Finance Limited

(butun) #102

RR, Thanks for your inputs. Here are what I see as major differences from the above. Though this is guideline but it gives key differentiators of product proposition in guideline itself. a) EMI card is pre-emi’ed & for credit card you need specific bank cards (not any CC that you have) b) Many retailers are on BFL EMI Cards but not all bank cards are with those retail cards (though this could easily change) c) Credit cards are constrained by 1 transaction 1 product 1 EMI kind of concept - cart contains single seller. (I think this could be a technological constraint). d) Bank Card may refuse to covert this to an EMI .

So primarily, they are still bit different but getting closer. Interestingly, now I see the CC EMI option against all products upfront but not BFL EMI card everywhere. May be I am missing the link somewhere (that itself may not be good)


(rajput.delhi) #103

On Flipkart, CC EMI option has been there for some time where they have been showing the interest cost separately. The concern is where No Cost EMI is offered which started as BFL being the only option. But in no time, all credit cards have copied this model and now all CCs are shown along with BFL with interest cost is mentioned by a discount is offered for the same amount to comply with RBI. So, basically, banks are having the last laugh - wherever BFL is there, they are matching the EMI and wherever BFL isn’t there, they are happily charging interest separately.

So, going forward, this fight will intensify, shrinking the profit pool, as BFL increases it’s network in the online word, eating into the credit card base thereby forcing banks to match BFL’s EMI. And it is only a matter of time before banks start matching BFL’s EMI in the offline world.


(butun) #104

Thanks. I agree with your assessment on other banks eating into the pie but I guess size of the pie will increase for sometime. Thanks Butun

(Abhishek Basumallick) #105

BFL continues to innovate in reaching new markets.

The article from HBL:

Bajaj Finance Limited, a motorcycle finance company, has partnered with India Post to facilitate purchase of vehicles in Karnataka. The company signed a joint MoU with India Post and formally announced special arrangement which enables prospective buyers to get information on various 2-wheeler loan schemes as well as special loan offers to the people including the instalment collection set-up at the Post Office itself, on behalf of Bajaj Auto Finance. This arrangement shall initially be rolled out across 208 E-Payment Post Offices across Karnataka.

Subsequently, the customers can also make repayments of their loans through the Post Offices by making the deposits. This partnership has expanded the reach of Bajaj Auto Finance along with enabling the Post Offices to offer value added services to its customers.

Talking on the partnership, Raunaq Singh, Senior VP Bajaj Auto, who heads Bajaj Auto Finance, said “This is the second state in India where we have launched this facility and with each such initiative we shall be extending our reach as well as bringing our services closer to our customers for their convenience and ease.”

“Today we confidently can say that across Tamil Nadu and Karnataka we cover almost 700 Post Offices from where our customers can avail finance facility for getting their favourite Bajaj Vehicle. We have had a good start with Tamil Nadu where we have successfully delivered 100+ Vehicles through this unique initiative and we look forward to more and more
states getting added in the near future. We are very happy to continue strengthening our partnership with India Post and benefit from their widespread reach,” he added.

Veena Srinivas – Post Master General (Business Development & Mails), Karnataka Circle, Bangalore, India Post said “This tie-up will help the customers in availing loans easily for their Bajaj 2 Wheelers by contacting nearest Post-Office. I wish for a long and fruitful tie-up in the interest of both the organizations’ as well as members of the general public”.

(amolk) #106

The valuation looks expensive but what is the probability of Bajaj Finance posting 40% to 50% profit growth at lest for next 2 years? I think with below +ve factors the probability is very high. What do you think? If yes then it may be worth to hold the stock.


  • Good Monsoon
  • 7th pay commission
  • Falling interest rate
  • Tie up with eCommerce players
  • Lower cost to income because of economics of scale


  • Emergence of new competition. Capital first, new model of credit cards payments etc
  • transition from 180 days NPA’s to 90 days NPA’s

Your thoughts?

Disclosure - 14% of my portfolio - Holding since last 3 years

(fabregas) #107

More positives:

  • During FY2016, BHFL received a certificate of registration from National Housing Bank and is in the
    process of commencing housing finance business.
  • Management has admitted that the next wave of growth will come from tier 3/4 towns and rural areas. Here is an excerpt from the Chairman’s report in the FY16 AR

And my favourite — the new Rural Lending business — grew its
receivables under finance from 50 crore in FY2014 to 333 crore in FY2015 and now to
1,339 crore in FY2016. Last year I had hoped that we could “expeditiously yet prudently tap this
market for the benefit of BFL as well as of the rural populace and its various enterprises”. Your
Company’s Management has shown that it can be successfully done with a more than three–fold
increase in this business.

(fabregas) #108

I also feel the EMI cards is a game changer. Consumers can now use it on Flipkart (only on select products) and offline retail outlets. Its an inherent growth engine.

Is any other NBFC doing something similar?

(ramanhp) #109

Capital First CMC briefly talks about it here :

(fabregas) #110

Capital First CMD is talking about EMI based financing. This is not the same as EMI cards.

EMI cards stands for Existing Member Identification cards. Consumers can use this card like a credit card at partner retail chains and on Flipkart for purchases above Rs 5000. These purchases are automatically converted to equated monthly installments. Its like a pre-approved loan card.

(Abhishek Basumallick) #111

Very large opportunity size for well capitalized financial institutions like BFL along with multi line asset base. Makes me think that “HDFC Bank is the next HDFC Bank” :slight_smile:
Jaitley has earmarked Rs 700 billion (USD 10.5 billion) in bank capital injections in the four years to March 2019.

Ratings agency Fitch estimates, however, that USD90 billion in capital will be needed for Indian banks to meet Basel III banking rules due to be fully implemented by March 2019. Fitch says that 11 Indian banks may fail to meet those norms.

(Growth_without Debt) #112

@basumallick Can you please explain more on -

(Abhishek Basumallick) #113

@hnk_so Nothing much to explain. People have been looking at a steady long term compounder for years now. With the kind of opportunity that the banking sector continues to provide, HDFC Bank itself can continue to be the star performer it has been for a very long time in the future. It has a lot of things going for it - great management culture, strong branch network, agile technology adoption, well capitalized and prudent lending.

(Manish Vachhani) #114

I think what he meant was “No need to look for next HDFC Bank, but stay put in HDFC Bank itself.”

(nil_71) #115

Fully agree. Banks growth is usually 2X where X is growth of economy. More than Corporate Gov. its uniqueness is prudent lending. No loan to Kingfisher.

We need to see how it is coping with new digital payments economy which will be disruptive like anything.

As a customer, I always found ICICI to be more tech savvy and innovative and HDFC yet to catch up on this

Time will tell us

(amolk) #116

Bajaj Finance is trading at P/E 40, P/B 7.47. ROE 20% to 21%, Gross NPA – 1.47%, Net NPA – 0.41%, 3 years Profit growth 30%
Yes bank is trading at P/E 18, P/B 3.5. ROE 20% to 21%, Gross NPA – 0.79%, Net NPA – 0.41%, 3 years Profit growth 25%

BFL is NBFC, Yes bank is a bank. No doubt Bajaj Finance will grow much faster than Yes bank in next many years to come. Looking at BFL’s valuation do you think the upside is limited and downside risk is more?

(Abhishek Basumallick) #117

Both BFL and Yes Bank are good businesses. Buying any stock cheap provides a margin of safety. For BFL, the future stock price rise will come from EPS growth with hardly any room for P/B expansion. The same goes for Yes Bank as well. Being an NBFC, BFL has lesser capital adequacy requirements compared to a bank, so growth may be faster. That fact is already captured in the higher valuation.


Would Bajaj Finance be a proxy for Indian E-Com play?

Amazon, Flipkart and Snapdeal are having “No Cost EMIs” payment option during the sale.

December is the highest sales quarter and I think we may see good growth this time around.

(ranvir dehal) #119

Another way to play Bajaj Finance story is through Bajaj Finserv. It holds almost 60% stake in Bajaj Finance. Plus its general insurance is doing really well. Any growth pickup in Life Insurance business ( already profitable ) will propel it further.
Plus the valuations are not as stretched.

Disc: Invested in HDFC , HDFC Bank, Yes Bank, Bajaj Finance and Bajaj Finserv !!!

(ankitkabra) #120

I think the biggest strength of Bajaj Fin(BAF) has its ability to extremely market savvy and nimble footed.
Its ability to start new streams and add revenues year on year and more importantly to run down low ROE portfolios and relaunch them with modified strategies which will inch ROEs higher.
Also the ease of exiting low profit/ low making business at an early stage.
Can remain expensive and go time correction, but return trajectory to remain higher.

(Abhishek Basumallick) #121

Q2 Results: Decent results continue. Good performance on the NPA front as well considering the current climate.

Results -

Investor presentation -