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Bajaj Finance shares: Why Jefferies raises target price on the stock

According to global brokerage Jefferies, if approved by the RBI, Bajaj Finance will become the first NBFC to launch a credit card, enabling BAF to take the product to deeper markets against the top-100 towns where RBL Bank/DBS cards are sold. A place where the bank and more players operate.

“If it can achieve 20-40% cross-sell to a non-delinquent client base of 40m and even at low transaction values, it can 9-17 billion profit in 3 years. This is 5-10% of FY25E profit and adds to the growth driver,” Jefferies said, maintaining a hold rating on Bajaj Finance shares with a price target. 8000 each (Prev 7300).

India has 80m credit cards and less penetration than larger markets. If Bajaj Finance gets approval to foray here, it will be able to ramp-up its network of +3,500 branches, 140k merchant relationships and 60m customers, it added.

“Today it collects credit card customers for RBL Bank and DBS Bank with over 3 million customers now; these are mostly limited by the banks’ network for underwriting, servicing and collection in the top-100 cities. Therefore, an internal credit card program can expand the opportunity to deeper markets where BAF already exists,” Jeffries highlighted. .

BAF aims to double loans in 3 years, approval to roll out credit card adds lucrative product to suite. With 60 million customers, 40 million of which are not delinquent, if it can sell cards to 20-40% non-delinquent users and 40% with low transaction value and credit/card, it can 170-350 bn in loans, according to a brokerage house.

“BAF continues to deliver stronger than peer-group growth and profitability. Moreover, even if there is some moderation in NIMs due to rise in funding costs, it may be offset by operational efficiencies potential. These support its premium valuations. We expect earnings to grow marginally and CAGR of 28% over FY23-25. Looking at profits (FY23 should grow faster on lower base),” the note added.

The views and recommendations made above are those of individual analysts or broking companies and not of Mint.

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