25 August 2021
Company Update | Sector: Financials
CMP: INR6,943 TP: INR7,700 (+11%)
BAJFIN and the entire Financial Services group set to
benefit from the new AMC license in the parent entity
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
4190.4 / 56.4
7052 / 3009
Financials & Valuations (INR b)
EPS Gr. (%)
C/I ratio (%)
Div. Yield (%)
Shareholding pattern (%)
Bajaj Finserv has got an in-principle approval from SEBI for sponsoring
a Mutual Fund (MF). While the opportunity is huge, given the under
penetration and financialization of savings in the country, the
competitive intensity in the industry is high with 44 players.
Bajaj Finserv has inherent advantages in its business model, given its
presence in the Retail Finance, Life Insurance, General Insurance, and
Securities businesses. Strong brand presence and wide distribution
reach are key pillars for garnering AUM, where BAGIC, BALIC, and BAF
have proved their expertise. Cross-sell to the existing customers of
these businesses is a huge opportunity.
Technology investments will be a key differentiator, given the
emergence of new-age Fintech players. Akin to the strong growth
displayed in other lines of businesses, Bajaj Finserv will be able to
deliver an industry-leading growth in the AMC business as well.
Barring any new COVID-related disruptions, we expect BAF to deliver
~21% AUM growth in FY22E and 25% CAGR thereafter. This Financial
Services group already had Lending products, General and Health
Insurance, Life Insurance, and Broking services. With an AMC in the
fold, the missing piece of a captive MF investment product (other than
deposits/traditional savings/ULIP products) will also be complete. This
should aid the fee and commission (particularly distribution) income
of BAF, which was already exhibiting high growth until Mar’20 when
BAF’s return ratios have been consistent and also the highest in our
Coverage Universe (excluding gold Financiers). Given the strong recovery
post relaxation of the lockdowns and the healthy progress made in its
digital transformation program (including wallets and payments), we
reiterate our Buy rating, with a TP of INR7,700 per share (8x 1HFY24E BV).
FII Includes depository receipts
Stock Performance (1-year)
The AMC business offers a huge growth opportunity
Sensex - Rebased
India’s MF industry has come a long way, with assets under
management (AUM) quadrupling to INR32t in the past decade (16%
CAGR). At 12% of GDP, India’s MF penetration is significantly lower
than that of other countries (UK: 62%, Brazil: 68%, and the US: 120%).
Increasing per capita income, the gradual financialization of savings, a
growing awareness with targeted marketing campaigns such as
and improving reach, with digital platforms,
will lead to strong AUM growth ahead.
While the number of PAN card holders in India has crossed the 500m
mark, the industry has ~23m unique MF investors.
Research Analyst: Abhijit Tibrewal
21 July 2021
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.