Target: ₹8,030

CMP: ₹7,209.95

Bajaj Finance (BAF) operates its business through 1,550-plus urban and over 2,600 rural lending branches, with over two lakh distribution points and caters to a customer base of 8.81 crore as of June 2024.

In Q1FY25, asset under management growth was strong at 31 per cent/7 per cent year on year/quarter on quarter, with growth healthy across segments. With the regulator lifting restrictions on both the digital lending products – ‘eCOM’ and ‘instaEMI’, the company went live offering the products across all platforms in mid-June 2024. The momentum on these products is expected to improve over the next three quarters.

BAF’s Q1FY25 NIMs contracted sharper than expected on the back of rising CoF (13 bps impact) and a change in the portfolio mix (10 bps impact). We expect NIMs to settle between 9.5 per cent and 9.6 per cent over FY25-27E vs about 9.8 per cent currently.

In Q1FY25, asset quality remained steady with GNPA/NNPA standing at 0.86 per cent/0.38 per cent vs 0.85 per cent/0.37 per cent quarter on quarter. The current headwinds on asset quality are transient in nature. The management expects these trends to stabilise over the next couple of quarters.

We expect BAF to deliver a healthy AUM/NII/earnings growth of 26 per cent/25 per cent/23 per cent CAGR over FY25-27E.

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