India's Bajaj Finance reverses course after dropping 4% on RBI ban order (updated)

Bajaj Finserv

16/11/2023 05:07

(Adds details, analysts' commentary)
       BENGALURU, Nov 16 (Reuters) - Shares of Bajaj Finance
 BJFN.NS  turned positive after falling 4.1% in early trade on
Thursday as brokerages shrugged off concerns, a day after
India's central bank barred it from issuing loans under two
products with immediate effect.
    The Reserve Bank of India (RBI) said the non-bank lender
failed to issue key information to borrowers under its eCOM and
Insta EMI Card digital lending products, as required under the
RBI's new digital lending guidelines.
    Enforced last year, the guidelines require that a lender
disclose all charges to borrowers upfront and also detail its
recovery practices in the event of a default.
    Brokerage Jefferies retained its 'buy' rating and price
target of 9,470 rupees, noting that the RBI order was a "slight
bump" and that the non-bank lender's broader earnings momentum
would continue.
    Bajaj Finance's stock reversed course to trade 0.5% higher
at 7,255.2 rupees at 10:26 a.m. IST. This was the stock's most
active session since July 4, with more than 2.7 million shares
changing hands.
    Insta EMI Cards segment accounted for only 5% of its total
customers and about 10% of customers availing EMI (equated
monthly instalment) products, Jefferies analysts said in a note.
    They estimated that the segment contributed less than 0.5%
to the non-bank lender's total profit.
    Bajaj Finance said in its statement that it was complying
with the RBI order and that the restrictions would not have a
material financial impact on the company.
    Analysts at Macquarie, however, were concerned by the share
of customers from the products that were restricted. "We think
these numbers look high, and for this reason, we are surprised
by management's comment of minimal operational impact," Suresh
Ganapathy wrote in a note.
    A possible decline in its assets under management and weak
fee growth impacting profitability were among the key risks from
the RBI order, he said.
    Twenty-nine analysts covering the stock, including Jefferies
and Macquarie, rate it the equivalent of 'buy' on average, as
per LSEG data.


 (Reporting by Kashish Tandon and Nandan Mandayam in Bengaluru;
Editing by Janane Venkatraman)
 ((Kashish.Tandon@thomsonreuters.com;))