Shares of Bajaj Finance have delivered over 4,000 per cent return to its long-term shareholders in the last 10 years. The multibagger stock has recovered over 24 per cent from its 52-week low of Rs 5,780.
ICICI Securities believes that the momentum will also continue going forward. In its recent report, it has initiated its coverage on the stock with a 'BUY' rating and a target price of Rs 8,500, valuing the standalone business at 5x FY26 BVPS and Rs 830 towards housing subs.
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It noted that Bajaj Finance is the only NBFC in India that prioritises customer ‘ownership’ over mere ‘lending’. "Providing financial solutions to India’s burgeoning aspirational middle class forms the crux of Bajaj’s unique business model, which will allow the business to showcase more than 25% growth in AUM and RoE soon," it said.
The brokerage firm believes that the company sports the lowest cost of delivery (cost of funds + cost to assets) among NBFCs, which is backed by a strong cross-sell/up-sell engine (cross-sell customer base at more than 60% of total) and robust digital infrastructure – arm in arm, these form the bedrock of Bajaj’s leadership now and going ahead too in the NBFC space.
According to ICICI Securities, a noteworthy aspect of Bajaj’s customer acquisition journey is its prominence at every conceivable point-of-sale, be it a brick-and-mortar establishment or digital purchases through mobile applications and e-commerce platforms.
For 9MFY24, Bajaj has delivered a return on assets (RoA) of 5.0% and a return on equity (RoE) of 20.5%; for FY23, it has delivered RoA of 5.4% and RoE of 22%; and for FY24, the brokerage firm expects Bajaj to report RoA of 5%, and thereby, RoE of 20.6%.
Adaptability to changing market needs
ICICI Securities believes that the adaptability to the ever-changing market needs has been one of the strongest points of Bajaj.
Bajaj’s checkout financing story, which started with the offline retail stores of electrical appliances and other electronics items, is now a blend of financing options under different product segments including electronics, large appliances, lifestyle products (furniture and home furnishings) and digital products, it said.
Peer benchmarking: How Bajaj compares
The brokerage firm noted that a few players have entered this high-yielding unsecured lending business and tried to create a space for themselves, but most have failed to scale. Bajaj succeeded.
"Its unique customer acquisition strategy, cross-selling to the existing customer base and coming up with new products to suit customer needs has been the key differentiator that has helped the company build its success story," it said.
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