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INVESTMENT INSIGHTS

Check Before You Invest : Bajaj Finance Ltd

BSE: 500034 NSE: BAJFINANCE ISIN: INE296A01032
  |   Sector:  BFSI   |   Industry:  Finance - NBFC

Snapshot

Q.1 Which industry/sub-sector does Bajaj Finance Ltd belong to?
Bajaj Finance Ltd belongs to the BFSI sector, operating specifically within the Finance - NBFC segment.
Q.2 Is Bajaj Finance Ltd a good quality company?
Bajaj Finance Ltd is a good quality company, based on a consistently good multi-year financial track record.

This assessment is based on the bank’s performance on Total Income growth, Pre-Provision Operating Profit, RoA, RoE, CAR, and Asset Quality, along with how these metrics compare with its long-term averages.

Q.3 Is Bajaj Finance Ltd undervalued or overvalued?
Bajaj Finance Ltd appears Undervalued, as its key valuation ratios are lower than their past averages.

Based on the industry it operates in, the relevant valuation ratios include one of the following, P/E, P/BV, P/Sales, EV/EBITDA or a combination of two or more.

Valuation Ratios Current 5-year
Historic Median
Price to Earnings 29.72 35.11
Price to Book 4.96 6.03
Price to Sales 6.94 8.41
EV to EBITDA 12.92 16.45
Q.4 Is Bajaj Finance Ltd a good buy now?
Bajaj Finance Ltd is a neutral opportunity now, based on stable price trend analysis suggesting prices may move sideways. However, you need to check its quality and valuation before making a decision

Performance Analysis

We have analysed the performance of the company on the following:

  • How has it performed on generating Profits?

    By checking its Total Income growth, NPM, PPOP, RoA and RoE compared to its last 5-year median.

  • How efficiently has it grown and managed operations?

    By checking its Total Asset growth.

  • How strong is its Capital position and Asset Quality?

    By checking its Capital Adequacy Ratio (CAR), GNPA and NNPA.

A: What are the trends in income and profitability?

Q.1 Total Income growth of Bajaj Finance Ltd?
Bajaj Finance Ltd Operating Income growth is 26.76% for FY-2025, which is above its 5-year CAGR of 21.45%, indicating faster growth.

Q.2 Return on Assets of Bajaj Finance Ltd?
Bajaj Finance Ltd Return on Asset is 4%, which is in line with its 5-year historical median of 4%, indicating stable earnings on assets.
Current Level 5-year
Historic Median
NPM (%) 24.08 24.08
PPOP (%) 25.73 25.73
RoA (%) 4 4

Q.3 Return on Equity (ROE) of Bajaj Finance Ltd?
Bajaj Finance Ltd Return on Equity is 19.6% for FY-2025, which is in line with its 5-year historical median of 19.6%, indicating the business is making similar use of its shareholders capital.

Q.4 Pre-provisioning operating profit margin of Bajaj Finance Ltd?
Bajaj Finance Ltd Pre-provisioning operating profit margin, which is the bank’s core operating profit before provisioning for bad loans, is 25.73% for FY-2025, which is in line with its 5-year median(25.73%), indicating stable margins.

Q.5 Net Profit Margin of Bajaj Finance Ltd?
Bajaj Finance Ltd Net Profit Margin, which is the difference between the rate of interest earned on assets and the rate of interest paid on liabilities, is 24.08% for FY-2025, which is in line with its 5-year median( 24.08%), indicating stable margins.

Q.6 Does its ROIC exceed its WACC?
Bajaj Finance Ltd return on invested capital (ROIC) is 8.26% for FY-2025, is lower than its estimated weighted average cost of capital (WACC) of 11.25%, indicating value erosion.

B: Does the bank grow efficiently and manage its operating costs?

Q.7 Total Asset growth of Bajaj Finance Ltd?
Bajaj Finance Ltd Total Asset growth is 24.09% for FY-2025, which is in line with its 5-year CAGR of 23.24%, indicating stable growth.

C: How strong is the bank’s capital position and asset quality?

Q.8 Capital Adequacy ratio of Bajaj Finance Ltd?
Bajaj Finance Ltd Capital Adequacy ratio (CAR) is 21.93% for FY-2025, which is above the regulatory requirement of 15%, indicating strong capital position.

Q.9 Asset Quality of Bajaj Finance Ltd?
Bajaj Finance Ltd Gross Non-Performing Assets, which are loans overdue by more than 90 days, is 0.96% for FY-2025, which is below its 5-year median 1.19%, while Net Non-Performing Assets, which is GNPA minus provisions made for bad loans is 0.56% which is in line with its 5-year median( 0.56%), indicating stable asset quality.

Ownership & governance

D: Promoter shareholding and pledge status of Bajaj Finance Ltd?

Q.1 Promoter shareholding and pledge status of Bajaj Finance Ltd?
Promoters hold 54.70% of the Bajaj Finance Ltd, with 0.00% of their stake pledged, indicating no pledge risk.

Peer comparison (industry-wise, mcap)

E: How does Bajaj Finance Ltd performance compare with that of its Peers?

Q.1 AUM Growth of Bajaj Finance Ltd vs Industry Peers?
Bajaj Finance Ltd AUM CAGR is 23.24%, compared to the 5-year industry median CAGR of 23.24%, indicating stable growth and maintaining its market share.

Q.2 Profit metrics (NPM, PPOP, RoA) of Bajaj Finance Ltd vs industry peers
Bajaj Finance Ltd profit metrics are in line with the industry median level of 17.64%, indicating similar profitability compared to peers.
Profit Metrics
Current Level 5-year
Industry Median
NPM (%) 24.08 24.08
PPOP (%) 25.73 25.73
RoA (%) 4 3.1

Q.3 Operating efficiency of Bajaj Finance Ltd vs industry peers?
Bajaj Finance Ltd ROCE (11.4) is in line with the industry median of (10.9); while the current ROE (19.6) are above than the 5-year average Industry ROE (15.6). This shows that the business is positioned in the top quartile of the industry.
Operating Efficiency
Current Level 5-year
Industry Median
NPM (%) 24.08 24.08
PPOP (%) 25.73 25.73
RoA (%) 4 3.1
ROCE (%) 11.4 10.9
ROE (%) 19.6 15.6

Valuation & price assessment

Q.1 Stock return of Bajaj Finance Ltd over the last decade?
Over the last 9 years, the stock has delivered a CAGR of 27.9% based on the current price.
9Y 5Y 3Y 1Y
Share Price
CAGR		 27.9% 10% 10.2% -0.7%
Q.2 How do the current valuation ratios compare with 5-year historical median and industry numbers?
Valuation Ratios Current 5-year
Historic Median		 5-year
Industry Median
Price to Earnings 29.72 35.11 29.12
Price to Book 4.96 6.03 1.11
Price to Sales 6.94 8.41 9.10
EV to EBITDA 12.92 16.45 11.77
Q.3 Valuation ratios of Bajaj Finance Ltd vs historical and industry averages?
The current Price-to-Book (P/B) ratio of 4.96 is lower than its historical median of 6.03, indicating that the stock is trading below its historical average valuation.

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7. Bajaj Hold & Invest

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