Bajaj Finance Company analysis

Industry Profile : NBFC or non banking Finance Company is playing key role in economy like India. as per definition they are companies providing certain banking services. As per RBI Definition

  A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.

In India, they are regulated under RBI  within the framework of the [[Reserve Bank of India Act, 1934]] (Chapter III-B) and the directions issued by it. there are major restrictions on NBFC about Collecting deposits and doing business. There are 8 major types of NBFCs in india.

  1. Asset finance company. The company doing business in financing of physical assets supporting productive or economic work. In simple word they are companies financing for tractor, Vehicle for agriculture lathe machines, cranes, generator sets, earth moving and material handling equipment, moving on own power and general purpose industrial machines.
  2. Investment company : the company like mutual Fund, Holding companies in some cases or Private equity Company.
  3. Loan Company : The company having buisness of giving loans but other than Asset finance company. Like Personal Loan, Housing Finance companies.
  4. Infrastructure Finance Companies : Companies Financing Infrastructure. Again, RBI kept Strict regulations on them.  Infrastructure finance companies deploys a minimum of three-fourths of their total assets in infrastructure loans. The net owned funds are more than 300 crores and a minimum crediting rating of ‘A’ and the Capital to Risk-Weighted Assets Ratio is 15%. Best example is IDFC, though now they are owned one bank, but basically they are one Infrastructure finance company. Another are India Infrastructure finance Company limited ( IIFCL), Infrastructure Finance corporation of India (IFCI) and Power Finance Corporation (PFC )
  5. Infrastructure Debt Fund Non Banking Finance Company aka IDF – NBFC : If you are unaware about it then yes they exist. India Infra Fund is best example managed by IDFC.  IDF-NBFC is a company registered as NBFC to facilitate the flow of long term debt into infrastructure projects. IDF-NBFC raise resources through Multiple-Currency bonds of minimum 5-year maturity. Only Infrastructure Finance Companies (IFC) can sponsor IDF-NBFCs.
  6. NBFC FACTORS : One another large type of NBFC in India. Factoring is type of working capital financing. SBI Factor and Canara factor are some examples.
  7. Gold Loan NBFC : You cant ignore this type in India. Over the years, gold loan NBFCs witnessed an upsurge in Indian financial market, owing mainly to the recent period of appreciation in gold price and consequent increase in the demand for gold loan by all sections of society, especially the poor and middle class to make ends meet. Though there are many NBFCs offering gold loans in India, about 95 per cent of the gold loan business is handled by three Kerala based companies, viz., Muthoot Finance, Manapuram Finance and Muthoot Fincorp. Growth of gold loan NBFCs eventuating from various factors including Asset Under Management (AUM), number of branches, and also the number of customers etc.
  8. Residuary Non Banking Finance Company : All famous for Sahara case as it is a company and has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner and not being Investment, Asset Financing, Loan Company. So you can do so many business. Nowadays There are not many of them and maybe restricted to exist, they were main accuse in many Frauds.

Company Profile :  The company is part of Bajaj Group and is subsidiary since 2010. The company deals in Consumer Finance, SME and Commercial Lending, and Wealth Management. The company is having one of the diverse portfolio of products as the company is attached with Automobile company. Today the company is giving loan for AC, Refrigerator, LED, Washing Machine under durable. Under Lifestyle loans, company is keeping tie-ups for Pre-approved loan like Home town, home center, @ home, houseful, Godrej interio etc. The company also give loan for mobile and other electronic appliances with which EMI card is also available.The company is well known for its SME loan in which it gives loan against property and loan for business. one another product is loan for E- commerce seller loan as well as e- commerce consumer finance. The company also lend for Two wheeler and three wheeler. As a subsidiary of Bajaj Finserve, it is also distributing insurance and and accepts fixed deposites, wholesale and retail.

Shareholding Pattern  :  Six promoter entities hold 55.26%. Mutual Funds are in love with this stock. hold 6.14%. Shocking fact. LIC is not visible in section TOP PUBLIC SHAREHOLDERS HOLDING 1%+. Financial Institutions hold 0.07%. Insurance companies hold 0.62%. foreign investors hold 21.17% remaining is held by public and other small institutions.

Financials and Ratio : 

 2010-112011-122012-132013-142014-152014-162016-17
Loan Book3,986.536,641.659,634.4413,852.4218,119.6724,878.3432,087.96
ROE18.1819.9817.5618.0118.7017.2119.13
ROA2.893.143.312.922.732.752.88
Efficiency47.31%37.91%33.23%34.59%33.46%33.75%33.81%
Book value370.76492.15676.38802.18959.941,386.86175.56
EPS67.47110.29135144178238.8333.67
Dividend per share1012151618253.60

Future prospectus :  NBFC, being fastest growth company with big brand name. Well known among customers and investors. Having large product range, the company keeping potential for large growth as SME and small finance is rising star in finance. funding is not problem when your parent is Bajaj.

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me analystashu@gmail.com or @androidashu & @InsideFinanc on twitter