Bajaj Finserv nears record high; stock rallies 16% in 6 days post Budget

Shares of Bajaj Finserv hit a fresh 52-week high of Rs 10,113, up 4 per cent on the BSE in the intra-day trade on Monday. The stock of the holding company for various financial services businesses of the Bajaj Group surpassed its previous high of Rs 9,996.75, touched on February 2, 2021. Besides, it was also trading close to its all-time high level of Rs 10,297, hit on December 18, 2019.

In the past six trading days, the stock has rallied 16 per cent after the government proposed to increase foreign direct investment in the insurance sector to 74 per cent, a move aimed at attracting overseas players. In comparison, the S&P BSE Sensex was up 11 per cent during the same period.

Bajaj Finserv holds 52.74 per cent stake in Bajaj Finance Ltd. The company also holds 74 per cent stake each in two unlisted insurance companies Bajaj Allianz General Insurance (BAGIC), and Bajaj Allianz Life Insurance (BALIC).

Bajaj Finserv reported a gradual revival in lending business, while insurance business continued to show healthy performance, though sequential run rate witnessed moderation in the December quarter. Led by improvement in profit after tax (PAT) in insurance business, consolidated earnings for company during the quarter (Q3FY21) went up by 14.6 per cent year on year (YoY) to Rs 1,290 crore. Insurance subsidiaries BALIC and BAGIC performed well, helped by a net positive impact on PAT on account of post-tax MTM gains from BAGIC & BALIC’s investments of Rs 384 crore.

"Bajaj Finserv’s strong capital metrics across all subsidiaries, with BAGIC’s solvency ratio robust at 330 per cent and BALIC’s solvency ratio at healthy 708 per cent, with BFL Tier-1 capital ratio at 24.7 per cent.  A lower claim ratio was seen in the motor, crop, and health segments, which partly were benefitted by the pandemic," analysts at Sharekhan said in Q3FY21 result update.

“The regulator has proposed norms, which (if accepted) would allow conversion of non-banking finance companies (NBFCs) to banks, is sentimentally positive for players like BFL, as they may open opportunity of possible conversion to a bank for them. While BFL has yet to evince active interest in acquiring a banking license, a change of course is possible. While near-term challenges remain, sound fundamentals of BFL’s business franchise are likely to sustain. BFL is well capitalized with a conservative leverage, and both BALIC and BAGIC have healthy solvency ratios and strong operating metrics, with structural tailwinds to benefit them for the long term,” the brokerage firm said and maintain 'Buy' recommendation on the stock with a revised SOTP-based price target of Rs 10,860.

At 03:09 pm, Bajaj Finserv was trading 3 per cent higher at Rs 9,993 on the BSE, as compared to a 1.2 per cent rise in the S&P BSE Sensex. A combined 920,000 equity shares have changing hands on the counter on the NSE and BSE till the time of writing of this report.