70 90 110 130 150 170 190 Mar-16 Mar-17 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 BFL NSE Bajaj Finance (BFL), owned by Bajaj Finserv (58%) and part of the Bajaj Group, is a fast growing, well-diversified leading NBFC in the country. BFL focuses on four broad categories viz. consumer, commercial, SME and rural compared to the single product focus of most NBFCs on CV finance, gold finance or auto finance. Focus of BFL's business model has been on building scale with profitability. So, the product portfolio of the company has been balanced with Home Loans, LAP, commercial lending (high ticket sizes) with 2/3 wheelers, consumer durables, lifestyle finance and personal loans (high yields) resulting in AUM growth coupled with profit maximisation. The company's diverse portfolio offers good scope for cross selling of products to its creditworthy customers. The ability to mine the existing client base augurs well for profitability as it reduces client acquisition costs. To enable faster loan appraisal for repeat customers, company provides an EMI card to all its consumer durable customers. BLF has reduced the turnaround time for loan applications through considerable investments in business analytics, from a few hours to 15 minutes thus allowing it to compete with credit cards in this segment. The turnaround time is maintained due to large in-house database and better data availability with CIBIL. Asset quality has been amongst the best in the BFSI space(NNPA at 0.3%), attained by being alert to potential asset quality risks and taking steps like exiting construction equipment and infrastructure lending and slowing down financing in LAP, 3 wheeler financing in a timely manner. BFL has benefitted from strong retail credit demand reflected in its strong AUM CAGR of 36% over FY12-FY16. At the same time, diligent lending has resulted in stable margins (NIMs 10.8%) and healthy return ratios (ROAA 3.2%, ROAE 20.9%). BFL's business model has a competitive edge over other NBFCs on risk and growth profile. Its loan book has compounded at 36% over FY12-FY16, due to its active churning of portfolio products keeping in mind the macro picture, its choice of borrowers as well as its robust risk management. Further, the USP of BFL is its stronghold in the consumer durable (CD) & lifestyle product financing business wherein it does not have any major competition. Despite strong growth in loans, the asset quality and provisioning remain among the best in the system. Given the strong growth rate, high margins and return ratios, its premium valuations within the NBFC space is justified. We recommend a BUY on BFL with a target price of 1,421(5.5x FY19E P/ABV). Financial Summary - consolidated Particulars, Rs cr FY15 FY16 FY17E FY18E FY19E Net Interest Income PPOP PAT EPS (Rs) ROAE (%) ROAA (%) Adj. BVPS (Rs) P/ABV (x) 2,872 1,742 898 18.0 20.4 3.1 92.8 12.7 4,030 2,508 1,279 23.9 20.9 3.2 136.4 8.7 5,326 3,510 1,819 33.8 22.0 3.2 164.4 7.2 7,179 4,738 2,415 44.8 23.7 3.1 202.4 5.8 9,444 6,247 3,204 59.4 25.1 3.0 258.4 4.6 Source : Company; RSL Research Religare Investment Call March 31, 2017 BFSI CMP (Rs) Target Price (Rs) Potential Upside Sensex Nifty Key Stock data BSE Code NSE Code Bloomberg Shares o/s, Cr (FV 2) Market Cap (Rs Cr) 3M Avg Volume 52 week H/L Shareholding Pattern (%) Promoter FII DII Others 1 Year relative price performance 1,170 1,421 21.5% 29,598 9,163 500034 BAJFINANCE BAFIN 53.6 63,229.2 1,249,864 1,206/664 Jun-16 57.4 19.7 5.5 17.5 Sep-16 57.4 19.4 5.1 18.2 Dec-16 58.1 18.5 5.5 18.0 Research Analyst Siji A Philip [email protected]Investment rationale Outlook & Valuation Initiating Coverage Bajaj Finance Ltd Best placed for sustained outperformance... BUY
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BFL NSE
Bajaj Finance (BFL), owned by Bajaj Finserv (58%) and part of the Bajaj Group, is a fast growing, well-diversified leading NBFC in the country. BFL focuses on four broad categories viz. consumer, commercial, SME and rural compared to the single product focus of most NBFCs on CV finance, gold finance or auto finance.
Focus of BFL's business model has been on building scale with profitability. So, the product portfolio of the company has been balanced with Home Loans, LAP, commercial lending (high ticket sizes) with 2/3 wheelers, consumer durables, lifestyle finance and personal loans (high yields) resulting in AUM growth coupled with profit maximisation.
The company's diverse portfolio offers good scope for cross selling of products to its creditworthy customers. The ability to mine the existing client base augurs well for profitability as it reduces client acquisition costs. To enable faster loan appraisal for repeat customers, company provides an EMI card to all its consumer durable customers.
BLF has reduced the turnaround time for loan applications through considerable investments in business analytics, from a few hours to 15 minutes thus allowing it to compete with credit cards in this segment. The turnaround time is maintained due to large in-house database and better data availability with CIBIL.
Asset quality has been amongst the best in the BFSI space(NNPA at 0.3%), attained by being alert to potential asset quality risks and taking steps like exiting construction equipment and infrastructure lending and slowing down financing in LAP, 3 wheeler financing in a timely manner.
BFL has benefitted from strong retail credit demand reflected in its strong AUM CAGR of 36% over FY12-FY16. At the same time, diligent lending has resulted in stable margins (NIMs 10.8%) and healthy return ratios (ROAA 3.2%, ROAE 20.9%).
BFL's business model has a competitive edge over other NBFCs on risk and growth profile. Its loan book has compounded at 36% over FY12-FY16, due to its active churning of portfolio products keeping in mind the macro picture, its choice of borrowers as well as its robust risk management. Further, the USP of BFL is its stronghold in the consumer durable (CD) & lifestyle product financing business wherein it does not have any major competition. Despite strong growth in loans, the asset quality and provisioning remain among the best in the system. Given the strong growth rate, high margins and return ratios, its premium valuations within the NBFC space is justified. We recommend a BUY on BFL with a target price of 1,421(5.5x FY19E P/ABV).
BFL, one of the leading NBFCs in India, started as a captive financier to 2/3 wheelers manufactured by Bajaj Auto. Since then, the company has explored various other lending segments and became an industry bell-weather in the retail asset financing segment. Its diversified product portfolio currently comprises of more than 30 products divided broadly into four categories like consumer, SME, commercial and rural. It is the largest financier of 2 wheelers and consumer durables in the country.
The company has Rs 44,229 crs (FY16) of Assets under Management (AUM) and witnessed strong growth at 36% CAGR over FY12-FY16. The portfolio mix is skewed towards Consumer (43%) and SME (42%) segments while Commercial (12%) and Rural (3%) form the rest. The company's reach and distribution channels are strong with a presence of 304 consumer branches and 519 rural locations with over 35,000+ distribution points. Further, for various product lines, BFL has tie-ups with all major manufacturers and dealers in consumer durables, lifestyle financing, digital products, etc.
Consumer financing segment continues its positive traction
In the four broad categories, Consumer Finance book (CF) as on FY16 was at Rs 18,996 cr, comprising 43% of the total AUM. Within the CF book, Consumer Durable financing (CD) and Lifestyle Product financing book were at Rs 5,556 cr and Rs 1,016 cr, respectively. Apart from these, the CF book includes 2/3 wheeler finance, personal loans and home loans to salaried individuals.
Consumer Finance (43% of AUM) SME (42% of AUM) Commercial (12% of AUM) Rural (3% of AUM)
Vendor Financing Consumer Durable FinancingAuto Financing Small Business Loans
Loan Against Property Construction Equipment Financing Gold Loans
Infra Lending Personal Loans
Consumer Durable
Loan Against Securities
Business Loans
Lifestyle Financing
Personal Loans
Home Loans
Professional Loans
Loans Against Property
SME Cross Sell
Digital Product Financing
Salaried Personal Loans
Source : Company; RSL Research
Portfolio Mix Increasing Share of Consumer Finance
42.9
42.3
11.83.0
Consumer Finance SME Commercial Rural
40.7 38.8 40.7 42.944.249.9 48.0
42.3
15.011.1 10.3 11.8
0.0 0.2 1.0 3.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
FY13 FY14 FY15 FY16
Consumer Finance SME Commercial Rural
Four broad business categories viz. consumer, SME, commercial and rural
Consumer Finance and SME Finance are the two dominant categories with +42% share
Growth in Consumer Finance driven by Consumer Durable and Lifestyle Product Financing
Initiating Coverage BFSI
Religare Investment Call
Bajaj Finance Ltd
In the past five years, BFL has witnessed strong accretion in new customer acquisition each year in the CD financing business with increase in Point of sales from 3,500 in FY13 to 9,400 in FY16 resulting in an increased new customer base of ~47 lacs from ~19 lacs in FY13. Even lifestyle product finance (that includes digital products financing i.e. mobile phones, laptops, etc and non-digital i.e. furniture, furnishing etc.) started in FY13 saw a robust increase from 37,000 new customers served in FY13 to ~7 lac new customers in FY16.
Currently, BFL is amongst the largest new client acquirers in India with an overall increase of new clients from 28 lacs in FY13 to 68 lacs in FY16. This increase is owing to BFL's large distribution network and reach. It has 193 branches with 9,400+ point of sales or distribution franchises in CD finance. Further, it has 8,400+ points of sales in lifestyle products (5,200+ in digital financing and 3,200+ in non-digital financing).
CD financing is largely a duopoly market with the two prominent players in the organized market, being BFL and Capital First. BFL enjoys the dominant market share and is the largest consumer electronic lender financing high value items such LCD, refrigerators, air-conditioners, mobile phones, etc.
It has capitalised strongly on its “0% financing” product, which enabled it to gain customer popularity. Almost the entire CD financing and lifestyle product financing business is through “0% financing”. Under this scheme, the customer does not have to pay any interest on his purchase, also getting the convenience of paying the purchase price in easy installments. The customer pays ~30% as down payment and the balance amount in EMI of seven to eight months. BFL gets 1-1.5% processing fees and ~6-8% of the product value as subvention from manufacturers. Further, the company offers EMI (Existing Membership Identification) cards to its existing customers. This card enables the holder to purchase consumer durables & lifestyle products by availing a loan from BFL thus providing quick & hassle-free finance. Customers simply have to Swipe & Sign to buy using an EMI card. As of Q3FY17, about 68 lac EMI cards have been offered.
BFL's stronghold in the CD financing business is on the back of its large reach, formidable relationships with dealers and manufacturers, strong brand, expertise of several years and database of such large customers. These factors act as entry barriers in the CD financing business and give BFL a competitive advantage.
Lifestyle Financing Personal Loans (PL)
2012 2012
Digital & Non Digital viz Mobiles, Furniture
PL to existing clients
Consumer Durable
Mass Affluent Existing clients
1995
~0.4lacs ~5lacs 12m 30 - 36m
TV, AC,LED
25 - 26% 16 - 18%
Mass Affluent
~0.3lacs
9m
24 - 26%
Auto Financing
1987
2/3 Wheeler
Mass clients
~0.5 - 1.5lacs2 - 3 yrs
22 - 25%
Particulars
Year
Product
Target
Ticket size
Duration
Yield range
Source : Company; RSL Research
CF AUM – Growth & Share (%)
EMI cards and 0% financing popular features of Consumer Financing
30.7
41.5
43.9
42.1
38.8 40.7
42.9
46.9
25.0
30.0
35.0
40.0
45.0
50.0
5,000
10,000
15,000
20,000
25,000
30,000
FY14 FY15 FY16 YTDFY17
CF (Rs cr, LHS) Growth (%) % of AUM
Further, we believe the competition will remain low as banks are largely focused on housing finance or auto financing within retail loans while other NBFCs are in niche areas like auto finance, housing finance, gold finance or infrastructure finance.
Sizeable financing market in consumer category products offers great opportunity
Overall macro indicators are very conducive for fast paced growth in the consumer financing space. Higher spending by a growing middle class population, increasing penetration in rural areas, growing urbanization rate would aid surge in demand for white goods, which will keep the need for financing in this space robust.
2/3 wheeler financing business – captive financing model
BFL has been present in 2/3 wheeler financing since its inception and is the largest 2 wheeler financier, focused on semi-urban and rural markets. This business has a captive financing model wherein BFL finances 2 wheelers produced by its group company Bajaj Auto and contributes ~30% of the total Bajaj Auto's domestic 2 wheeler sales. BFL also finances ~15% of Bajaj Auto's 3 wheeler sales. BFL continues to capitalize on Bajaj Auto's distribution network to build its loan book and has access to >3,000 dealers.
Though there has been a decline in the 2 wheeler financing proportion in BFL's overall AUM, the company is still the largest 2 wheeler lender with a market share of ~20%.
The large number of customers acquired through the CD financing business allows BFL to cross-sell various other products to customers with a healthy credit history. These products include personal loans, life/general insurance, etc. Further, home loans to salaried individuals are also covered in CF financing and have a book size of ~3% of AUM.
Initiating Coverage
Religare Investment Call
Macro indicators conducive for robust growth in Consumer Finance category
Proportion of 2/3 wheeler finance less than 10% in overall AUM
BFSI Bajaj Finance Ltd
Source : Mckinsey Global Institute, IMF, RSL Research
Increase in Per Capita Income Rise in Middle Class Population
Source : Mckinsey Global Institute, IMF, RSL Research
Growth in Urbanisation Growth in White Goods & TV Market
We expect the share of the CF segment in total AUM mix to increase mainly led by CD financing & lifestyle financing segment, on the back of a rise in sales of consumer durable, increased finance penetration and jump in the share of BFL in the overall financing market.
Mortgage heavy SME financing book – steady growth
Share of BFL's SME book has come down gradually from ~50% in FY14 to ~42% in FY16 and includes small business loans, loan against property (LAP), home loans to self-employed & loan against securities (LAS). The slowdown in SME book was deliberate on management's assessment that the LAP market was getting overheated. Share of LAP book in overall AUM has come down to 19% in FY16 from 25% in FY15; though it continues to have the highest share in the overall AUM. To diversify its mortgage business, BFL also lends to non-salaried individuals which stood at ~10% of AUM.
Business loans (~10% of AUM) are mostly working capital loans with a ticket size of Rs 10-30 lacs with an average maturity of 2-3 yrs. In the LAS segment, company provides working capital and growth capital to high net worth SMEs, with established financials against marketable securities.
Commercial financing – traction dependent on underlying economic trend
In the commercial segment, BFL provides finance in the construction equipment (CE) and infrastructure space. Apart from these, BFL also offers wholesale lending products covering short, medium and long term needs of auto component vendors in India. The proportion of commercial segment has increased from 10.3% in FY15 to 12% in FY16. There has been a continuous run down in the book related to CE and infra financing. These segments witnessed asset quality pressures in the past resulting in actively slowing down exposure. Going ahead, share of commercial lending could improve as macro recovery gradually picks up.
Rural financing to maintain strong growth on lower base, increasing reach
In the rural financing category, BFL is a highly diversified lender. The company is currently present in CD financing, asset backed financing, gold loans, personal loans, etc. BFL functions through a hub & spoke model. The company operates its rural business in Maharashtra, Gujarat, Karnataka, Madhya Pradesh and Rajasthan. As the business commenced in FY13, the book size is small and witnessed sharp traction. We expect the rural portfolio to continue to witness robust growth, going ahead.
Strong operating metrics to sustain
Overall book expected to grow at +30% CAGR over FY16-19E
BFL has a diversified loan portfolio with a leadership position in under penetrated & growing segments like CD financing, lifestyle product financing, 2 wheeler financing, LAP, etc. These factors have allowed BFL to clock strong AUM CAGR of 36% over FY12-16. This has been despite a weak economic environment in the past few years.
The traction in AUM in the past four years has been led by the Consumer Finance segment, which grew 39% followed by SME (34%) and Commercial Lending (26%). The LAP portfolio in the SME segment, accounts for highest proportion (~19%) in overall AUM. CD financing
Rural financing spread across five states currently
L o a n g r o w t h e x p e c t e d t o b e maintained at +30% CAGR over FY16-FY19E
BFSI Bajaj Finance Ltd
Commercial AUM – Growth & Share (%)
Source : Company; RSL Research
Source : Company; RSL Research
1.7
24.3
56.5
33.7
11.1 10.3 11.8 12.1
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2,000
3,000
4,000
5,000
6,000
7,000
8,000
FY14 FY15 FY16 YTDFY17
Commercial (Rs cr, LHS) Growth (%) % of AUM
Rural AUM – Growth & Share (%)
0.2
1.0
3.0
4.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
0
500
1,000
1,500
2,000
2,500
3,000
FY14 FY15 FY16 YTDFY17
Rural (Rs cr, LHS) % of AUM
Initiating Coverage
Religare Investment Call
is 13% of the entire portfolio. Of the total AUM, BFL places about 3-5% for securitisation for better asset liability management which leads to a difference in the AUM and actual advances outstanding in the balance sheet. Going ahead, we expect overall advances traction to continue at +30% CAGR over FY16- 19E, primarily driven by CF segment.
NIMs expected to sustain
The margins of BFL are one of the highest among its peers. Its margins during FY16 were at 10.8% on the back of strong blended yields of 18.6% (pushed by high yields in CF segment) and competitive Cost of Funds, which helps the company to earn an overall spread of 9.2%.
With banks reducing their base rates, the company could benefit going ahead on the Cost of Funds front. However, lower yields expected in segments like SME (which is predominantly mortgage) could pare some of these savings. We expect margins to moderate a bit, but still remain healthy compared to peers and remain in +10% range.
Operational efficiency to be maintained
In the past, BFL had to resort to continuous investments to streamline operations, expanding its network, upgrade technology for maintaining large database of customers, their behavioral pattern and on other analytics in CD, lifestyle financing and the SME business to meet increasing asset generation. However, we believe that, to a large extent, fixed costs have been incurred, BFL since then is reaping the benefits of the same. BFL's cost-to-income ratio has improved to 43.7% in FY16 from 46% in FY14. Cost to average assets has also been stable at ~5% in the last two years. We expect further improvement as incremental costs comes down.
Asset quality stable & well capitalized
BFL's gross NPA ratio at 1.3% as on FY16 is relatively better than some of its peers and also considering the weak economic environment of the past two or three years. Post setbacks in FY09-FY10, the company has focused on improving its risk management process and framework which included focusing on safer products like LAP and mortgages, increased use of Cibil scores, focusing on repeat customers with good repayment pattern and on affluent & mass affluent customers. These efforts helped in maintaining stable asset quality with NNPAs at less than 1% in the last five years.
BFL is in a comfortable position on the capital adequacy front with CAR of 19.5% and Tier I of 16.1%, which is well above the RBI capital requirements. We expect the current capital to be sufficient to meet growth requirements for the next two or three years.
Diversified borrowing profile
Funding profile is diversified among banks, debentures, commercial papers and fixed deposits. As on FY16, the borrowing mix remains skewed towards banks (48%) followed by debt markets (46%) and retail deposits (6%). Being a highly rated company (viz. Credit rating of AAA/Stable by India Ratings (Fitch), AA+/Positive by CRISIL & AA+/Stable by ICRA), cost of funds is lower and stood at 9.2%. Further, at regular intervals, the company was able to raise funds via QIP, which also helped in reducing its funding costs. We expect funding costs to continue at lower levels and derive further savings in a lower interest rate scenario.
Return ratios to sustain
BFL has delivered strong earnings growth supported by improved credit profile, strong NIMs and best in class asset quality with lower credit costs. PAT has compounded at +30% over last four years, posting PAT of Rs 1,279 cr in FY16. Consequently, ROAAs have remained steady at +3%. We expect the strong growth in profitability to continue with return ratios staying healthy.
Steady NIMs of +10% improving over last four years
Asset quality stable through prudent risk management processes; NNPA less than 1%
Funding profile a mix of banks (48%), debt markets (46%) and retail deposits (6%)
ROAA to be maintained at +3%
BFSI Bajaj Finance Ltd
Initiating Coverage
Religare Investment Call
Source : Company; RSL Research
Loan Growth at +30%CAGR FY16-FY19E Steady NIMs
BFSI Bajaj Finance Ltd
17,05023,375
31,59343,314
57,175
77,186
101,886
0
20,000
40,000
60,000
80,000
100,000
120,000
FY13 FY14 FY15 FY16 FY17E FY18E FY19E
Loans (Rs cr)
CAGR 33%
Source : Company; RSL Research
Stable Asset Quality Healthy Return Ratios
1.2
1.5
1.3
1.2 1.11.0
0.3
0.5
0.3
0.4 0.5
0.3
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
FY14 FY15 FY16 FY17E FY18E FY19E
GNPA(%) NNPAs (%)
3.8
3.43.1
3.2
3.23.1 3.0
22.0
19.6 20.4
20.9
22.0
23.7
25.1
16.0
18.0
20.0
22.0
24.0
26.0
2.5
2.8
3.1
3.4
3.7
4.0
FY13 FY14 FY15 FY16 FY17E FY18E FY19E
ROAA (%) ROAE (%)
19.718.7 18.6 18.6 18.2 18.2 18.2
12.8
12.3
10.6
9.29.0
8.7 8.5
11.6
11.010.4
10.8 10.6 10.7 10.5
8.0
9.0
10.0
11.0
12.0
13.0
12.0
14.0
16.0
18.0
20.0
22.0
FY13 FY14 FY15 FY16 FY17E FY18E FY19E
YOA (%) - LHS COF(%) - RHS NIM (%) - RHS
Initiating Coverage
Religare Investment Call
Bajaj Finance (BFL) is one of the leading NBFCs in India and is part of the well-known Bajaj group. Incorporated in 1987, it started as a captive financier to Bajaj Auto's vehicles. Initially, BFL was promoted by the erstwhile Bajaj Auto and Bajaj Auto Holdings. However, as per the scheme of de-merger of erstwhile Bajaj Auto in 2007, the shareholding of Bajaj Auto in the company has been vested with Bajaj Finserv, which is the financial services arm of the Bajaj Group. Subsequent to being a primarily, two wheeler financier, company entered into various other lending segments and became one of the significant players in the retail asset-financing industry. BFL's diversified product suite now comprises >30 product lines divided broadly into four categories like consumer, SME, commercial and rural. The company is the largest financier of two-wheelers and consumer durables in India.
Company Background
BFSI Bajaj Finance Ltd
Bajaj Finance
Legacy
CD Financing
2W & 3W Financing
FY08
Life Insurance
Personal Loans
Cross Selll
FY09&FY10
Rs 4,000 cr
Business Loans
Loan Against Shares -
Promoter
Loans Against
Property
Vendor Financing
Extended Warranty Cross Sell
FY11
Rs 7,600 cr
Home Loans - Self
Employed
Loan Against Shares -
Retail
ConstructionEquipment Financing*
FY12
Rs 13,100 cr
Salaried Personal
Loans
Professional Loans
Relationship
Mngmt
InfrastructureFinancing*
Co-branded Credit Card*
EMI Card
FY13
Rs 17,500 cr
Lifestyle Product
Financing
Home Loans -Salaried
Lease Rental Disc.
FY14
Rs 24,100 cr
Consumer Rural
Lending
Retailer Finance
General Insurance
Distribution
Crisil SME Rating
Consumer Financial Fitness Report
FY15
Rs 32,400 cr
Digital Finance
Property Fitness Report
MSME Rural
Lending
FY16
Rs 44,200 cr
E-Commerce
Seller Finance
SME Financial Fitness Report
Financial Institutions
Lending Business
Light Engineering
Business
Corporate Finance Business
Urban Gold Loans
BFL Product Journey
*Exited Businesses Source : Company; RSL Research
Initiating Coverage
Religare Investment Call
Segment concentration risk: Though BFL's loan book is well diversified; certain products like LAP, CD financing have higher share. Any large decline in property price could lead to asset quality stress cropping up in the LAP segment. Demand for consumer durables depends on various factors like state of the economy, employment opportunities etc. Any letdown can also impact demand for consumer durables and other lifestyle products. In turn, this could impact the advances growth of BFL and consequently, its profitability.
Increasing competition in CF segment: BFL's key strength against its peers is in its stronghold in the CD financing business and lifestyle product financing business. Currently no major player except Capital First Ltd is in this business who can pose a challenge to BFL but there are no entry barriers too. With demand for corporate loans and SME loans expected to remain weak, other financial institutions like banks and NBFCs may look towards this under penetrated CD financing business. This may reduce BFL's strong positioning or compel it to resort to risky ways of going about its business. This may lead to a reduction in the premium multiple it gets currently.
MCLR applied to banks may get imposed to NBFCs: RBI has imposed a Marginal Cost Lending Rate (MCLR) on banks which slightly impacted margins. As has been witnessed in the past, the RBI has gradually subjected NBFCs to the same NPA provisioning guidelines as applicable to banks. Similar instance can also happen in lending rate calculation for NBFCs which can have negative implications NBFC's margins.
Risks & Concerns
BFSI Bajaj Finance Ltd
Interest Earned
Interest Expended
Net Interest Income
Other Income
Total Income
Total Operating Exp
PPOP
Provisions & Contingencies
PBT
Provision for Tax
PAT
Particulars, Rs cr FY16
FY18E FY15 FY19E
FY17E
Source : Company; RSL Research
6,957
2,927
4,030
427
4,457
1,949
2,508
543
1,965
686
1,279
12,273
5,094
7,179
892
8,071
3,333
4,738
1,022
3,716
1,300
2,415
5,120
2,248
2,872
298
3,170
1,429
1,742
385
1,357
459
898
16,098
6,654
9,444
1,061
10,505
4,258
6,247
1,317
4,930
1,725
3,204
9,205
3,879
5,326
729
6,055
2,545
3,510
711
2,799
980
1,819
P&L Account
Religare Investment Call
Initiating Coverage BFSI Bajaj Finance Ltd
SOURCES OF FUNDS
Share capital
Reserves and surplus
Shareholders' funds
Total Borrowings
Other Liabilities, provisions
Total
APPLICATION OF FUNDS
Advances
Investments
Fixed assets
Other Assets
Total assets
Particulars, Rs cr FY16
FY18E FY15 FY19E
FY17E
Source : Company; RSL Research
107
7,320
7,427
37,025
2,005
46,456
43,314
1,029
290
1,823
46,457
108
11,190
11,298
67,924
11,576
90,798
77,186
1,245
296
12,070
90,798
100
4,700
4,800
26,655
1,325
32,780
31,593
326
252
608
32,780
108
14,124
14,232
88,641
16,457
119,330
101,886
1,370
299
15,775
119,330
108
8,982
9,090
49,171
8,837
67,097
57,175
1,132
293
8,496
67,097
Balance sheet
Religare Investment Call
Initiating Coverage BFSI Bajaj Finance Ltd
VALUATION RATIOS
EPS
Earnings Growth (%)
BVPS (ex reval.)
Adj. BVPS (ex reval. & 100% cover)
RoAA (%)
ROAE (%)
P/E (x)
P/ABV (x)
P/PPOP (x)
Dividend Yield (%)
PROFITABILITY
Yield on Advances (%)
Cost of Funds (%)
Core Spread (%)
NIM (%)
OPERATING EFFICIENCY
Cost/Avg. Asset Ratio (%)
Cost-Income Ratio (%)
BALANCE SHEET STRUCTURE RATIOS
Loan Growth (%)
Borrowing Growth (%)
Equity/Assets (%)
Equity/Loans (%)
Total Capital Adequacy Ratio (CAR)
ASSET QUALITY
Gross NPL (%)
Net NPLs (%)
Provision/Avg. AUM (%)
Particulars, Rs cr FY16
FY18E FY15 FY19E
FY17E
Source : Company; RSL Research
23.9
42.4
138.7
136.4
3.2
20.9
49.5
8.7
5.0
0.2
18.6
9.2
9.4
10.8
4.9
43.7
38.9
16.0
17.1
19.5
16.1
1.3
0.3
1.4
44.8
32.8
209.6
202.4
3.1
23.7
26.4
5.8
2.7
0.3
18.2
8.7
9.5
10.7
4.2
41.3
38.1
12.4
14.6
15.9
12.4
1.1
0.5
1.5
18.0
24.9
96.0
92.8
3.1
20.4
65.8
12.7
6.8
0.2
18.6
10.6
8.1
10.4
5.0
45.1
67.1
14.6
15.2
18.0
14.2
1.5
0.5
1.4
59.4
32.7
264.0
258.4
3.0
25.1
19.9
4.6
2.0
0.4
18.2
8.5
9.7
10.5
4.1
40.5
30.5
11.9
14.0
15.4
11.9
1.0
0.3
1.5
33.8
42.3
168.6
164.4
3.2
22.0
35.0
7.2
3.6
0.2
18.2
9.0
9.2
10.6
4.5
42.0
32.8
13.5
15.9
17.0
13.5
1.2
0.4
1.4
Key Ratios
Religare Investment Call
Initiating Coverage BFSI Bajaj Finance Ltd
Net Interest Income
Non Interest Income
Operating Cost
Provisions
Tax
ROAA
Leverage (x)
ROAE
Particulars, Rs cr FY16
FY18E FY15 FY19E
FY17E
Source : Company; RSL Research
10.8
1.1
5.2
1.4
1.8
3.4
6.1
20.9
10.7
1.3
5.0
1.5
1.9
3.6
6.6
23.7
10.4
1.1
5.2
1.4
1.7
3.3
6.3
20.4
10.5
1.2
4.8
1.5
1.9
3.6
7.0
25.1
10.6
1.5
5.1
1.4
1.9
3.6
6.1
22.0
ROAA TREE
Religare Investment Call
Before you use this research report , please ensure to go through thedisclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulat ions , 2014 and Research Disc la imer at the fol lowing l ink : http://old.religareonline.com/research/Disclaimer/Disclaimer_RSL.htmlSpecific analyst(s) specific disclosure(s) inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 is/are as under:Statements on ownership and material conflicts of interest , compensation– Research Analyst (RA) [Please note that only in case of multiple RAs, if in the event answers differ inter-se between the RAs, then RA specific answer with respect to questions under F (a) to F(j) below , are given separately]
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I/we or any of my/our relative has any financial interest in the subject company? [If answer is yes, nature of Interestis given below this table]
I/we or any of my/our relatives, have actual/beneficial ownership of one per cent. or more securities of the subject company, at the end of the month immediately preceding the date of publication of the research report or date of the public appearance?
I / we or any of my/our relative, has any other material conflict of interest at the time of publication of the research report or at the time of public appearance?
I/we have received any compensation from the subject company in the past twelve months?
I/we have managed or co-managed public offering of securities for the subject company in the past twelve months?
I/we have received any compensation for brokerage services from the subject company in the past twelve months?
I/we have received any compensation for products or services other than brokerage services from the subject company in the past twelve months?
I/we have received any compensation or other benefits from the subject company or third party in connection with the research report?
I/we have served as an officer, director or employee of the subject company?
I/we have been engaged in market making activity for the subject company?
YES NO
NO
NO
NO
NO
NO
NO
NO
NO
NO
NO
Nature of Interest ( if answer to F (a) aboveis Yes : …………………………………………………………………………………………………………………………………………………............................................Name(s)with Signature(s)of RA(s).[Please note that only in case of multiple RAs andif the answers differ inter-se between the RAs, then RA specific answer with respect to questions under F (a) to F(j) above , are given below]
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