Jefferies has recommended a ‘Buy’ rating for Bajaj Finance, setting a target price of Rs 9,470. The report discusses the repercussions of recent regulatory constraints on Bajaj Finance, with a specific focus on the company’s performance in consumer electronic stores.
Jefferies highlights the enduring strength of Bajaj Finance’s brand recall, emphasizing that a substantial number of borrowers actively seek information about BAF’s loans at consumer electronic outlets. This recognition is attributed to Bajaj Finance’s robust platform for loan approvals, swift Turnaround Time (TAT), and the popularity of its EMI-Cards.
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The report also added that despite regulatory restrictions, BAF’s lending channel remains resilient. The company continues to offer loans based on PAN Cards, Aadhaar Cards, and phone numbers for Cibil score verification, ensuring a quick approval process once necessary documents are provided.
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A notable change observed is the temporary cessation of EMI card issuance by BAF, impacting EMI fees and cross-selling strategies. The report suggests that this period, occurring post-Diwali when sales typically experience a decline, offers BAF an opportunity to adapt and address the changes effectively.
Acknowledging the potential impact on fees, the report indicates that it may surpass the effects on Assets Under Management (AUM) and Net Interest Income (NII). Fees earned from value-added services, particularly those associated with cards, constitute a significant portion of Bajaj Finance’s earnings.
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Considering the seasonal adjustment in sales post-Diwali, Jefferies anticipates a short-term impact on Bajaj Finance’s earnings. However, the company’s proactive approach during this lean period is seen as an opportunity to address disclosures and minimize the overall impact on earnings.
While Jefferies trims FY24 estimates by 1-2% due to the short-term challenges, it maintains steadfast projections for FY25-26. Investors and stakeholders are closely monitoring how Bajaj Finance strategically navigates through the post-Diwali sales period amidst regulatory adjustments.
