Bajaj Finance fundamental analysis : Key Metrics and Insights

Starting with a Bajaj Finance fundamental analysis, one of the standout features is the extraordinary surge in the company’s share price since it was first listed in 1994. The trajectory of its stock value has been nothing short of remarkable. If you had invested ₹10,000 in Bajaj Finance shares in 1995, by the end of 2023, your money would have grown a lot. It would have become ₹98.4 lakh, which is nearly 1 crore! This is a huge increase, showing that Bajaj Finance’s shares performed really well over this time.

In simple terms, your investment would have increased by almost 98,297%. That’s a very high growth! On average, each year, your investment would have grown by about 27.9%. This means it wasn’t just one lucky year, but it kept growing steadily over a long period. This shows that Bajaj Finance has been a very good investment over the years, and it’s an example of how smart investing in good companies can lead to big gains in the long run. The late 2000s and the following decade witnessed a significant expansion of Bajaj Finance’s product portfolio. Let’s dive deeper into the Bajaj Finance fundamental analysis.

About the Company- Bajaj Finance fundamental analysis

Early Beginnings and Expansion (1987 – 1994)

Bajaj Finance started in 1987 as a part of Bajaj Auto Limited, a well-known Indian company. At first, it mainly helped people buy Bajaj Auto’s scooters and motorcycles by offering them financial help.

Entering the Stock Market (1994)

In 1994, Bajaj Finance took a big step. They became a part of the stock market. This meant they could get money from people who wanted to invest. This helped them grow beyond just helping with buying vehicles.

Growing Strong (Mid 1990s – Early 2000s)

In the late 1990s and early 2000s, Bajaj Finance kept growing steadily. They started offering more kinds of loans, like for personal needs, buying things, and helping small businesses. This was a smart move because it reduced the risk of depending on just one type of loan.

Independent Company (2007)

In 2007, Bajaj Finance became its own separate company, not tied to Bajaj Auto anymore. This gave them more freedom to do things their way.

Expanding Horizons (Late 2000s – 2010s)

From the late 2000s to the 2010s, Bajaj Finance introduced many new financial services. They came up with things like EMI cards, insurance, and help with managing money. This made them useful to even more people.

Impressive Growth (2010s)

During the 2010s, Bajaj Finance grew a lot faster than many other financial companies. They were careful with risks, put customers first, and had smart new ideas.

Share Price and Profits

The price of Bajaj Finance’s shares went up a lot since they joined the stock market in 1994. This made investors very happy. They also made sure their shareholders got good returns. This shows how well they used their resources.

Achievements and Looking Ahead

Bajaj Finance stayed strong in India’s money-help sector. They faced big challenges but got respected in the money world. The company grew more and made plans for the future. They really want to keep their customers happy and use digital tools to grow even more.

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Bajaj Finance fundamental analysis- Essentials & Financials

Market Status and Value: Bajaj Finance is a major player in the financial market with a substantial market cap of ₹4,48,172 Crores, firmly placing it in the large-cap category.

Revenue Performance: The company has shown impressive revenue figures, generating ₹44,610.10 Crores in the past year, with a remarkable 31% annual growth.

Profitability and Returns: Bajaj Finance demonstrates solid profitability, with ROCE at 11.8% and ROE at 23.5%. Their PAT margin stands strong at 27.80%, indicating healthy profit margins.

Investor Interest and Valuation: With a P/E ratio of 36.4, higher than both its sector and competitors, investors are clearly enthusiastic about Bajaj Finance. The historical P/E of 46.17 over 5 years hints at possible undervaluation.

Earnings Growth and Value: Earnings per Share (EPS) stands at a robust ₹203.97 per share, with consistent positive growth over 5 years, a clear sign of an advancing company.

Shareholder Benefits: Bajaj Finance ensures shareholder value with a Dividend Yield of 0.41%, providing a steady return to its investors.

Financial Strategy and Risk: Maintaining a Debt to Equity Ratio of 4, Bajaj Finance leans towards borrowed funds for financing. While this can enhance returns, it also elevates financial risk, emphasizing the need for prudent debt management.

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What does high P/E ratio means?

In this case, Bajaj Finance’s P/E ratio is 36.4, which is higher than the average for its sector, which is 24.7. It’s also higher than the P/E ratios of its closest competitors.

This could mean a few things:

High Expectations: Investors might have high hopes for Bajaj Finance. They could believe the company will do very well in the future, which is why they’re willing to pay more for each unit of earnings.

Strong Confidence: A high P/E ratio suggests that investors are confident in the company’s ability to keep making profits.

Competition and Positioning: Bajaj Finance might be in a strong position compared to its competitors. Investors are willing to pay a premium for a company they think is ahead of the pack.

However, it’s important to remember that a high P/E ratio can also mean that the stock is relatively expensive. If the company doesn’t meet the high expectations, the stock price could fall.

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Analysis Of Company’s Past Year Performances

Over the last five years, Bajaj Finance has showcased impressive profit growth, boasting a Compounded Annual Growth Rate (CAGR) of 36%. Looking at a three-year trend, the profit growth rate stabilized at 30%. In the most recent twelve months, the company achieved an exceptional profit growth of 43%.

Turning to the share price performance, Bajaj Finance demonstrated steady growth. Over the course of five years, the share price increased by 22%. In the preceding three years, the stock price saw a noteworthy rise of 28%. In the last year alone, there was a modest 1% increase in the share price.

When it comes to utilizing shareholders’ funds, Bajaj Finance has been prudent. The Return on Equity (ROE) for both the past five years and three years has been a solid 19%, indicating efficient use of resources. In the most recent year, this metric has even further improved, reaching 23%.

In terms of sales growth, Bajaj Finance has shown remarkable performance. Over the past five years, the company achieved a Compound Annual Growth Rate (CAGR) of 27%, which experienced a slight reduction to 16% in the three-year CAGR. However, in the most recent twelve months, the sales growth rate surged to an impressive 31%.

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Overall, the financial record in Bajaj Finance fundamental analysis demonstrates an upward trend that has been characterised by significant profit and sales growth as well as careful management of shareholder money. The operational effectiveness and strategic financial management of the organisation are demonstrated well by this.

Bajaj Finance fundamental analysis – Earnings And Revenues

In the previous year, annual revenue surged by an impressive 30.9%, reaching Rs 41,405.7 Crores. Meanwhile, annual net profit witnessed a remarkable growth of 63.7%, totaling Rs 11,507.7 Crores. On the stock market front, there was a modest 3.5% increase in the stock price, although it lagged behind its sector by 25.3%.

Looking at the quarterly performance, there was substantial growth as well. Quarterly revenue experienced a robust year-on-year increase of 34.7%, reaching Rs 12,500.5 Crores. Additionally, quarterly net profit saw a commendable growth of 32.4% year-on-year, amounting to Rs 3,436.9 Crores.

BAJAJ FINANCE earnings for the last quarter are 56.81 INR whereas the estimation was 55.22 INR which accounts for 2.88% surprise. Company revenue for the same period amounts to 83.98B INR despite the estimated figure of 77.23B INR.

Estimated earnings for the next quarter are 59.34 INR, and revenue is expected to reach 88.74B INR.

Bajaj Finance’s Competitive Edge

The factors that have contributed in making Bajaj Finance the leading player in India’s financial services sector are:

Diverse Product Range: Offers a wide array of financial products and services to cater to various customer needs.

Effective Risk Management: Demonstrates careful evaluation of borrowers and robust underwriting processes to maintain a healthy loan portfolio.

Technological Innovation: Leverages technology for streamlined operations, user-friendly interfaces, and digital payment solutions.

Customer-Centric Approach: Focuses on understanding and meeting customer needs, resulting in high satisfaction levels.

Market Leadership and Trust: Holds a leading position in the non-banking financial sector, earning a reputation for reliability and transparency.

Extensive Distribution Network: Wide physical and online presence ensures access to customers in diverse geographic areas.

Innovative Financial Solutions: Introduction of products like EMI cards provides unique credit solutions, setting them apart from traditional lenders.

Efficient Capital Utilization: Demonstrates prudent management of capital and resources, leading to healthy returns on investments.

Adaptability and Growth: Exhibits consistent growth and adapts to changing market dynamics and consumer preferences.

Strong Governance and Compliance: Maintains rigorous governance standards and regulatory compliance, instilling confidence in stakeholders.

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Can BAJAJ Finance still give massive Returns like before?

While Bajaj Finance has demonstrated impressive growth in the past, it’s important to acknowledge that predicting future performance in the financial market is inherently uncertain. There are several factors that could influence Bajaj Finance’s ability to continue delivering massive profits:

Regulatory Adherence and Compliance: Adhering to ever-evolving financial regulations and ensuring compliance is a critical challenge. Staying updated with legal changes, and implementing them effectively across operations, is imperative. Non-compliance could lead to legal repercussions and damage the company’s reputation.

Effective Risk Management: Managing credit risk and ensuring the quality of loans is crucial. It’s like finding the right balance between lending to different types of customers while making sure the loan portfolio stays healthy. Being watchful to spot and address potential risks is key for steady and sustainable growth.

Technological Adaptation and Security: A primary focus is keeping up with the quick technical advancements and ensuring the security of our digital systems. While protecting our clients’ information from any online risks or breaches, we wish to adopt innovative approaches.

Market Competition and Differentiation: The finance industry is quite competitive. Because there are so many competitors, we must always think of fresh, unique approaches to offer our clients. Offering something unique is key, whether it is through our goods, the calibre of our services, or the whole experience we deliver. We remain in the lead because of this.

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BOTTOM LINE

Now that we have summarised the Bajaj Finance fundamental analysis, we can conclude that stories like that of Bajaj Finance inspire both new and seasoned investors to remain dedicated to the stock market in order to reap the same rewards they did years before.

Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. Contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.