BAJAJ FINANCE: SHARES RALLY 30% TO LIFETIME HIGH ON FINTECH WAVE

What’s Buzzing?

Bajaj Finance has been among the best performing NBFCs for the past many years and a leader in the consumer durable segment. With fintechs gaining attention, Bajaj Finance has rallied 30% and is trading at lifetime high valuation of ~8.9x FY23E ABV crossing | 8000 levels.

Context:

Bajaj Finance has traded at rich valuations in the past but remained around ~3% RoA.

Our Perspective:

We believe Bajaj Finance foraying into the fintech arena and joining the likes of Paytm and Amazon by entering the wallet business has captured investors’ interest. Recently, in July, the company launched its wallet business and aims to reach 2.5 crore customers by FY23. The management has a proven historical track record of launching various products like lifestyle financing, digital product loans, among others, etc. We believe that with the lending business firmly in place along with a strong customer base, the payments business should get a boost and better credit assessment could be an advantage compared to other fintechs. Bajaj Finance can evolve as a twin play on e-commerce and conventional lending with the potential to capture the best of both worlds. Going ahead, we expect the company to be on a strong footing to capture market share, implying that rich valuations are here to stay. Accordingly, Bajaj Finserv, that derives bulk of its value from its holding in Bajaj Finance, is also witnessing a similar rally.

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