Bajaj Finance shares fell 4% to day’s low at Rs 6,937 on BSE in the morning but soon took a U-turn to trade 0.4% higher. Rub-off effect was also seen on the counter of holding company Bajaj Finserv whose scrip fell 3% to Rs 1,540 only to recover similarly later on.
In its order, RBI said the action was driven by non-adherence to digital lending guidelines. The NBFC expects this embargo to be lifted within the next 6-8 weeks and with no material financial impact.
“While this is negative & speed of correction will be key to reinstating products, we see a limited financial impact as Insta EMI Card base of 4m is 5% of total clients & we estimate it to be 0.2% of disbursals,
Bajaj Finance had 77 million customers as on Sep-23, of which 42 million had EMI cards and of that, 4 million had Insta EMI Cards. This implies that the product is 5% of total customers and 10% of EMI customers.
Analysts believe that deficiencies identified by the RBI are more operational in nature and do not raise any questions on Bajaj Finance’s processes or the structures of the various products in these two sourcing channels.
“We have not made any changes in our estimates as yet, even though we acknowledge that there will be an impact on both AUM growth as well as fee income in 2HFY24. However, our long-term thesis for this franchise remains intact. BAF will take corrective action, and once successful in satisfying the RBI, its momentum will only get stronger ahead with the digital ecosystem – app, web platform and full-stack payment offerings – in place,” Motilal Oswal said.The brokerage has told clients to use any significant correction in the stock price purely because of this event as an opportunity to accumulate.
While maintaining its overweight call, Morgan Stanley said while the stock could be under pressure in the near term the issue looks to be one that can be resolved soon, thus mitigating EPS impact. The brokerage’s target price is at Rs 10,300.
CLSA, however, said the ban could impact profits by 6% but has maintained a buy call with a target price of Rs 9,500.
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