Bajaj Finance- Jeffries sees 18% upside potential; recommends Buy at Rs 8830

Bajaj Finance: Jeffries sees 18% upside potential; recommends Buy at Rs 8830

Jeffries recommends ‘Buy’ for the Bajaj Finance stock with an 18% upside target of Rs 8,830. The share price surged nearly 5% during the intra-day trade on Monday following the company’s announcement to raise funds. According to the information available on the NSE, BAF’s board will consider capital raising via pref issue and/or QIP on October 5.

“While it is well capitalised with a tier-1 CAR of 23%, this raise may be upfronting of capital to support strong AUM growth (32% in 1Q) & is reasonably ahead of time. Assuming BAF raises 10-15% of net worth, issue size may be Rs 80 billion/$1 billion. This would lead to dilution of 2% whereas FY24E EPS & BVPS may rise 6% and 11%; RoE may see slight fall to 22%. BAF stays among our top NBFC picks,” said Jefferies in its report.

The report stated that, “our target price of Rs 8,830 is based on SoTP valuation. Standalone entity is valued at 6.5x Jun-25E P/BV. Key risks to our valuation: slowdown in growth, higher-than-expected NIM compression, or asset quality deterioration. Upside can arise from stronger than expected growth in consumer durable and rural financing business, and further improvement in operating efficiencies and reduction in cost ratios.”