The Bajaj Finance stock has been in focus after the Reserve Bank of India (RBI) directed the company to halt the sanction and disbursal of loans under its ‘eCOM’ and ‘Insta EMI Card’ products due to non-compliance with digital lending norms. However, brokerages are not very worried. Jefferies, has upheld its ‘Buy’ recommendation on Bajaj Finance, anticipating a substantial 29% upside.
Regarding the RBI directive, Jefferies highlighted potential negative implications and emphasized that the speed of corrective measures would be crucial to reinstate the affected products. Despite this regulatory development, the brokerage sees limited financial impact, estimating the affected Insta EMI Card base to constitute 5% of total clients, 0.2% of disbursals, less than 1% of fees, and less than 0.5% of profit. Jefferies continues to monitor progress, retaining earnings expectations and maintaining its ‘buy’ rating on Bajaj Finance.
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Jefferies also raised the price target on Bajaj Finance to Rs 9,470 from Rs 8,830. The brokerage emphasised the strong and broad-based asset growth in the September quarter, acknowledging a slight dip in Net Interest Margins (NIMs). Jefferies anticipates ongoing pressure on NIMs as Bajaj Finance is expected to resist rate hikes. The brokerage retained its profit Compound Annual Growth Rate (CAGR) estimates at 26% for FY23-26, positioning Bajaj Finance as a top pick among Non-Banking Financial Companies (NBFCs).
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For the quarter ending September 2023, Bajaj Finance reported 28% year-on-year increase in consolidated net profit, totaling Rs 3,551 crore, aligning with market estimates. Total revenue from operations exhibited a substantial YoY growth of 34%, reaching Rs 13,378.26 crore.