Bajaj Finance: Share price in Bajaj Finance plummeted about 4% on Thursday following RBI restrictions to NBFC for extending the loans under two its products. Bajaj Finance fell 3.97 % to Rs. 6,937.15 per share on the BSE.
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Following suit, Bajaj finance today informed BSE / NSE about an RBI direction to them which had to be carried forth without any delay, specifically with reference to eCOMM & Insta EMI Card loans, with zero issuances of KFS. Subsequently, some supervision limitations shall be applicable until when the company rectifies the defects raised by RBI as mentioned regarding Key Fact Statements provision to the borrowers.
Bajaj Finance stated that these KFSs were being issued in relation with the above-mentioned two lending products. Nevertheless, in response to the concerns raised by the RBI about the supervision, the company has promised to review the entire KFS project and take appropriate remedial action that will be acceptable to the RBI.
Nonetheless, it is argued that its effect on Insta EMI card users will be minimal since only 5%, which comprise the company’s entire clientele. Analysts predict that the Bajaj Finance’s shares will be under pressure over the short run, however, the case should get resolved soon because it looks like an act of procedural failure without the intent to cheat. CLSA brokerage firm foresees 5% dent in Bajaj Finance’s EPS due to ban.
The company says that the RBI’s latest move does not have a single monetary consideration on it whatsoever. Bajaj Finances shall stop lending for eCOM immediately on various e-commerce platforms including Amazon, Flipkart, Yatra and MakeMyTrip. In turn, the EMI card, NBFC funds its existing customers when they buy goods and services through e-commerce platforms.
However, this ban comes at a good time as it follows the festive season during which it makes an average of 350, 000 – 400,000 loans on ecommerce platforms each month However, over the next 45 – 90 days, we should see a modest lull in Bajaj Finance’s e-commerce loan production averaging around 22,000 – 23,000 per month. Within 45 days to 90 days, BAF may stand to sacrifice e-commerce new loans worth 345,000 to 690,000,” as outlined by Motilal Oswal Financial Services.
Broker states despite this fact, the company may not be granted a permit to issue Insta EMI cards as these limitations could slow down issuance and acquisition processes for Insta EMI Cards within next 45 to 90 days.
The brokerage house believes that because the loan volumes may be compromised at 450,000 and even 900,000 over 45 and 90 days respectively. It assumes an impact on disbursements of anything from ₹12.6billion to ₹45bn depending on a 45-90 day embargo period period as for ticket size ranges from ₹20,000 to ₹50,000 Therefore, it is possible that outflows may drop between 0.5 and 1.6 percent of AUM at Bajaj Finance for September 2023.
As of now, Motilal Oswal has not revised its estimates even though it acknowledges that there would likely be an impact on AUM growth and fee income in H2FY24. Nevertheless, our long term theory for this business still stands valid. BAF will rectify and after the success of satisfying the RBI the momentum only gets stronger ahead with the digital environment – app, web platform and full stack payment offers – already available.
It affirmed its ‘buy’ outlook on the share and stated that this was just a minor correction, hence an ideal moment for investing. At 9: At 16:30 am, Bajaj Finance share price was down by 2.00 percent, trading ₹7,079.45 a share on the BSE.
