BAJAJ FINSERV LIMITED
Know the Company
Bajaj Finserv Ltd (BAJFINSRV) is the holding company of the Bajaj Group’s financial services business, under Bajaj Holdings and Investment Ltd, encompassing deposit-taking non-banking finance, insurance and wealth management operations. Its primary functioning is through its subsidiaries and branch network across India. Bajaj Finserv is headquartered in Pune. The company provides a diverse array of financing solutions, including consumer durable loans, construction equipment loans, loans against property and shares, personal loans, and loans against two- and three-wheelers, SMEs, and commercial ventures. Additionally, it offers insurance and wealth management products for both individuals and corporate clients. Bajaj Finserv also extends infrastructure financing with a focus on sectors such as roads, telecom, power, railways, ports, and associated industries. Its insurance portfolio covers life, health, auto, travel, property, and commercial insurance. Furthermore, Bajaj Finserv is engaged in wind energy generation, boasting an installed capacity of nearly 70 MW.
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Bajaj Finserv is also engaged in various businesses through subsidiaries and joint ventures, which include:
1.Bajaj Finance Limited
Bajaj Finance is one of the leading non-banking financial companies (NBFCs) in India, with Bajaj Finserv holding a 51.42% stake in the company. Bajaj Finance Limited is listed on the Indian stock exchanges with a current market capitalization of around Rs 4.4 lakh crores. It offers a wide range of lending products, including personal loans, consumer durable loans, business loans, and more. Bajaj Finance has a significant presence in consumer finance, SME finance, and commercial lending with a market capitalization of Rs 2,58,310 crore. The company holds nearly a 51.4% stake in Bajaj Finance Ltd, which alone is valued at almost Rs 2,26,252 crore, as per the current market price.
2.Bajaj Allianz General Insurance Company Limited
Bajaj Allianz General Insurance is a joint venture between Bajaj Finserv Ltd and Allianz SE, one of the world’s largest insurance companies. BAJFINSRV holdings 74% stake in this joint ventures. It offers a comprehensive range of general insurance products such as motor insurance, health insurance, travel insurance, home insurance, and more.
3.Bajaj Allianz Life Insurance Company Limited
Bajaj Allianz Life Insurance is another joint venture between Bajaj Finserv Ltd and Allianz SE, where BAJFINSRV holds 74% equity capital. The Company is providing various life insurance products including term insurance, ULIPs (Unit Linked Insurance Plans), retirement plans, and savings plans. Bajaj Allianz Life Insurance is known for its innovative insurance solutions and customer-centric approach.
4.Bajaj Housing Finance Limited
Bajaj Housing Finance is a wholly owned subsidiary of Bajaj Finserv Ltd, that focuses on providing housing finance solutions. It offers home loans, loan against property, and other related financial products tailored to the needs of individuals seeking to buy or construct homes, as well as those looking for funds against their existing properties.
5.Bajaj Financial Securities Limited
Bajaj Financial Securities, a 100% subsidiary of Bajaj Finserv Limited is engaged in the business of stockbroking and related financial services. It provides equity, commodity, and currency trading facilities, along with other investment services, catering to both retail and institutional clients.
BAJFINSRV also has other subsidiaries, including Bajaj Finserv Direct Ltd, a digital marketplace offering a wide array of services ranging from loans to cards, insurance, mutual funds, investments, lifestyle products, payments, and e-commerce facilities. Bajaj Finserv Health Ltd, another 100% subsidiary, is a health tech venture aiming to revolutionize healthcare in India by integrating a fragmented healthcare delivery ecosystem with technology and financial services on a digital platform. This initiative seeks to bring quality healthcare closer to consumers through products, networks, and technology. Additionally, Bajaj Finserv Ventures Ltd, another subsidiary, serves as an investment platform for alternate assets.
Strengths
Established businesses with strong track-record, Bajaj Finserv is a part of the Bajaj Group, one of the oldest and most respected conglomerates in India. The company has a strong presence in the Indian financial market, serving millions of customers across the country through its extensive network of branches, digital platforms, and partnerships. Its major three business segments, including financing, life and non-life insurance, and housing loans, leverage the robust brand image of ‘BAJAJ.’ The strong synergy between these divisions provides the company with a competitive edge in client acquisitions and cross-selling opportunities.
Aggressive expansion is another positive aspect for the company. In Q3FY24, Bajaj Finance expanded its reach by adding 158 new locations and almost 95000 distribution points. Consequently, its geographic presence grew to 4,092 locations and over 1.9 lakh active distribution points as of December 31, 2023, compared to 3,714 locations and 1.44 lakh distribution points as of December 31, 2022. Moreover, the Bajaj Finserv App experienced significant growth, with its user base reaching 4.9 crore as of December 31, 2023, up from 3.1 crore as of December 31, 2022. This substantial increase underscores the platform’s expanding popularity and utility among users.
Financials
On a consolidated, trailing 12 months (TTM) basis, Bajaj Finserv’s revenues stood at Rs. 101,966 crore with a net profit of Rs. 14,846 crore. The TTM earnings per share (EPS) stood at Rs. 49. For Q3FY24, the company reported revenue of Rs. 29,040 crore as against Rs. 21,755 crore reported in the same quarter of the previous financial year. Net profit for the period surged to Rs. 4,045 crore as against Rs. 3,335 crore.
Improving market share with steady growth
Bajaj Finance, a subsidiary of Bajaj Finserv, is one of the largest financiers of Bajaj 2 and 3-wheelers. The company has been financing almost 50% of domestic sales of Bajaj motorcycles and Bajaj three-wheelers for several years. Bajaj Finance posted a 35% year-on-year growth in Assets Under Management (AUM) at Rs. 3.11 trillion as of December 31, 2023, compared to Rs. 2.31 trillion in the year-ago period. In Q3FY24 alone, the company’s AUM improved by nearly Rs. 20,700 crore. The deposit book of the company also rose by 35% to Rs. 58,000 crore in Q3FY23 from Rs. 42,984 crore in Q3FY22. New loans booked during Q3FY24 improved by 26% to 9.86 million compared to 7.84 million in the corresponding quarter of FY23.
Bajaj Allianz Life Insurance Company Ltd (BALIC) has built a profitable and diversified portfolio of products and solutions with an emphasis on multi-channel distribution, strong underwriting with a stress on combined ratio, and prudent financial management. It boasts a pan-India distribution reach with a presence in over 500 branches. BALIC has emerged as the fastest-growing private life insurance company among the top 10 players in FY23 and 9MFY24. Additionally, it holds the highest solvency ratio in the industry. For the 9MFY24 period, BALIC registered a 14% growth in Gross Written Premium to Rs. 1,790 crore.
Bajaj Allianz General Insurance Company Limited (BAGIC) maintains a balanced product mix and a diverse distribution network to ensure sustainable and profitable growth, supported by robust risk management practices. For the 9MFY24 period, BAGIC recorded a notable 34% growth in Gross Written Premium to Rs. 1,888 crore. The company also boasts industry-leading combined ratios, which stood at 100.5% in FY23.
Bajaj Housing Finance Limited offers a full range of mortgage products such as home loans, loans against property, and lease rental discounting. The company is focused on originating home loans at developer points and through distributors, targeting mass affluent and above customers by offering customized propositions to both self-employed and salaried individuals. For Q3FY24, the housing finance Assets Under Management (AUM) increased by 31% to Rs. 85,929 crore, compared to Rs. 65,581 crore as of December 31, 2022. Additionally, Home loans AUM grew by 21%, Loans against property grew by 15%, Lease rental discounting grew by 70%, Developer finance grew by 74%, and Rural mortgages grew by 19%.
Bajaj Finserv – Entry into Emerging Opportunities
Bajaj Finserv has diversified its portfolio by venturing into various emerging opportunities beyond its traditional financing and insurance businesses. These ventures include exploring new sectors, investing in innovative technologies, and expanding its range of financial services to cater to evolving consumer needs. This strategic approach allows Bajaj Finserv to stay competitive, adapt to market changes, and seize growth opportunities in dynamic industries beyond its core areas of expertise. These initiatives are:
Bajaj Finserv Health Limited: The Company’s ‘Health Techventure’ aims to revolutionize the healthcare sector in India by integrating the fragmented healthcare delivery ecosystem with technology and financial services on a digital platform. This initiative seeks to make quality healthcare more accessible to consumers by introducing a suite of products and services for individuals and corporates. These offerings include a wide range of personalized, preventive, and prepaid healthcare packages such as OPD care and telemedicine. Through innovative networks and technology, Health Techventure is committed to bringing healthcare closer to individuals and organizations, thereby enhancing overall well-being and convenience.
Bajaj Finserv Direct Limited: Bajaj Finserv Direct Limited operates a B2C marketplace known as Bajaj Markets, which digitally sources and distributes financial products across India. In addition, the company provides a range of digital technology services, including Digital Application Development, Enterprise Solution Development, Data Engineering, Analytics, Quality Assurance & Automation, and Managed Cloud Services.
Bajaj Finserv Asset Management: It is the newly established Asset Management Company and Trustee Company, aimed at fortifying the group’s array of retail financial offerings by launching its mutual fund business. The strategy is founded on innovation, cultivating mutually beneficial partnerships, and adopting a forward-looking business model that leverages data and technology platforms. This approach ensures readiness for the future and enables the company to remain agile and competitive in the evolving financial landscape.
Bajaj Financial Securities Limited: Bajaj Finserv has been established a digital stockbroker to extend Loan Against Securities to customers of Bajaj Finance Ltd, named Bajaj Financial Securities Limited. This all-in-one digital platform seamlessly integrates demat services, broking facilities, and margin trade financing for both retail and high-net-worth individuals primarily through a B2C platform. This initiative aims to enhance convenience and accessibility for investors while offering a diverse suite of financial solutions tailored to their needs.
The Company is also working to enhance operating efficiencies by implementing a host of GenAI capabilities and other digital initiatives.
Aggressive Fundraising
In November 2023, through a Preferential Issue, Bajaj Finserv has subscribed 15,50,000 warrants of Bajaj Finance Limited, at a price of Rs 7,670 per warrant. In addition to this, Bajaj Finance Limited allotted 12,104,539 equity shares to qualified institutions at a price of Rs 7,270 per Share aggregating approximately Rs. 8,800 crores.
Government Support
Government of India taking various efforts to increase the awareness of insurance among common people and already announced numerous insurance programmes to help the public to enjoy the benefits of insurance. Pradhan Mantri Fasal Bima Yojana (PMFBY)- which is the largest Crop Insurance scheme in the world. National Health Protection Scheme was announced under Union Budget 2018-19 as part of Ayushman Bharat and Pradhan Mantri Jan Arogya Yojna (PMJAY), the world’s largest social health scheme, also expected to support the insurance industry in India.
Promising Industry Outlook
Bajaj Finserv’s subsidiaries are engaged in promising industries such as insurance and NBFCs, both of which have a strong outlook. NBFCs cater to segments of the population that may not have access to traditional banking services due to various reasons such as lack of huge collateral or credit history. By providing tailored financial products and services, NBFCs bridge this gap, allowing a broader section of society to access credit and other financial solutions. Increasing life expectancy, improving awareness about financial products among the general public, and rising employment opportunities all are expected to fuel demand for insurance and pension plans as a whole.
India has been one of the fastest-growing non-life insurance markets for many years, supported by strong growth in vehicle sales, with motor insurance constituting nearly 40% of the non-life insurance market in India. Automobile sales in India are robust, and the future looks promising due to the Vehicle Scrappage Policy and emerging trends in electric vehicles as well as introduction of hybrid new-generation vehicles. Considering that India is still in the nascent stage of the insurance industry, the growth opportunity is immense. Lending flexibility, quick processing facilities, niche market focus, and technological adoption help NBFC companies achieve significant growth in a fast-growing economy like India.
Cause of Concern
A significant portion of Bajaj Finserv’s revenue contributor, the NBFC’s portfolio, depends on personal loans. A prolonged slowdown in the economy, if it occurs, may adversely affect the company’s asset quality and business. Additionally, a shift to a new tax regime is likely to negatively impact the life insurance business, which is also a cause of concern for the company.
Sector: Financial Services
Market Price: Rs. 1634.20 as on today
FV: Rs 1/-
Stock Name: Bajaj Finserv Ltd
BSE Code: 532978, NSE Code: BAJAJFINSV
Market Cap.: Rs 2,58,310 Cr.
Book Value: Rs. 319
Segment: Investment/Holding Companies
Incorporation: 2007
Headquarters: Pune
