Bajaj Finance is doing very well under the able stewardship of Sanjiv Bajaj and Rajeev Jain, CEO. The management is “cautiously aggressive” which means that while they are at the look out for opportunities to grow, they are wary of taking on unnecessary risks.
Evidence of this approach is the fact that the management took a conscious decision a couple of quarters ago to reduce the exposure to the commercial segment (including construction equipments, infrastructure loans and vendor financing). This was visible in Q4 FY 2013 as well with the loans contracting 45% YOY to Rs 700 crore.
Q4FY 2013 Results:
Bajaj Finance Key Financials |
|||
| (Rs cr) | Mar 2013 | Mar 2012 | YOY |
|---|---|---|---|
| Operating Income | 832.25 | 618.91 | 34.47 |
| Total Expenses | 228.35 | 184.80 | 23.57 |
| Operating Profit | 603.90 | 434.11 | 39.11 |
| Other Income | 11.21 | 4.39 | 155.35 |
| PBDIT | 615.11 | 438.50 | 40.28 |
| PBT | 238.37 | 161.24 | 47.84 |
| Adjusted Net Profit | 163.81 | 108.27 | 51.30 |
Bajaj Finance reported superb Q4 FY 2013 results. There was a 52% jump in net profit to Rs 164 crore while the loan disbursements increased 21% to Rs 5,106 crore. This is higher than the average industry credit growth of 14%. The Net interest income increased 33% to Rs 517 crore.
The dominant business activity was deployment of loans to small and medium enterprises (SMEs) which increased 66% to Rs 2110 crore. Consumer goods loans increased 27% to Rs 2300 crore. Overall, the consumer segment contributes to around 40% while the SMEs contribute 48-50% and the commercial contributes around 10-12%.
Annual Performance for FY 2013:
The annual performance for the year ended March 31, 2013 was also impressive. The total assets under management (AUM) increased 34% YOY to Rs 17,520 crore while the NII increased 34% YOY to Rs 1,900 crore. The net profit increased 46% to Rs 591 crore.
The credit quality of the borrowings is quite strong. The gross NPAs for the year ended 31st March 2013 was 1.09% while the net NPA was only 19 bps. It is amongst the lowest in the banking and non-banking industry.
Prospects for FY 2014:
For FY 2014, Rajeev Jain CEO, consistent with the cautious and conservative approach, said that while the growth rate may not be at the 33% seen in Q4 FY 2013, it was expected to be in the range of 20-25% asset and net income growth for FY 2014. He said the momentum was quite strong at present despite the headwinds in the economy.
Valuations:
| Comparison Of Bajaj Finance & Its’ Peers | ||||
|
|
BAJAJF |
SHRTRA |
SUNFIN |
MAHFIN |
|
PE (x) |
12.38 |
12.64 |
11.06 |
15.77 |
|
Price to Book Value (x) |
2.17 |
2.52 |
2.39 |
3.12 |
|
Return on Capital Employed (%) |
13.34 |
14.44 |
12.03 |
13.57 |
|
Return on Equity (%) |
23.97 |
23.96 |
19.96 |
23.07 |
|
3 Yr CAGR Sales (%) |
54.73 |
16.75 |
20.19 |
27.50 |
|
3 Yr CAGR Profit (%) |
128.92 |
27.07 |
38.54 |
43.07 |
For FY 2013, Bajaj Finance reported an EPS of Rs. 134.74. Its book value was about Rs. 676. At the CMP of Rs. 1470, the stock is trading at 2.17 times book value. This compares favourably with its peers Mahindra & Mahindra Finance (PBV 3.12), Shriram Transport (PBV 2.52) and Sundaram Finance (PBV 2.39). At the same time, Bajaj Finance has a higher 3 year CAGR revenue of 54% and a 3 year CAGR profit of 128%. So, from all parameters, Bajaj Finance is an excellent investment candidate.
Bajaj Finance has also made it clear that it is keen on a banking license. When that fructifies, that will be another trigger for the stock to spurt.
Bajaj Finance Research Reports
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