Bajaj Finance has seen its assets under management (AUM) double over the last four years, led by its customer base, which also doubled over the same time period. The company's loan mix has also undergone a change with the share of consumer loans declining as a percentage of the overall mix, as has the commercial book.
The decline in these segments is made up by mortgage and rural, which have seen a rise in their respective share.
India's largest non-bank lender released its September quarter business update according to which new loans declined compared to the June quarter while AUM increased 7 percent. Deposits over the previous quarter also increased 15.5 percent.
Shares of Bajaj Finance have gained nearly 300 percent over the last five years.
However, while some analysts are hailing the company's strong AUM growth, some are questioning the slow growth in loan disbursements.
Who Are The Bulls?
BofA Securities has a 'buy' rating on Bajaj Finance with a price target of Rs 8,345, implying a potential upside of 12 percent from Tuesday's closing levels. The firm believes that the 31 percent growth in Bajaj Finance's AUM is a sign of accelerating growth and that the stock is well-positioned for a strong growth revival. It also noticed encouraging progress on the company's Omnipresence strategy.
Morgan Stanley believes that the company managed to do well in a seasonally weak quarter. The firm also writes that Bajaj Finance has gained significant ground in its deposits franchise with a growth of 15 percent over the June quarter. The brokerage maintains its 'overweight' rating on the stock with a price target of Rs 8,500, implying a potential upside of 13.5 percent.
Jefferies has called Bajaj Finance's AUM growth strong while adding that reducing surplus liquidity position by 19 percent on a sequential basis will aid the company's Net Interest Margins going forward. The brokerage has a 'buy' rating on the stock and a price target of Rs 8,000.
The Ones Who Differ
However, not every firm concurs with the bullish commentary on Bajaj Finance.
CLSA believes that despite the loan growth, the number of loans disbursed have only increased 8 percent year-on-year. It believes that the divergence between volume and value growth could be due to higher ticket size and mix changes. The firm further writes that in case the growth is led by higher ticket sizes, it would decline once inflation cools down. CLSA has a 'sell' rating on Bajaj Finance and its price target of Rs 5,600, implies a 25 percent downside from Tuesday's closing.
Macquarie also has an 'underperform' rating on Bajaj Finance with a price target of Rs 5,000. While net customer additions of 2.6 million was ahead of the firm's estimates, the volume of loans booked at 6.8 million, missed its projection of 7 million. It also mentions that higher customer engagement, coupled with higher volume of loans are essential to call the company's digital transformation a success and it is yet to see this emerge clearly.
Shares of Bajaj Finance are down 1.6 percent at Rs 7,369. The stock is flat on a year-to-date basis.
