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Buy Bajaj Finance; target of Rs 1000: Sharekhan
//business-finance.news-articles.net/content/202 .. y-bajaj-finance-target-of-rs-1000-sharekhan.html
Published in Business and Finance on Tuesday, July 29th 2025 at 4:03 GMT by moneycontrol.com🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source
Sharekhan is bullish on Bajaj Finance has recommended buy rating on the stock with a target price of Rs 1000 in its research report dated July 28, 2025.
Sharekhan Recommends Buy on Bajaj Finance with Target Price of Rs 1000
In a recent research report, brokerage firm Sharekhan has issued a strong buy recommendation on Bajaj Finance, one of India's leading non-banking financial companies (NBFCs), setting an ambitious target price of Rs 1000. This endorsement comes amid a backdrop of robust growth prospects in the consumer finance sector, where Bajaj Finance has established itself as a dominant player. The report highlights the company's resilient business model, impressive asset under management (AUM) expansion, and strategic focus on digital transformation as key drivers that could propel the stock to new heights. As investors navigate a volatile market environment influenced by interest rate fluctuations and economic recovery post-pandemic, Sharekhan's analysis provides a compelling case for why Bajaj Finance stands out as a top pick in the financial services space.
Bajaj Finance, a subsidiary of the Bajaj Group, has evolved from a modest auto finance provider into a diversified financial powerhouse offering a wide array of products including consumer loans, personal loans, home loans, and credit cards. The company's journey began in 1987, but it was the aggressive expansion in the last decade that truly set it apart. With a market capitalization that places it among the top NBFCs in India, Bajaj Finance has consistently delivered superior returns to shareholders, often outpacing broader market indices like the Nifty 50. Sharekhan's report delves into the company's financial health, noting that its AUM has grown at a compound annual growth rate (CAGR) of over 25% in recent years, driven by strong demand in urban and semi-urban markets. This growth is not just quantitative; it's underpinned by qualitative improvements in risk management and customer acquisition strategies.
One of the primary reasons for Sharekhan's bullish stance is Bajaj Finance's exceptional profitability metrics. The report points out that the company's net interest margins (NIMs) have remained healthy, typically hovering around 12-13%, which is significantly higher than many peers in the banking and NBFC sectors. This is attributed to Bajaj Finance's ability to price its products effectively while maintaining low funding costs. In the fiscal year ending March 2023, the company reported a net profit that surged by over 30% year-on-year, reflecting efficient cost controls and a favorable asset-liability mix. Sharekhan analysts emphasize that Bajaj Finance's return on equity (ROE) stands at an impressive 20-22%, a testament to its capital efficiency. They project that this profitability will sustain, with earnings per share (EPS) expected to grow at a CAGR of 25% over the next three years, fueled by expanding loan books and cross-selling opportunities.
The brokerage also lauds Bajaj Finance's digital prowess, which has become a cornerstone of its growth strategy. In an era where fintech disruptions are reshaping the financial landscape, Bajaj Finance has invested heavily in technology to enhance customer experience and operational efficiency. The company's app-based lending platform allows for seamless loan disbursals, often within minutes, which has helped it capture a larger share of the millennial and Gen Z demographics. Sharekhan notes that digital channels now account for a significant portion of new customer acquisitions, reducing dependency on physical branches and lowering acquisition costs. This digital edge is particularly relevant in the post-COVID world, where contactless services have become the norm. The report forecasts that Bajaj Finance's AUM could double in the next five years, driven by this tech-driven approach, potentially reaching Rs 5 lakh crore by 2028.
Market positioning is another critical factor in Sharekhan's recommendation. Bajaj Finance operates in high-growth segments such as consumer durables financing, where it holds a market share of over 30%. The company's partnerships with major retailers and e-commerce platforms like Amazon and Flipkart have created a symbiotic ecosystem that drives volume growth. Sharekhan analysts argue that as India's middle class expands and disposable incomes rise, demand for financed purchases will soar, benefiting leaders like Bajaj Finance. Furthermore, the company's foray into rural lending and microfinance adds diversification, mitigating risks associated with urban economic slowdowns. The report compares Bajaj Finance favorably against competitors like HDFC Bank and SBI Cards, highlighting its superior growth trajectory and asset quality. Non-performing assets (NPAs) have been kept in check, with gross NPAs below 2%, thanks to rigorous credit underwriting and data analytics.
However, the report does not shy away from acknowledging potential risks. Sharekhan cautions that regulatory changes, such as tighter norms on NBFC lending or interest rate caps, could impact margins. The ongoing geopolitical tensions and inflationary pressures might also lead to higher borrowing costs, squeezing profitability. Additionally, competition from new-age fintechs like Paytm and PhonePe poses a threat to market share. Despite these headwinds, Sharekhan remains optimistic, assigning a price-to-earnings (P/E) multiple of 30x to the company's FY25 earnings estimates, which justifies the Rs 1000 target. This valuation is premised on sustained growth and a premium over historical averages, reflecting Bajaj Finance's quality franchise.
From a macroeconomic perspective, Sharekhan ties the recommendation to India's broader economic revival. With GDP growth projected at 7-8% annually, driven by consumption and infrastructure spending, the financial sector is poised for expansion. Bajaj Finance, with its consumer-centric model, is well-positioned to capitalize on this. The report includes detailed financial projections: revenue growth of 25% CAGR, AUM expansion to Rs 3.5 lakh crore by FY25, and a dividend payout ratio that ensures attractive yields for investors. Analysts also highlight the company's strong capital adequacy ratio, above 25%, which provides a buffer against economic downturns and supports aggressive lending.
In terms of stock performance, Bajaj Finance has been a multibagger for long-term investors. Over the past five years, the stock has delivered returns exceeding 200%, far outstripping the benchmark indices. Sharekhan's target of Rs 1000 implies an upside of approximately 30-40% from current levels (assuming the report's reference price), making it an attractive entry point for value investors. The brokerage advises accumulating the stock on dips, particularly during market corrections, to maximize returns.
Sharekhan's analysis extends to the company's sustainability initiatives, which are increasingly important for ESG-focused investors. Bajaj Finance has committed to green financing and inclusive lending practices, aligning with global standards. This not only enhances its brand reputation but also opens doors to cheaper funding from international sources. The report suggests that as ESG criteria gain prominence in India, companies like Bajaj Finance will command valuation premiums.
Looking ahead, Sharekhan envisions Bajaj Finance evolving into a full-fledged financial supermarket, potentially venturing into insurance and wealth management. Such expansions could unlock new revenue streams and further solidify its market leadership. The brokerage's conviction is evident in its reiterated buy call, urging investors to consider the stock for portfolios seeking growth with stability.
In conclusion, Sharekhan's comprehensive report on Bajaj Finance paints a picture of a company firing on all cylinders, ready to navigate challenges and capitalize on opportunities in India's dynamic financial sector. With a target price of Rs 1000, the recommendation underscores confidence in the company's fundamentals and long-term potential. Investors would do well to heed this advice, balancing it with their risk appetite and market conditions. As always, thorough due diligence is recommended before making investment decisions.
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Read the Full moneycontrol.com Article at:
[ https://www.moneycontrol.com/news/business/stocks/buy-bajaj-finance-target-of-rs-1000-sharekhan-13342751.html ]
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