HDFC Securities: Bajaj Finance - Long Term Story Intact Despite FY21 Glitch
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HDFC Securities Report
Bajaj Finance Ltd. is one of the largest non banking financial companies and perhaps the most diversified one in the country. It has consistently delivered strong performance across fronts.
Over FY13-20, its assets under management (AUM) grew at a compound annual growth rate of approximately 35%, return on asset equities averaged approximately 19.6%, and gross non-performing assets did not exceed 1.7%.
However, its near-term performance is likely to be a stark contrast to that seen in recent times due to the overarching impact of Covid-19. FY21E is likely to be an aberration in terms of growth, asset quality, and return ratios, but we expect a significant recovery in FY22E.
While our near-term outlook may seem lack lustre, we believe that Bajaj Finance's long-term prospects remain reasonably intact, despite Covid-19.
Further, we believe that current valuations do not adequately price in Bajaj Finance's potential to sustainably deliver superior return ratios in the long term. This underpins our positive stance.
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