In this article, we can see Bajaj Finance as a Potential Multibagger Stock as on April 2024.

Company	Website	Location	Products	P&L
Positives	Negatives	Checklist	Summary

Bajaj Finance Ltd

Bajaj Finance Ltd (BFL) is mainly engaged in the business of lending. BFL has a diversified lending portfolio across retail, SME, and commercial customers with a significant presence in urban and rural India. Sanjiv Bajaj is the current chairman and managing director. Rajeev Jain is the current managing director of the company.

Website of Bajaj Finance

 http://bajajfinserv.in/finance

Location of Bajaj Finance

Bajaj Finance is headquartered in Mumbai. BFL is present in 3,733 locations across the country, including 2,341 locations in rural/smaller towns and villages.

Products & Services

• Loans
• Insurance
• EMI service
• Cards
• Investments

POSITIVES to become a multibagger

• To focus on profitable growth and endeavor to be among the top 20 profit-making companies in India and the top five financial services companies in India.100 additional locations in UP, Bihar and North-East India in 2024 and 100 more locations in 2025.
• It offers a diverse suite of over 50 financial products and services focused on Consumer Lending (Sales finance), Personal Loans SME Lending, Commercial Lending, Loan against Securities, Rural Lending, Deposits, and Partnerships and Services.
• RBI lifted the ban on Digital Loan Processing during April 2024 – this would enable the company to regain 30% revenue growth momentum & compete with smallcap/midcap agile competitors
• Bajaj Finance has also rapidly expanded its presence across the digital space through Bajaj Finserv App platform, the web platform and three proprietary marketplaces — Insurance Marketplace, th Investment Marketplace and the EMI Store.
• Bb16.66 million customers have a wallet account with the Company, and (ii) 12.98 million customers have a UPI handle. During FY2023, 15.92 million bill payment transactions were executed by the customers using BFL’s bill pay service.
• BFL disbursed 29.6 million loans — its highest ever, representing a growth of 20% over FY2022.
• The company’s deposit program is rated the highest with a credit rating of CRISIL AAA/Stable and ICRA AAA/Stable. These ratings reaffirm the high reputation and trust that the Company has earned for its sound financial management and ability to meet financial obligations.
• BFL has been continuously investing in and adopting various evolving technologies and analytical tools like Big Data, Cloud Computing, and Open-Source software like Python.
• Government-led capital expenditure has continued to be an important driver of the economy with gross fixed capital formation (GFCF) expected to contribute to 34.0% of the GDP in FY2023 versus 32.7% of the GDP in FY2022.
• The Company plans to expand its footprint in some 300 to 350 locations to further deepen its presence across India to take geographical presence in 4,000 to 4,100 locations. On the app platform, the Company will focus on increasing the adoption of sales and services to increase online business and enhance self-service.
• BFL’s Lifestyle Finance business deals with discretionary spending with high ticket-size products and services. In FY2023, it financed over 637,000 accounts, which represents a YoY growth of 38% over FY2022. The business served over 6,000 stores through the BFL sales app & QR code as part of the digital adoption.

Value Investing

• The Intrinsic value discount stands at 50% as of today. Profit after tax (PAT): increased by 64% to  11,508 crore.
• Bajaj Finance has been growing earnings at an average annual rate of 27.5%, while the Consumer Finance industry saw earnings growing at 19.9% annually. Revenues have been growing at an average rate of 18.7% per year. Bajaj Finance’s return on equity is 23%, and it has net margins of 45.7%.
• Capital adequacy ratio as on 31 March 2023: 24.97%, which was well above the RBI norms. Tier-I adequacy was 23.20%.
• BHFL’s net interest income increased by 52% to 2,454 crores; pre-impairment operating profit grew by 60% to  1,824 crores; PBT rose by 77% to 1,700 crores; and PAT increased by 77% to  1,258 crores.
• Assets under management (AUM) of the urban sales finance increased by 22% during FY2023.
• BFL remains well capitalized with a capital-to-risk weighted asset ratio (CRAR) of 24.97% as of 31 March 2023, making it among the best capitalized large NBFCs in India.
• Total income: increased by 31% to 41,406 crore.  Net interest income (NII): rose by 32% to 28,846 crore. Pre-impairment operating profit: increased by 31% to 18,716 crore.  Impairment on financial instruments: reduced by 34% to 3,190 crore.
• The Company delivered its highest-ever return on average assets (ROA) of 5.3% in FY2023 and delivered return on average equity (ROE) of 23.5% on a consolidated basis.
• Debt Equity Ratio is moderate around 4 with Interest Coverage Ratio at 2X.
• PEG ratio is below 1.0 with High Promoter Holdings of 55%

Profit & Loss

	Mar-18	Mar-19	Mar-20	Mar-21	Mar-22	23-Mar	CY
Revenue	12,746	18,487	26,374	26,673	31,641	41,398	51,400
Interest	4,696	6,723	9,608	9,519	9,855	12,701	17,100
Expenses	4,115	5,454	9,159	10,839	11,880	12,680	15,231
Financing Profit	3,935	6,310	7,608	6,314	9,906	16,018	19,069
Financing Margin %	31%	34%	29%	24%	31%	39%	37%
Other Income	10	13	9	3	-17	-4	21
Depreciation	102	144	295	325	385	485	624
Profit before tax	3,843	6,179	7,322	5,992	9,504	15,528	18,466
Tax %	35%	35%	28%	26%	26%	26%
Net Profit	2,496	3,995	5,264	4,420	7,028	11,508	13,784
EPS in Rs	43.19	69.12	87.48	73.35	116.09	190.07	226.36

Negatives

• Operational risk is the risk of loss resulting from inadequate or failed internal processes, systems, or human factors, or from external events. This is further elaborated in the section “Operational Risk Management.
• Bajaj Finance’s net debt-to-equity ratio (324.2%) is considered high.
• Operating cash flow is negative, therefore debt is not well covered
• The company is moderately overvalued at 8X Book Value & PE 32.  Any corrections would be the right opportunity to invest heavily in this counter.
• Loss of reputation can result in loss of customers thereby adversely impacting the businesses of BFL Group
• BAJFINANCE’s earnings growth over the past year (28%) did not outperform the Consumer Finance industry by 44.2%.
• BFL Group provides financial products and services to millions of customers, any undesirable customer experience could result in loss of customers or even reputational loss.
• The reputational risk could arise in case BFL is not able to meet the stakeholder expectations on climate-related disclosures and initiatives.
• •Conforming with environment-related standards could result in increased expenses/loss of business which would have otherwise been underwritten.

Warren Buffett Checklist

Factor	Value
Economic Moat	Moderate
Growth	Good
Valuation	Good
Debt	Moderate
Integrity	Good

Summary

Based on above evaluation the company have low multibagger properties.

References

Original 2012 Article on Bajaj  Finance

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