 "Bajaj Finance Investor Day: Shares gain as mgt eyes becoming FINAI by FY29")
Bajaj Finance share: Bajaj Finance (BFL) shares rose 3.3 per cent intraday to Rs 7,165 per share before closing 2.6 per cent higher (Rs 7,116) on the BSE on Wednesday. This was a day after Bajaj Finserv presented a five-year long-range strategy at its investor day for group companies.
Analysts lauded BFL’s 2023-24 through 2028-29 (FY29) growth plan, where it aims to become the lowest-cost financial service provider to a 200-million customer franchise by FY29 and use artificial intelligence (AI) across businesses and functions.
In the near term, however, they cautioned that the stock’s upside may be limited until the non-banking finance company (NBFC) successfully navigates asset quality challenges and improves the proportion of secured loans in its loan mix.
“While the valuations are attractive at 3.7 times price-to-book value and 20 times price-to-earnings based on 2025-26 (FY26) earnings, we do not anticipate any significant upside catalysts until the asset quality challenges in its business-to-consumer loan book and imbalance in the proportion of secured loans in its loan mix persist. We maintain ‘neutral’ with a target price of Rs 7,500,” said Motilal Oswal Financial Services analysts.
By comparison, the S&P BSE Sensex index settled a mere 16 points (0.02 per cent) higher at the 81,526 level.
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Eye on AI
Under BFL 3.0, the NBFC eyes becoming a FinAI company, focusing 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 workstreams, which may save roughly Rs 150 crore annually in FY26.
BFL’s strategic priorities under its AI drive include conversational AI for sell and cross-sell; an interactive multimodal AI assistant and conversational AI to improve customer engagement; AI-led underwriting; and an AI-enabled loan origination system, sales, document management software, and dealer management.
Product strategy
On the product side, the management said it will focus on green finance, multi-Cloud, and zero trust as its three new megatrends.
It aims to start with financing solar and electric vehicle products for retail and micro, small and medium enterprise customers in the fourth quarter of the current financial year (2024-25/FY25) and eyes a Rs 2,000 crore green financing pool in FY26.
Besides, zero trust will be based on the ‘trust, but verify’ principle, while the multi-Cloud orchestration strategy will deploy applications Cloud-agnostically.
“With an increase in customer franchise and cross-sell franchise by FY29, BFL 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 2023-24 through FY29, against 6.15 currently. Similarly, cost savings due to extensive use of AI could improve assets under management (AUM) per cross-sell franchise to Rs 80,000-85,000 by FY29 from Rs 64,800 in September 2024. Profit after tax per cross-sell franchise, too, may improve to Rs 3,800-4,000 by FY29 from Rs 1,374 in the first half of FY25," noted analysts at ICICI Securities.
This, the brokerage said, may lead to a profit after tax compound annual growth rate of around 25 per cent and a 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, BFL is eyeing a share of 3-4 per cent in the total credit market by FY29, 4-5 per cent in retail credit, and 1 per cent in payments gross merchandise value. 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.