Thus far in the financial year( FY) 2018-19, Bajaj Finance has rallied 66 per cent, against 16 per cent rise in the benchmark indices. It is the top gainer among Sensex and Nifty50 stocks during the fiscal year.
Since 2009-10 (FY10), the stock beat the benchmark index for 10 consecutive fiscals. The stock appreciated 451-fold, as compared to Sensex, which rose four-times during the same period.
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For October-December (Q3FY19) quarter, Bajaj Finance delivered a stellar performance in a tough liquidity environment with profit after tax of Rs 1,060 crore, up 54 per cent year-on-year (YoY). During the quarter, the company added Rs 9,700 crore, its highest level, to its assets under management (AUM). AUM growth continued to be strong at 41 per cent YoY at Rs 1.10 trillion driven by all the segments.
Going forward, Bajaj Finance remains well-positioned to deliver sustainable profitable growth driven by strong customer acquisition engine, increasing rural footprint with diversified product offering, rising contribution of fee income, superior asset quality with capital adequacy ratio (CAR) of 21 per cent, according to analysts at JM Financial.
The brokerage firm expects earnings CAGR of 37 per cent over FY18-21E, driven by robust AUM growth (33 per cent CAGR), improvement in the opex and lower credit costs, it added.
It has a leadership position in the short duration, lower ticket size, consumer durable financing, and lifestyle product financing business along with the diversified nature of its loan portfolio. This has allowed Bajaj Finance to register strong assets under management (AUM) growth of more than 36.7 per cent CAGR in the past five years to Rs 80,444 crore as on FY18 with asset quality staying under control (GNPA ratio at 1.5 per cent).
The net interest income (NII) of a company has registered a CAGR of 37.1 per cent in the last five years which has grown from Rs 2,500 crore in FY-14 to Rs 8,831 crore in FY-18. Favourable product mix along with growing AUM has resulted in strong net interest income (NII) growth. The profit after tax in FY11-18 rose at a robust pace of 40 per cent CAGR to Rs 2,646 crore as on FY18.
Demand for consumer durables in India has been growing on the back of rising incomes. This trend is set to continue as other factors such as rising rural incomes, increasing urbanisation, growing middle class and changing lifestyles aid demand growth in the sector, according to an analyst at Anand Rathi Share and Stock Brokers. The brokerage firm has initiated the coverage on Bajaj Finance with a ‘Buy’ rating and target price of Rs 3,370 per share.