Valuation premium for Bajaj Finance unjustified, says CLSA

Mumbai: The valuation premium enjoyed by investor favourite Bajaj Finance over other lenders is unjustified, said CLSA, retaining a sell rating on the stock with a target price of ₹6,500. Shares of Bajaj Finance ended down 1.33% at ₹7,389.25 on Tuesday.

"Bajaj Finance's assets under management growth outperformance versus HDFC Bank has now declined from 15 percentage points plus pre-Covid to just 5 percentage points in FY22. We believe that the valuation premium Bajaj Finance enjoys is unjustified," said CLSA.

Bajaj Finance reported 26% year-on-year growth in core assets under management in the fourth quarter. The AUM stood at ₹1.97 lakh crore as of March 31 versus ₹1.53 lakh crore a year ago.


CLSA said the deposit book was flat sequentially at ₹30,800 crore and the company has reduced liquidity, now at 5% of assets under management.

"Excluding the festive season quarter, we compare trends between second quarter and fourth quarter during pre-Covid years. Fourth-quarter customer acquisitions have either been stronger or on par with the second quarter in FY19 and FY20. However, this trend has reversed, with 8% fewer customer acquisitions in the fourth quarter versus the second quarter," said CLSA.

CLSA said Bajaj Finance's fourth-quarter pre-quarterly release indicates a weaker customer acquisition trend compared to previous quarters.