KRChoksey Research has maintained a BUY recommendation for Bajaj Finserv Limited, setting a target price of Rs 2,075, indicating a potential upside of 19.5% from its current market price of Rs 1,736. Despite regulatory headwinds and fluctuations in income from key segments like insurance, the diversified NBFC's performance in Q3FY25 has been buoyed by robust growth in its core lending businesses and strategic focus on new segments.

Financial Overview and Key Performance Indicators

Revenue and Profit Growth:
For Q3FY25, consolidated revenue rose by 10.3% year-on-year (YoY) to Rs 320,418 million. However, a 4.9% quarter-on-quarter (QoQ) decline was noted, largely due to weaker insurance income. Despite this, net profit increased by 3.4% YoY to Rs 22,310 million, supported by improved cost-to-income ratios, which fell to 69.6% from 71.6% in the previous quarter.

Impact of Market Conditions:
Earnings missed projections due to unexpected mark-to-market (MTM) losses on equity investments. Bajaj Allianz Life Insurance (BALIC) and General Insurance (BAGIC) recorded MTM losses totaling Rs 2,750 million during the quarter, contrasting with an MTM gain of Rs 1,070 million in Q3FY24.

Lending Segment Performance

Assets Under Management (AUM):
The consolidated AUM surged by 28.0% YoY to Rs 3,980,430 million. Bajaj Housing Finance Ltd (BHFL) saw 26.0% YoY growth in AUM, contributing significantly to the overall increase.

Net Interest Margins (NIMs):
NIMs remained stable at 9.6%, showcasing resilience despite heightened competition and minor fluctuations in funding costs.

Customer Base Expansion:
The company added 5.03 million new customers during the quarter, bringing its total customer franchise to 97.12 million, with a robust cross-sell franchise of 61.56 million.

Asset Quality:
Gross Non-Performing Assets (GNPA) stood at 1.12%, while Net NPA was 0.48%. Provisions for loan losses increased to Rs 20,433 million, aligning with a marginal rise in Stage 2 and Stage 3 assets.

Insurance Business Performance

Bajaj Allianz Life Insurance (BALIC)

BALIC reported a **7.8% YoY** increase in new business premiums to Rs 27,610 million, although a **13.8% QoQ** decline was observed. Regulatory changes impacted product offerings and distribution channels. However, renewal premiums grew **24.0% YoY**, resulting in a **16.4% YoY** rise in gross written premiums (GWP) to Rs 63,610 million.
The Value of New Business (VNB) rose marginally by 1.2% YoY, with VNB margins at 15.1%. AUM for BALIC increased by 16.5% YoY to Rs 1,220 billion, supported by a strong solvency ratio of 369%.

Bajaj Allianz General Insurance (BAGIC)

BAGIC achieved **46.1% YoY** growth in GWP, driven by government health insurance schemes. However, excluding tender-based segments, GWP saw a slight **1.8% YoY decline**.
The combined ratio improved to 101.1%, indicating operational efficiency. PAT for the quarter surged 39.4% YoY to Rs 4,000 million, despite increased claim ratios in the health insurance segment.

Emerging and Digital Businesses

Bajaj Finserv’s emerging businesses, including Bajaj Finserv Health, Bajaj Finserv Direct, and Bajaj Finserv Asset Management, continued to make progress. Notably:

Bajaj Finserv Health facilitated 2.3 million health transactions.
Bajaj Markets attracted 8.2 million users on its digital platform.
Bajaj Finserv Asset Management recorded AUM of Rs 174,340 million, marking a 7.0% QoQ increase.
Losses from these ventures stood at Rs 950 million, aligning with the company’s strategic roadmap.

Key Technical Levels and Stock Outlook

52-Week Range:
The stock has traded between Rs 2,030 and Rs 1,419 over the past year.

Price-to-Earnings Ratio (P/E):
The current P/E ratio stands at 59.22, reflecting moderate valuation pressures due to the evolving market landscape.

Support and Resistance Levels:
Technical analysis indicates immediate support near Rs 1,650, with resistance around Rs 1,850. A breakout beyond Rs 2,030 may pave the way for sustained bullish momentum.

Competitive Landscape and Industry Trends

Bajaj Finserv competes with other diversified NBFCs such as HDFC Ltd and ICICI Lombard General Insurance. Its emphasis on digital transformation, diversified product offerings, and disciplined capital allocation positions it advantageously for long-term growth in an increasingly competitive environment.

Conclusion and Investment Recommendation

Bajaj Finserv’s Q3FY25 results underscore its resilience amidst regulatory and market challenges. Strong growth in lending businesses, combined with strategic digital initiatives, provides a foundation for sustained profitability. KRChoksey’s BUY rating reflects confidence in the company's long-term potential.

Disclaimer

Investors are advised to conduct their own due diligence before making any investment decisions. This report is for informational purposes only and should not be considered as financial advice.