Business Standard

Don’t miss the latest developments in business and finance.

Bajaj Finance jumps 8% intraday after RBI lifts ban on eCOM, Insta EMI Card

Bajaj Finance stock price update: This was Bajaj Finance stock's biggest single-day rally in three years

Bs_logobajaj finance logo
Photo: X@Bajaj_Finance
Nikita Vashisht New Delhi
4 min read Last Updated : May 03 2024 | 11:11 PM IST
The Reserve Bank of India's decision to lift curbs on Bajaj Finance's two products, earlier than expected, sent the stock on a tear on Friday. The shares soared 7.5 per cent to Rs 7,400 in intraday trade, but erased most of the gains as markets came under heavy selling pressure.

The stock, eventually, settled 0.75 per cent higher at Rs 6,933 per share as against a 0.98-per cent (733 points) fall in the benchmark S&P BSE Sensex. 
 
This was Bajaj Finance stock's biggest single-day rally (intraday) in three years. Bajaj Finance stock had hit a record high of Rs 8,190 on October 6, 2023.

The move, analysts said, comes as a huge positive surprise as the restrictions have been lifted in less than six months, relative to the RBI's recent actions where similar restrictions were removed after at least one year.

"The recent development in the beginning of FY25 itself is a positive start for Bajaj Finance for the fiscal, and is expected to boost investor confidence on processes, commitment of management in making things right, and the company's ability to adapt to the changing regulation and business environment," wrote analysts at Emkay Global.

On Thursday, Bajaj Finance said  the RBI has lifted restrictions on 'eCOM' and online digital 'Insta EMI Card' with immediate effect. With this, the Non-Banking Financial Company (NBFC) will resume sanction and disbursal of loans through both these business segments, including issuance of EMI cards.

The restrictions, which were put by the RBI in mid-November last year, on account of deficiencies related to the Key Fact Statement (KFS) of these products, had a significant impact on Bajaj Finance's profitability in the January to March quarter (Q4) of the previous fiscal (FY24). Bajaj Finance's profit before tax (PBT) was lower by 4 per cent in Q4FY24, and its new loan book was lower by 0.8 million in Q4 and by 1.2 million in FY24.

Lifting of this ban, thus, would result in higher customer acquisition, along with improved fee income. That apart, the earlier-than-anticipated removal of restrictions endorses the Management's ability to course-correct promptly when needed, analysts added.

Emkay Global said the early resolution of the restriction increases confidence on the FY25 outlook and raises hopes of approval by the RBI for renewal of Bajaj Finance's co-branded credit card with RBL Bank.

"We keep our FY25-27 estimates unchanged and reiterate our 'BUY' rating on the stock, with an unchanged target price of Rs 9,000," the brokerage said.

V K Vijayakumar, chief investment strategist at Geojit Financial Services, concurred that the RBI's decision to lift the restrictions is highly positive for the stock. "Short covering in the stock has the potential to trigger further up move," he added.

Bajaj Finance is India's largest NBFC with primarily a retail/MSME product suite focussed on mass affluent and above demographics, built on cross-sell/upsell model. 

The shifting household economic pyramid of India convinces analysts that Bajaj Finance should deliver high-twenties loan growth till 2030, in-line with its long-term guidance.

"While loans per customer have already settled, we see the possibility for about 15 per cent CAGR in customers, 10 per cent annual benefit of loan upselling, and 5-6 per cent annual systemic inflation," Santanu Chakrabarti, analyst tracking the banking and finance sector at BNP Paribas India, had said in a coverage initiation report in March, 2024.

The brokerage assigned 'Outperform' rating to Bajaj Finance with a target price of Rs 9,040.

"High loan growth ensures that Bajaj Finance could potentially hit its internal dilution threshold leverage by FY26. Our analysis suggests that a 3 per cent/5 per cent dilution is potentially a 15 per cent/25 per cent boost to book value per share (BVPS), ensuring that the current trading multiple of 4.4x FY25E P/B is rather attractive," he said.


Topics :Reserve Bank of IndiaBuzzing stocksBajaj FinanceMarketsRBI

Next Story