Broker's call: Bajaj Finance (Buy)

| Updated on April 01, 2020 Published on April 02, 2020

Emkay Global

Bajaj Finance (Buy)

CMP: ₹2,220.1

Target: ₹3,570

Bajaj Finance has offered a conditional moratorium to its existing customers instead of a blanket offering. The company has put two main conditions: 1) loans sanctioned after March 1, 2020, are not eligible; 2) only the customers, who do not have more than two EMIs due (historically) in any of their loans, are eligible.

This is encouraging as Bajaj Finance has clearly avoided regular defaulters (track record of more than two defaults) from availing such moratorium. Also, it has safeguarded their new loans, which anyhow should be availed by customers with sufficient cash flows. Further, interest charges on delayed payments would also safeguard some margin loss.

We highlighted our caution on Bajaj Finance earlier due to its lower ticket size lending and higher dependence on a similar set of customers due to elevated cross sale. However, post the recent correction, we have turned positive on the company, considering favourable risk-to-reward ratio.

Bajaj Finance has a well-balanced liability franchise, with excessive cash on the balance sheet of ₹15,000 crore at consolidated levels, which makes it the least volatile among peers in our NBFC coverage universe.

We maintain ‘Buy’, with a TP of ₹3,570, based on ~4.4x FY22E P/B. We maintain ‘Equal Weight’ in NBFC EAP.

Published on April 02, 2020

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