Sharekhan has reiterated its BUY recommendation for Bajaj Finserv Limited, citing the company’s strong growth potential across its lending, general insurance, and life insurance businesses. Bajaj Finserv has consistently outpaced industry peers, particularly through its flagship subsidiary Bajaj Finance Ltd (BFL), while its insurance arms—Bajaj Allianz General Insurance (BAGIC) and Bajaj Allianz Life Insurance (BALIC)—are navigating regulatory changes and market competition effectively. With a price target of ₹2,350, representing an upside from its current market price of ₹1,935, Bajaj Finserv is well-positioned to deliver substantial returns driven by structural growth and the scaling of its newer ventures.

Key Financial Metrics

Current Price: ₹1,935
Price Target: ₹2,350
Market Cap: ₹3,08,954 crore
Price-to-Earnings (P/E) Ratio: 31.1x (TTM)
Subsidiaries: Bajaj Finance Ltd, BAGIC, BALIC
Dividend Yield: 0.32%

Investment Rationale

Lending Business—Bajaj Finance Ltd (BFL):
Bajaj Finance Ltd is the key driver of Bajaj Finserv’s overall performance, consistently outpacing industry growth with strong profitability metrics. The company has a well-diversified loan portfolio and continues to expand customer acquisition and cross-selling. Management has projected 26-28% AUM growth for FY25, supported by improving collections and stable margins. Although margins faced pressure in Q1FY25, the outlook remains robust with an expected recovery in the second half of the year.

Insurance Business—BAGIC and BALIC:
Bajaj Allianz General Insurance Co. (BAGIC) has demonstrated healthy profitability amid intense competition. The company’s ability to adjust its product mix and target profitable demographics has resulted in consistent profitability growth. Bajaj Allianz Life Insurance Co. (BALIC) has also navigated recent regulatory changes and is building a diversified product portfolio and multi-channel distribution network to capture market share sustainably. Regulatory risks remain, but both insurance arms are expected to continue gaining momentum.

Growth Opportunities

New Ventures and Digital Expansion:
Bajaj Finserv is also making strategic moves in new business areas, including its asset management (Bajaj Finserv AMC), securities (Bajaj Securities), and health services (Bajaj Finserv Health) ventures. These businesses, although in their nascent stages, provide a long-term growth opportunity. The company’s ability to leverage advanced technology and data analytics positions it to offer comprehensive financial lifecycle services, which can enhance customer engagement and drive profitability across segments.

Complete Financial Services Partner:
Bajaj Finserv’s vision is to be a complete financial services partner, covering every aspect of customers’ financial lives, from lending and investing to insurance and wealth management. The company’s vast customer base, combined with its data-driven approach, will enable it to deliver personalized financial solutions efficiently.

Valuation and Target Price

Sharekhan values Bajaj Finserv using a Sum-of-the-Parts (SOTP) approach, arriving at a price target of ₹2,350. This target reflects the upside in valuations for its key subsidiaries. Bajaj Finance remains the biggest contributor to this valuation, with an estimated value of ₹1,954 per share, while BAGIC and BALIC contribute ₹409 and ₹247 per share, respectively. A 10% holding company discount has been factored in to arrive at the final target.

Investment Outlook

For Short-Term Investors:
With a BUY rating and a target price of ₹2,350, Bajaj Finserv offers an attractive upside potential of approximately 21.5% over the next 12 months, making it a compelling option for short-term investors looking to capitalize on strong near-term growth drivers.

For Long-Term Investors:
Given its diversified portfolio of high-growth financial businesses, long-term investors can view Bajaj Finserv as a core holding. The company’s aggressive expansion into newer digital ventures and its established presence in the insurance and lending markets offer sustained growth opportunities.

Key Risks

Regulatory and Competitive Risks:
Increased competition in the insurance sector and any adverse regulatory changes could impact profitability in the short term. The performance of Bajaj Finserv’s key subsidiaries, particularly BAGIC and BALIC, will be crucial in determining future earnings growth.

Rising Credit Costs and Market Volatility:
Bajaj Finance’s earnings could be affected by a rise in credit costs and market volatility, particularly in the event of an economic slowdown or higher interest rates.

Overall, Bajaj Finserv remains a well-diversified financial conglomerate with a strong foothold in the lending and insurance markets. Its ability to innovate and scale new businesses will be critical in unlocking future growth, making it a solid investment option for both short-term and long-term investors.