हिंदी – Bajaj Finance stock review ( Basant Maheshwari )


Hello investors , my name is Sagar and in this video we´ll talk about Bajaj Finance We will talk about their business model , financials and valuations Let´s start with their history . As we all know , Bajaj Auto has always been famous for their vehicles many people prefer to finance their vehicle instead of paying the whole amount at once and this is how Bajaj Auto finance started. The majority of their business was coming from Bajaj Auto , hence the name they had a small segment of consumer loans but the majority was from Bajaj Auto but in 2007-2008 they decided to split the business so they ended with Bajaj Auto in one side and Bajaj Finance on the other side Now you might be wondering , why did they split the business ? The management was thinking about this for a while because they thought the investors can choose which business are they interested in but there is one more important reason the structure of a financial company is totally different from an auto company so many investors weren´t able to estimate the fair value of this company as both of the divisions were under one company After the split , Sanjiv Bajaj became the head of Bajaj Finance and he started by creating a new team Mr. Rajeev Jain was one of the initial team members ( current managing director ) he has done a phenomenal job in this company . Previously he was working in GE Money GE stands for General Electric and it´s one of the most famous American companies Mr. Rajeev Jain was working in their financial division but as I mentioned , this split happened in 2008 – 2008 and the financial crisis happened at the same time that affected every financial company including Bajaj Finance even though their revenues grew in 2007 – 2008 , their profit went from more than 40 crores to 20 crores Mr Rajeev Jain decided to make some huge changes in the business At that time , Bajaj Finance had more than 400 branches and he got that number to 72 he also started cleaning the loan book because the amount of bad loans was huge (10 % of their book ) but there is one more important decision they took at that time as I mentioned , the financial crisis affected every company , especially their retail segment because many people weren´t able to repay their loans and that´s why many banks wanted to stay far away from retail loans so there was no competition because nobody wanted to invest in that segment at that time , Bajaj Finance decided to invest in the retail segment so when nobody wanted to participate in retail segment , Bajaj Finance kept investing in technology that´s why in their initial years , you will see they barely had competition and this gave them a very big advantage so you might be thinking , what type of technology did they invest in ? Let me give some examples before , if you wanted retail loan , it would take 4 – 5 days to precess it many times , you would get to know that they didn´t approve your loan after waiting for 5 days with Bajaj Finance , you would know this in days and now in seconds the second example is their 0 % interest loans , which you already know where they tied up with the manufacturer and the customer gets a 0 % interest loan after some time , they realised that many of their new loans are coming from existing customers every time an old customer tries to get a loan , he needs to submit the papers again and this was a big issue that´s when they launched their EMI card ( existing member identification ) that gives you access to credit immediately currently they have given more than 20 million EMI cards Now let´s talk about the management . As I mentioned earlier , Rajeev Jain is the managing director and he was working in GE money previously and Sanjiv Bajaj is the current Vice Chairman of this company previously , he was working in Bajaj Auto , which he joined in 1997 he was working in the exports division because at that time , most of their sales was from the domestic market in 2004 fo example , they exported 50 000 vehicles but this number jumped to more 600 000 in 2007 they did this with the presence of Chinese and Japanese competitors now let´s talk about their business. As you know , this is a financial company so they make money with their loans let´s talk about their loans and their categories 39 % of their total loans are in the consumer segment so we can start with that In 2019 , bajaj finance financed more than 12 million consumer durable and digital products this number was more than 9 million the previous year so they grew by 29 % and if you have already worked with them before , they offer you their EMI card to make your next purchase easier their most famous product is 0 % interest loan . You might be wondering how do they make money if they don´t charge interest there are several youtube videos which explain how this works so I will make this very short so they don´t charge interest to the customer so they tied up with retailers and manufactures who pay that price to them you might be wondering , why would retailers and manufacturer pay bajaj finance ? the customer is happy because they get 0 % interest loan the manufacturers and retailers are also happy because they are able to clear their inventory faster , especially premium products because people can pay in instalments this scheme is great for premium products many times , retailers use this to clear their inventory rapidly that´s why you might have realised that 0 % interest loan is only offered on selected products sometimes , these are older models that retailers want to get rid of of course , they have more loans in consumer segment so for example we have personal and salaried loans as I mentioned earlier , they started with Bajaj auto so they also finance their vehicles this is their entire consumer segment and this has been their core growth engine in their initial years , they weren´t facing any competition because people didn´t want to get into retail loans because of high NPA´s I will explain later what NPA means but bajaj finance was purposely investing more because they thought this would do well their margins in this segment are really high but the issue is that consumer loans are very small in size as I will show you later , there are some categories , where the loan size is very high but the consumer segment , is very small in size the good thing is they can charge a very high interest in this segment plus the volumes are very high the second segment is rural loans .This is 8 % of their total loans the loans are similar to the consumer segment , so consumer durables and digital products financing they started fixed deposits this year in rural as well third category is SME ( small medium enterprise ) . This is 13 % of their total loans you can divide these loans into two categories : secured and unsecured secured loan always has a collateral , a house for example so if you aren´t able to repay the money , the bank get the collateral and the second type is unsecured , where there is no collateral . If you want to start a small business and need a loan , they can help you they also give professional loans to doctors and engineers the next loan is commercial loans , this is 10 % of their total loans I want to mention that commercial loans size is very big compared to other segments and the interest they charge is lower compared to their consumer segment Let me explain the types of loans they have . One example is loan agains securities , so you can borrow money against your shares They can also help with working capital to auto manufactures , specialty chemicals and engineering companies the last segment is mortgages , 30 % of their total loans fall into this category In 2018, they started their own subsidiary , Bajaj housing finance , and the mortgages belong to this subsidiary so if you want a home loan , they can help you with that As you already know , Bajaj Finance is already very famous so they have tied up with developers when then they want to sell their properties , they can do that through bajaj fiance now you know the different types of loans they offer but there is one more segment which nobody is talking about , that´s their fee income aprox. 10 % of their revenue comes from fee income . So how they do earn money here ? As I mentioned earlier , if you are a repeat customer , they give you an EMI card but they charge you 200 rupees initially if you take a loan and you don´t repay on time , they will charge you a penalty fees as they already have many branches , they also sell insurance which belongs to the bajaj group , they earn fees from that as well Lastly , they have partnered with RBL bank for credit cards and thy get a fee from that as well so you can see they have various sources for fee income and it´s been growing rapidly now let me share one secret with you , which nobody is talking about . Let´s imagine that you have a business and the first year , you manage to sell your product to 100 customers the second year , you don´t get any new customer . So , you decide to email your old 100 customers telling them about your new product and your old customers buy your new product again , so your business did well despite of no new customers the next year you launch another product and you email the same clients again and do business with them this is a very interesting concept and bajaj finance does this really well so if you check their last quarter ,70 % of their new loans came from existing customers so their old customers took another loan basically . Let me explain why this is so important. Let´s imagine that you buy a TV this year . You won´t buy a TV the next year again but you might buy a mobile the next year, you might decide to buy a washing machine . So if you take a loan from bajaj finance , if they give good service , you will take another loan when you buy something you can see that they keep doing more business with their existing customers and this gives them several advantages when you give a loan to a new customer , you never know for sure if they will be able to repay back the money or not but if you have given a loan to an old customer , you know if they have the ability to repay you back their loan or not so if I give a loan to an old customer my risk automatically decreases . That´s how Bajaj Finance manages their risk there is one more advantage this company constantly needs to find new customer to increase their business . You need to spend money on marketing so people know about your product but if you work with a previous client , you don´t need to spend money on marketing because they already know what you do so you can see why it´s such a big advantage for them , as they can manage their risk easily because they know if someone will be able to repay the loan or not and this is known as cross sell franchise . They have more than 22 million members , to whom they can sell their new products every time they launch something and now you know how Bajaj Finance keeps growing at such a rapid rate with very low risk so how can we actually see the amount or risk they take ? We look at the NPA or non performing assets so when you give a loan to a client and you aren´t able to recover the money in 90 days , you call it NPA when financial companies look at their NPA , they always keep some money aside , this is known as provisions so we start with the NPA and we remove the money they kept aside , this brings us to net NPA in their case , their net NPA was 0.63 % in 2019 and this is a very good number it has always been between 0.4 and 0.5 % but it increased a bit in the least year and let me explain why as I mentioned earlier , they also finance vehicles of Bajaj Auto and the NPA´S in that category are big higher and the least year, they gave many loans in this category but I want to repeat that 0.63 % is a very good number When we are talking about loans , there are two more important metics to look at one of them is NIM or net interest margin. As I said , financial companies don´t have money , so they have to borrow first in order to lend it later so let´s say they can borrow at 10 % and then lend at 20 % , this gives us 10 % NIM ( 20 – 10 ) In the case of Bajaj Finance , the NIM is 10 % and it has been growing steadily and the last metric is ROA or return on asset. Their loans are their assets . So this metric helps us understand the amount of profit they generate on their loans In the case of Bajaj Finance it´s higher than 4 %, which is a very good number anything about 2.5 % or 3 % is a good number so now that I mentioned the metrics , let´s take a look at their financials As I mentioned earlier , financial companies have to borrow first in order to lend that´s why when you see the balance sheet and cash flows ,you see negative numbers but that´s because the business is built this way but you can see their revenue and profit has been growing at a very rapid rate ( 30 – 40 % ) Lsat year , their revenue reached 18 502 crores and their profit was 3995 crores Now let´s talk about valuation . Is this company expensive or cheap ? The management expects to grow their profit between 23 – 25 % in the long term, which is great because this company is very big now they expect their return on asset to more than 3 % and if you think the consumer segment will do well then bajaj finance is a great company because maybe , you don´t know which mobile people are going to buy , maybe Apple or Samsung but if you think people are going to buy mobiles and consumer durables , then you can just bet on bajaj finance but is this company expensive or cheap ? if you think the company can grow between 30 – 40 % then the company is not expensive there are not many companies that can grow at such rate being that big you might find it bit expensive in the beginning , but the returns will still be great later so if you think it can grow between 30 – 40 % , then it´s not expensive but I won´t invest because I already have one NBFC in my portfolio because it´s growing between 20 – 30 % and I find it cheap so I think I will get great returns from that and that´s why I won´t invest in bajaj finance but if you think 30 – 40 % growth is possible , then it´s not expensive at all so if you would like to know that the stocks I own in my portfolio and my buying price or if you want to know , why I invested in them , I have my portfolio service , which you can join I also make special content for that service and I will go live soon so if you have any questions , you can ask me there so if you would like to join the portfolio service , I will leave the link in the description don´t forget to subscribe to see more videos

64 thoughts on “हिंदी – Bajaj Finance stock review ( Basant Maheshwari )

  1. Awesome explanation… Plz…. Make video on CLUB MAHINDRA, ACELYA KALE SOLUTION(IT'S ALSO HAVE IT'S MOST) I hope you do so…

  2. Hi nice and detailed analysis , applauds for the same.
    What is your source of such vast information regarding all the companies you analyse?

  3. Today Bajaj finance and finserv results announced. Growing 52% YoY. Bajaj finserv is nearing 10,000rs. Can we expect share split in finserv. Current face value is 5rs. Please answer.

  4. Mai to Long term k liye kharidke rakkhi hu but jinlog intraday kiya yaa short term k liye kharida hoga accha khasha profit kiya aaj …

  5. Hello Dr. Sagar! 🙂 I was having a rather lively discussion with one of my friends, and asked me the same question that I want to ask you – why would a common man even bother to have a credit card, when you can get the zero emi option with Bajaj?

  6. Sir Bajaj finance give me 10% after a weak can you sir please recommend be can I Sale or hold my buying 4099 and current price 4520

  7. How dare u say ur stock is much valuable than Bajaj finance just don’t mislead last time also when Bajaj finance was at 3200 u told it’s costly now also same thing what’s up bro don’t be over smart I follow u but not blindly I know u might be holding Manappuram or Muthoot finance but don’t u forget if Bajaj finance also jumps in gold business then what bro don’t misguide

  8. INDIA'S NO 1 CHOR & FROUD COMPNEY.

    BAJAJ FINSERV = PROCESSING FEE+ LATE FEE+ PENALTY+INSURANCE+ADVANCE EMI AND MUCH MORE …….

    PHIR BHI BOLTE HAI NO COST EMI WITH BAJAJ FINSERV LTD.

    CHOR COMPNEY HAI YEH.

  9. Sir ,
    1.voltas (676)
    2.deepak nitrate(497)
    3.princ pipe(152)
    4.bajaj financ(2521)
    Sir,4. छोडकर, सभी 34% negative हैं , क्या सभी stocks for long term (5-7year) सही हैं?

  10. Very good research Sagar. but pls don't upload these videos in 1.5X speed. you can split the videos in part1 n part2.

  11. Sir, please make a detailed video on "Cholamandalam Finance". It seems fundamentaly strong company, which available on very attractive valuations. I am thinking of adding in portfolio for next 5 years. Thanks

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