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1
SYNOPSIS
We initiated coverage of Bajaj Finance Ltd and set a target price of Rs.940.00 for Medium & Long term investment.
Bajaj Finserv Lending is one of the most diversified NBFCs in the market catering to more than 5 million customers across the country.
During the quarter, the robust growth of Net Profit is increased by 53.16% to Rs. 1082.70 million.
The company product offerings include Consumer Durable Loans, Personal Loans, Loan against Property, Small Business Loans, Two & Three-wheeler Loans, Construction Equipment Loans, and Loan against Securities & Insurance Services.
The company recommended Dividend of Rs. 12/- per equity share of face value of Rs. 10/-.
Net Sales and PAT of the company are expected to grow at a CAGR of 31% and 45% over 2011 to 2014E respectively.
Years Net sales EBITDA Net Profit EPS P/E
FY 12 21630.20 13601.70 4064.40 98.36 8.54
FY 13E 26388.84 16907.48 5771.93 139.69 6.01
FY 14E 31138.84 19991.67 7453.30 180.38 4.66
Stock Data:
Sector: Financial Services
Face Value Rs. 10.00
52 wk. High/Low (Rs.) 916.00/552.15
Volume (2 wk. Avg.) 3609.00
BSE Code 500034
Market Cap (Rs in mn) 34708.80
Share Holding Pattern
1 Year Comparative Graph
BSE SENSEX BAJAJ FINANCE LTD
C.M.P: Rs. 840.00 Target Price: Rs. 940.00 Date: May 28th 2012 BUY
Bajaj Finance Ltd Result Update: Q4 FY 12
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Peer Group Comparison
Name of the company CMP(Rs.) Market Cap. (Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)
Bajaj Finance 840.00 34708.80 98.36 8.54 1.96 100.00 Shriram City Union
Finance 615.00 32225.50 65.37 9.41 2.69 60.00
Reliance Capital 322.55 79755.80 21.10 15.36 1.13 65.00 Mahindra & Mahindra
Financial Services 626.60 65168.10 59.62 10.51 2.10 100.00
Investment Highlights
Q4 FY12 Results Update
Bajaj Finance Ltd has reported net profit of Rs 1082.70 million for the quarter
ended on March 31, 2012 as against Rs 706.90 million in the same quarter last
year, an increase of 53.16%. It has reported net sales of Rs 6189.00 million for the
quarter ended on March 31, 2012 as against Rs 3892.50 million in the same
quarter last year, a rise of 59.00%. Total income grew by 57.97% to Rs 6233.00
million from Rs.3945.60 million in the same quarter last year. During the quarter,
it reported earnings of Rs 26.20 a share.
Quarterly Results - Standalone (Rs in mn)
As At Mar-12 Mar-11 %change
Net sales 6189.00 3892.50 59.00
PAT 1082.70 706.90 53.16
Basic EPS 26.20 19.30 35.78
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� Break up of Expenditure
� Recommends Dividend
Bajaj Finance Ltd recommended Dividend of Rs. 12/- per equity share of face value
of Rs. 10/-. The Dividend, if declared by the shareholders, will be credited /
dispatched between July 23, 2012 to July 25, 2012.
� Allotment of Shares
The Company has allotted 46,90,000 equity shares to the promoter, Bajaj Finserv
Ltd on conversion of warrants issued to it.
Company Profile
Bajaj Finance Ltd offers loans for various needs. The company offer loans for Bajaj
Auto Two Wheelers under the name of Bajaj Finance Ltd. The company Consumer
Durable Loans, Personal Loans, Loan against Property, Small Business loans,
construction, Equipment Loans, Loan Against Securities and Insurance services under
the name of Bajaj Finserv Lending.
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Bajaj Finserv Lending is one of the most diversified NBFCs in the market catering to
more than 5 million customers across the country. Apart from being a well recognized
organization. The company product offerings include Consumer Durable Loans,
Personal Loans, Loan against Property, Small Business Loans, Two-wheeler and
Three-wheeler Loans, Construction Equipment Loans, Loan against Securities and
Insurance Services.
Bajaj Finance Ltd unique products feature across all categories and offer a compelling
value proposition to their customers. The company strong presence in the Indian
market for over 23 years has enabled to establish a strong foothold here and the
company aim to continuously provide their customers with premium service and
exclusive benefits.
Business Segment
� Two and Three Wheeler Financing
� Consumer Durables Financing
� Personal Loan Cross-Sell
� Personal and Small Business Loans
� Vendor Financing
� Mortgages
� Construction Equipment Finance
� Infrastructure Finance
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Products & Services
� Personal
• Lifestyle Product Finance
Lifestyle products include the categories such as Home improvements, Modular
Kitchens, Jacuzzi & Bathroom Fittings, Kitchen Equipments, Home furnishings,
Luxury watches, Digital lifestyle products, High-end Camera’s, Tablet PC’s,
Smart-phones and many more.
• Consumer Durable Loans
Bajaj Finserv Lending is one of the leading financiers in the market offering
consumer durable loans on EMI. Now you can easily avail a loan for products
like LCD, LED, Color TV, Refrigerator, Washing Machine, Air Conditioner,
Music System, and Microwave amongst a host of other products. Bajaj Finserv
Lending consumer durable loan comes with 0% financing and with a small fee.
• Personal Loan
Bajaj Finserv Lending personal loans can be availed for personal use without
providing security or guarantors. The company offer loans that are convenient,
flexible, come with fast processing and have superior features like Nil
prepayment charges.
• Credit Card
Bajaj Finserv Standard Chartered Credit Card comes in 2 variants - the World
Credit Card and the Platinum Credit Card.
� Business
• Small Business Loans
Small Business Loans come with fast approval and hassle free documentation.
Like manufacturing sector, service industry or any other field.
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• Loan Against Property
Bajaj Finserv Lending offers Loan against Property which helps you avail a loan
between Rs. 20 lacs and Rs. 20 crores, which can be paid over a term of up to
15 years, in a convenient manner by mortgaging the property as collateral.
• Loan against Securities
The company has an approved selection of shares and mutual funds against
whom offer loan disbursement. The loans are available from Rs. 50 lacs to Rs.
10 crores and for a maximum period of 24 months.
• Construction Equipment Finance
The company offer finance for various infrastructure related equipments in the
field of Construction, Mining, and Material Handling businesses
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Financial Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) FY11 FY12 FY13E FY14E
Description 12m 12m 12m 12m
Net Sales 13923.30 21630.20 26388.84 31138.84
Other Income 138.00 88.90 97.79 109.52
Total Income 14061.30 21719.10 26486.63 31248.36
Expenditure -6464.00 -8117.40 -9579.15 -11256.69
Operating Profit 7597.30 13601.70 16907.48 19991.67
Interest -3779.50 -7461.80 -8207.98 -8864.62
Gross profit 3817.80 6139.90 8699.50 11127.05
Depreciation -118.60 -117.70 -148.50 -166.32
Profit Before Tax 3699.20 6022.20 8551.00 10960.73
Tax -1232.90 -1957.80 -2779.08 -3507.43
Profit After Tax 2466.30 4064.40 5771.93 7453.30
Extraordinary Items 3.30 0.00 0.00 0.00
Net Profit 2469.60 4064.40 5771.93 7453.30
Equity capital 366.30 413.20 413.20 413.20
Reserves 13214.80 17279.20 23051.13 30504.43
Face value 10.00 10.00 10.00 10.00
EPS 67.42 98.36 139.69 180.38
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Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12E
Description 3m 3m 3m 3m
Net sales 4916.80 6027.70 6189.00 6807.90
Other income 16.20 7.90 44.00 39.60
Total Income 4933.00 6035.60 6233.00 6847.50
Expenditure -1937.00 -2149.00 -2245.90 -2518.92
Operating profit 2996.00 3886.60 3987.10 4328.58
Interest -1673.20 -2072.10 -2340.00 -2457.00
Gross profit 1322.80 1814.50 1647.10 1871.58
Depreciation -34.00 -39.80 -34.70 -35.74
Profit Before Tax 1288.80 1774.70 1612.40 1835.84
Tax -415.10 -574.80 -529.70 -592.98
Profit After Tax 873.70 1199.90 1082.70 1242.86
Equity capital 366.30 366.30 413.20 413.20
Face value 10.00 10.00 10.00 10.00
EPS 23.85 32.76 26.20 30.08
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Key Ratios
Particulars FY11 FY12 FY13E FY14E
No. of Shares(in mn) 36.63 41.32 41.32 41.32
Market Price 840.00 840.00 840.00 840.00
EPS (Rs.) 67.42 98.36 139.69 180.38
EBITDA Margin (%) 54.57% 62.88% 64.07% 64.20%
PBT Margin (%) 26.57% 27.84% 32.40% 35.20%
PAT Margin (%) 17.71% 18.79% 21.87% 23.94%
P/E Ratio (x) 12.46 8.54 6.01 4.66
ROE (%) 18.16% 22.97% 24.60% 24.11%
ROCE (%) 9.57% 15.57% 17.51% 18.57%
Debt Equity Ratio 4.94 3.98 3.15 2.51
EV/EBITDA (x) 4.05 2.55 2.05 1.74
Book Value (Rs.) 370.76 428.18 567.87 748.25
P/BV 2.27 1.96 1.48 1.12
Charts:
Net sales & PAT
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Outlook and Conclusion
At the current market price of Rs.840.00, the stock is trading at 6.01 x FY13E
and 4.66 x FY14E respectively.
Earning per share (EPS) of the company for the earnings for FY13E and FY14E
is seen at Rs.139.69 and Rs.180.38 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 31% and
45% over 2011 to 2014E respectively.
On the basis of EV/EBITDA, the stock trades at 2.05 x for FY13E and 1.74 x for
FY14E.
Price to Book Value of the stock is expected to be at 1.48 x and 1.12 x
respectively for FY13E and FY14E.
We expect that the company will keep its growth story in the coming quarters
also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.940.00 for Medium to Long term investment.
Industry Overview
The Indian financial services industry has a lot of scope for further penetration, and
thus has immense scope and potential to grow exponentially. The online genre, mobile
explosion, emergence of social media platforms, technologies like cloud computing and
increasing pace of convergence and interconnectivity of devices are intensely driving
the growth of this industry. These are playing pivotal roles in transforming the way
financial services are delivered to the end-consumer. Further, financial institutions are
revamping their operational infrastructure and business delivery models.
Financial services industry mainly comprises the BFSI industry, that is, banking,
financial services (such as mutual funds) and insurance. Key developments and
performance pointers pertaining to each of these sub-segments are discussed in this
overview.
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Insurance Sector
There are 24 life insurers in India with about Rs 15 trillion (US$ 292.5 billion) in
assets.
According to data released by the Insurance Regulatory and Development Authority
(IRDA), the life insurance industry collected Rs 89,655.83 crore (US$ 17.5 billion)
during April 2011-February 2012 by writing new policies while the insurers sold about
35.12 million policies collectively. Private players sold seven million policies.
The general insurance industry continued with its growth trajectory as the gross
written premium grew 24.03 per cent during 2011-12 against the year-ago period.
Banking Services
According to the world's largest rating agency, Standard & Poor (S&P)'s Ratings
Services, India's banking system has a high level of stable, core customer deposits
supported by the system's good franchise, extensive branch networks, and large, yet
growing, domestic savings.
• According to the Reserve Bank of India (RBI)'s 'Quarterly Statistics on Deposits and
Credit of Scheduled Commercial Banks', September 2011, Nationalised Banks, as a
group, accounted for 52.2 per cent of the aggregate deposits, while State Bank of
India (SBI) and its associates accounted for 21.8 per cent. The share of New private
sector banks, Old private sector banks, Foreign banks and Regional Rural banks in
aggregate deposits was 13.7 per cent, 4.8 per cent, 4.6 per cent and 2.9 per cent,
respectively.
With respect to gross bank credit also, nationalised banks hold the highest share of
51.6 per cent in the total bank credit, with SBI and its associates at 22.1 per cent
and New Private sector banks at 13.8 per cent. Foreign banks, Old private sector
banks and Regional Rural banks held relatively lower shares in the total bank
credit with 5.2 per cent, 4.8 per cent and 2.5 per cent, respectively.
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• Another statement released by the RBI stated that bank deposits grew 13.4 per
cent to Rs 60.72 trillion (US$ 1.18 trillion) in the fiscal 2011-12 (the year to March
23, 2011) while loans and advances grew 17.08 percent to Rs 47.54 trillion (US$
927.16 billion).
Mutual Funds Industry in India
The Rs 6.70 trillion (US$ 130.66 billion) Indian mutual funds (MF) industry has 44
asset management companies (AMCs). Recent data released by the Association of
Mutual Funds in India (AMFI) indicated that average assets under management (AUM)
reported by these fund houses amounted to Rs 6,68,824 crore (US$ 130.33 billion) in
2011-12.
HDFC Mutual Fund maintained its top position as the country's biggest MF with an
average AUM of Rs 89,879 crore (US$ 17.51 billion), followed by Reliance MF (Rs
78,112 crore [US$ 15.22 billion]), ICICI Prudential MF (Rs 68,718 crore [US$ 13.39
billion]), Birla Sunlife MF (Rs 61,143 crore [US$ 11.92 billion]) and UTI MF (Rs 58,922
crore [US$ 11.48 billion]).
Private Equity (PE) and Mergers & Acquisitions (M&A) in India
India Inc witnessed 202 merger and acquisition (M&A) deals worth US$ 9.4 billion
during the first quarter of 2012. According to Ernst & Young (E&Y)'s latest
transactions quarterly report, deals in January-March 2012 were 22 per cent higher
than those of October-December 2011 quarter in terms of volume and 4.5 times higher
in terms of value. Domestic deals dominated the M&A space as they accounted for 63
per cent of the total number of deals and contributed 88.4 per cent of the total
disclosed deal value for the quarter.
According to experts, M&A landscape is likely to experience intense activity in the
coming months, owing to improving stock markets and better availability of finance
options.
Private equity (PE) and venture capital (VC) investors infused a capital of US$ 1.88
billion across 90 deals during the reported period.
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Foreign Institutional Investors in India
According to the data released by Securities and Exchange Board of India (SEBI), net
investment in equities made by foreign institutional investors (FIIs) stood at Rs 47,935
crore (US$ 9.34 billion) during the financial year ended March 31, 2012. During the
reported fiscal, foreign fund houses injected Rs 49,053 crore (US$ 9.56 billion) in the
debt market taking the collective net investments by FIIs in stocks and bonds to Rs
93,725 crore (US$ 18.26 billion).
Recent Developments
• India has launched the country's first domestic payment card network, RuPay, to
compete with multinational Visa Inc. and Mastercard Inc. The new development
will not only help banks reduce cost of issuing a debit card but will also lead to
expansion of payment network in rural areas. National Payments Corp of India Ltd
(NPCI), the nodal agency to manage and promote RuPay, has stated that 200,000
RuPay cards have already been issued and the target is to have 10 million debit
cards under the brand by March 2013.
• Stating India as 'extraordinarily attractive investment destination', PE firm Bain
Capital LLC has announced that it will infuse about US$ 800 million in appropriate
proposals across four investment deals during 2012-16.
• L&T Finance has decided to buy Fidelity Worldwide Investment's Indian mutual
fund business. The deal would boost L&T's assets to Rs 13,500 crore (US$ 2.63
billion), making it the 13th biggest fund house and the 10th largest on the basis of
equity.
• In a recent announcement, the RBI has granted FIIs to invest in primary issuances
of companies' non-convertible debentures (NCDs), provided these papers are
scheduled to be listed on the stock exchanges within 15 days of being issued. If the
instrument, that is the NCD, does not get listed within 15 days, the foreign investor
concerned would have to sell the securities to a domestic investor.
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Government Initiatives
In its Budget for 2012-13, the Government has earmarked a capital of Rs 15,888 crore
(US$ 3.11 billion) to be infused in public sector banks, regional rural banks and other
financial institutions. Apart from this, the Government is also planning to set up a
financial holding company that will raise funds for public sector banks.
Furthermore, the RBI has liberalised regulations pertaining to FCAs to provide
operational flexibility to Indian entities making overseas direct investments. After
satisfying stipulated requirements and conditions, Indian entities can open, hold and
maintain FCAs abroad that would simplify the process of making overseas direct
investments.
Road Ahead
According to a report by the Boston Consulting Group (BCG) India, prepared in
association with a leading industry organisation and Indian Banks Associations (IBA),
Indian banking industry would be the world's third largest in asset size by 2025 and
mobile banking would become the second largest banking mode after ATMs.
Furthermore, owing to the positive eco-system of the industry and regulatory and
Government initiatives, mobile banking is anticipated to enhance from 0.1 per cent of
transactions in a 45 per cent financial inclusion base in 2010 to 34 per cent of the
transactions with 80 per cent rural inclusion base by 2020, as per the report.
While the Indian Government projects that qualified foreign investors (QFIs) would
invest US$ 50-75 billion in India's equity and bond markets, G Chokkalingam,
Executive director and CIO, Centrum Wealth Management, believes that Indian
markets would witness record inflows, probably to the extent of US$ 30 billion, by FIIs
in 2012.
Such positive forecasts are being made owing to monetary expansions in the West and
considering that India would remain the second-fastest growing economy in the world.
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______________ ____ _________________________ Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
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Firstcall India Equity Research: Email – info@firstcallindia.com
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