Bajaj Finance Investor Day: Shares gain as mgt eyes becoming FINAI by FY29

Bajaj Finance share: Bajaj Finserv presented a five-year Long-Range Strategy (LRS) at its investor day for Group companies on December 10, 2024. What should investors do with Bajaj Finance shares now?

Bajaj Finance share: Bajaj Finance shares moved little on the bourses on Wednesday, December 11, 2024, a day after Bajaj Finserv presented a five-year Long-Range Strategy (LRS) at its investor day for Group companies.

 

Bajaj Finance share price fell barely 0.5 per cent in the morning trade to hit a low of Rs 6,894 per share. The stock, however, bounced back 2.1 per cent to touch an intraday high of Rs 7,045 per share. By comparison, the benchmark BSE Sensex was quoting 0.23 per cent higher at 81,697 levels at 12:05 PM today.

 

While Bajaj Finance has displayed solid growth over the past decade and a half, and is poised to achieve current financial year 2024-25 (FY25) target, upside in the stock is seen only if it successfully navigates the asset quality challenges and makes improves the proportion of secured loans in its loan mix, analysts said.

 

 

“While the valuations are attractive at 3.7-times price-to-book value (P/BV) and 20-times price-to-earnings (P/E) based on FY26 earnings, we do not anticipate any significant upside catalysts till the asset quality challenges in its business-to-consumer (B2C) loan book and imbalance in the proportion of secured loans in its loan mix persists. We maintain ‘Neutral’ with a target price of Rs 7,500,” said analysts at Motilal Oswal Financial Services.

 

Nonetheless, analysts lauded Bajaj Finance’s FY24-29 growth plan where it aims to become the lowest cost financial service provider to 200-million customer franchise by FY29 and use artificial intelligence (AI) across businesses and functions.

 

Eye on AI

Under BFL 3.0, Bajaj Finance eyes becoming a FIN-AI company, focussing on an AI-first approach across all its businesses and processes to remain “ahead of-the-curve” and become the “lowest cost financial service provider” in India.

 

The management said it is currently implementing 29 GenAI use cases across 25 work streams, which may save approximately Rs 150 crore annually in FY26.

Bajaj Finance’s strategic priorities under its AI drive include conversational AI for sell and cross-sell; interactive multi-modal AI assistant and conversation AI to improve customer engagement; AI-led underwriting; and AI-enabled loan origination system, sales, DMS, and dealer management.

 

Product Strategy

On the product side, Bajaj Finance management said it will focus on Green Finance, Multi-cloud, and Zero Trust as its three new megatrends.

 

It aims to start with financing of solar and EV products to retail and MSME customers in the fourth quarter of the current fiscal, and eyes Rs 2,000-crore green financing pool in FY26.

 

Besides, Zero Trust will be based on ‘trust by verify’ principle, while Multi-cloud orchestration strategy will deploy the applications cloud agnostic.  

 

“With an increase in customer franchise and cross-sell franchise by FY29, Bajaj Finance may see a cross-sell ratio at over 60 per cent. Further, the thrust on AI would ensure product-per-customer at 6-7 over FY24-29 as against 6.15 currently. Similarly, cost savings due to extensive use of AI could improve AUM per cross-sell franchise to Rs 80,000-85,000 by FY29 from Rs 64,800 in September ’24. Profit after tax per cross-sell franchise, too, may improve to Rs 3,800-4,000 by FY29 from Rs 1,374 in H1FY25,” noted analysts at ICICI Securities.

 

This, the brokerage said, may lead to a PAT CAGR of around 25 per cent and 20-22 per cent AUM CAGR over FY24-29.

 

ICICI Securities maintained its ‘Buy’ rating on the stock with a target price of Rs 8,500.

 

Overall, Bajaj Finance is eyeing a share of 3-4 per cent in total credit market by FY29, 4-5 per cent in retail credit and 1 per cent in payments GMV. It hopes to sustain return on equity (RoE) at 20-22 per cent.

 

“The company’s market share increased from 0.1 per cent to 2 per cent, and profit ranking improved from 722nd to 21st in India over the past 17 years. This robust performance underscores the company's ability to scale operations while maintaining profitability, with sustained improvements in RoE,” said Motilal Oswal Financial Services.