Bajaj Finance stock recoups early losses post RBI ban; analysts see limited impact but eye quick resolution

Bajaj Finance has said it is committed to rectifying the issues flagged by the central bank and supervisory restrictions will remain in place “till the deficiencies observed are made good by the company to the satisfaction of RBI”

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Bajaj Finance was trading in the green again after early trades saw the stock fall 3 percent lower at Rs 7,033 on November 16. This comes a day after the Reserve Bank of India (RBI) barred the non-banking finance company (NBFC) to stop sanction and disbursal of loans under its two lending products. At 10:30 am, the stock was trading at Rs 7,256.05, around 0.44 percent higher.

While brokerages expect a limited adverse impact and a quick resolution, they expect some hit on profitability during the ban. On November 15, Bajaj Finance stock closed at Rs 7,217, falling 2 percent from the previous close.

In a regulatory filing after market hours, Bajaj Finance said the RBI directed it to “to stop sanction and disbursal of loans under its two lending products eCOM and Insta EMI Card, with immediate effect.”

The company said it will review and resolve RBI’s concerns at the earliest.

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Brokerages see limited impact of RBI ban 

Jefferies sees a limited financial impact as the Insta EMI card base is just 5 percent of Bajaj Finance’s total clients. The RBI move is surprising but while this is a negative, the speed of correction will be key to reinstating the products, the firm said. Jefferies has a “buy” call on Bajaj Finance and a target price of Rs 9,470.

Morgan Stanley does not see any financial impact. The brokerage said that while the stock could see near-term pressure, the issue could be resolved soon, thus mitigating the EPS impact. Morgan Stanley has an “overweight call” on the stock with a target price of Rs 10,300.

Bajaj Finance’s profit could take a knock during the ban

CLSA said the issue should be resolved in one or two quarters but may impact profits by around 6 percent while the ban is in place. The brokerage sees this as more of an operational breach rather than a major violation. CLSA has a “buy” call and target price of Rs 9,500 for the stock.

Also read: RBI asks Bajaj Finance to stop lending under ‘eCom’ and ‘Insta EMI card’ products with immediate effect

Citi, on the other hand, has a “neutral” call with a target price of Rs 8,375.

In the first half of FY24, 1.34 crore Insta EMI cards were acquired digitally, while B2B loans from digital EMI cards were 3.8-4.2 percent of loans booked, the analysts at Citi said.

What prompted the ban 

In a separate statement, the RBI said the action was necessitated due to “non-adherence of digital lending guidelines of Reserve Bank of India, particularly non-issuance of key fact statements to the borrowers” under the lending products and deficiencies in the key fact statements issued in respect to other digital loans sanctioned by the company.

Bajaj Finance said that it would “implement requisite corrective actions to the satisfaction of the RBI at the earliest”, and undertake a detailed review. “Key Fact Statement (‘KFS’) are being issued for the loans booked under the above mentioned two lending products,” it added.

Bajaj Finance said that the company was committed to rectifying the observations and the supervisory restrictions would remain in place “till the deficiencies observed are made good by the Company to the satisfaction of RBI”.

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