Detailed Report | Sector: Financials
12 Annual Global Investor Conference
BSE Sensex
28,797
S&P CNX
8,867
th
Bajaj Finance
Buy
CMP: INR1,152
TP: INR1,275 (+11%)
Mr Rajeev Jain
MD and CEO
Bajaj Finance
CEO TRACK
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
12M Avg Val (INR M)
Free float (%)
BAF IN
535.5
1,180 /468
11/64/116
616.9
9.2
810
42.7
Non-bank with the structure of a bank
Takeaways from CEO track
Business construct to deliver 3% RoA and 18-20% RoE
Financial Snapshot (INR b)
Y/E Mar
2017E 2018E
NII
54.6
69.8
PPP
35.9
46.9
PAT
18.5
23.7
EPS (INR)
34.6
44.2
EPS Gr. (%)
44.9
27.8
BV/Sh. (INR) 166.3 204.0
RoAonAUM % 3.5
3.4
RoE (%)
22.8
23.9
Payout (%)
14.0
14.0
Valuations
P/E (x)
33.3
26.1
P/BV (x)
6.9
5.6
Div. Yield (%)
0.2
0.3
Relative to Index
Bajaj Finance (BAF) is a non-bank with a bank’s strategy and structure, both on the
assets and liabilities side. It caters to the diverse needs of multiple segments, with
33 products for retail, SME and commercial clients. BAF has a strategic business unit
(SBU) organization design, with horizontal common utility support functions to drive
domain expertise, scalability and operating leverage. It strives to achieve an optimal
2019E
mix of risk and profit, thus attaining a sustainable business model. Mr Jain believes
89.5
BAF has the business construct to deliver sustainable RoA of 3% and RoE of 18-20%.
61.7
31.9
59.5
34.7
254.9
3.4
25.9
14.0
19.4
4.5
0.4
Cross-selling expert – Focus to mine existing credit tested customers
BAF mainly targets affluent and mass affluent customers, and focuses on (a) product
& process innovations, (b) customer experience, and (c) cross-selling to create a
profitable business model. While it attempts to add new clients, it places higher
emphasis on retaining existing clients for a lifetime. BAF has a customer franchise of
17.18m of which 9.24m are cross sell franchise,(moreover these customer are
bureaus best customers with CIBIL score of +750) which growing at ~30% per year.
This gives it a sizable pool to cross-sell to.
BAF has developed significant competence in cross-selling products to its existing
customers. It recognizes the twin advantages of cross-selling: (1) better asset quality
– existing clients are already credit-tested; therefore, delinquencies are lower, and
(2) cost savings – new customer acquisition involves sizable costs. In 1QFY17, BAF
disbursed 2.5m loans – 1.1m were new customers, while 1.4m (57% of the loans
disbursed) were existing customers.
BAF uses a metric – products per customer (PPC) – to evaluate its ability to cross-
sell. PPC measures the cumulative products bought by a customer over their
lifetime. It has an internal PPC benchmark of three products for retail customers and
five products for SME customers. It regularly reports its PPC data. Currently, its
overall PPC stands at 2.88; in the SME business, it is 3.78.
Sunesh Khanna
(Sunesh.Khanna@MotilalOswal.com); +91 22 3982 5521
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com)/Piran
Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 3980 4393
September 2016
advised to refer through important disclosures made at the last page of the Research Report.
1
Investors are
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.