Bajaj Finance reported net profit of Rs 211.4 cr (+20.3% YoY) in Q1FY15 which was above expectations primarily due to higher than expected Net Interest Income (NII). NII increased 23.2% YoY and 23.0% QoQ with increase in consumer durable segment.

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Bajaj Finance Limited
QQ11FFYY1155RReessuullttUUppddaattee––1177tthh
JJuullyy22001144
4
Recommendation HOLD Strong growth momentum
Bajaj Finance Ltd (BFL) reported net profit of Rs 211.4 cr (+20.3% YoY) in
Q1FY15 which was above expectations primarily due to higher than expected
Net Interest Income (NII). NII increased 23.2% YoY and 23.0% QoQ with increase
in consumer durable segment. AUM growth remained strong at 40.1% YoY and
disbursements increased 48.3% YoY led by growth in Consumer Durables
(digital product sales and lifestyle financing) and SME business.
Asset quality witnessed improvement in Q1FY15 with gross NPA at 1.15% and
net NPA at 0.27% (vs 1.18% and 0.28% in Q4FY14). Almost all the product mixes
witnessed satisfactory performance in an extremely challenging environment
which is commendable.
Going forward, SME business will continue to drive disbursement growth.
Capital Adequacy Ratio of 18% will support BFL’s growth plan for the next 4-5
quarters and the company does not intend to raise capital in near term.
However, with increasing contribution from SME business; comparatively lower
margin yielding business could lead to some margin compression going forward.
Strong loan growth, focus on distribution income, control over costs coupled
with stable asset quality would drive performance for BFL. We expect earnings
to grow at 25.4% CAGR over FY14-FY16E. Continued focus on rural lending will
further strengthen its position as a retail finance company. Despite the
challenging macroeconomic environment and the high risk segments where BFL
operates, its focus on affluent segments and strong risk management
framework have ensured stable asset quality, even in the riskier segments.
At CMP the stock is trading at 2.35x FY15E and 1.95x FY16E ABV and 12.38x
FY15E and 9.69x FY16E EPS. We maintain our HOLD rating on the stock and
arrive at target price of Rs 2,410 (2.15x FY16E ABV); an upside of 10.3% from
current levels.
BFL will wind its Construction Equipment business due to continued poor
ROE performance. The residual portfolio of around Rs 400 cr will be re-paid
in due course of 15-18 months. BFL does not foresee any major credit loss
to emerge in the residual portfolio.
Net interest income increased 23.2% on YoY basis which is lower than the
volume growth reported by the company. This is primarily due to re
adjustment of portfolio towards lower yielding SME segment led to lower
spreads for the company. Going forward, declining yields on SME portfolio
will continue to result in lower margins.
Operating expenses increased by 26.8% YoY and 12.0% QoQ. The increase
is due to one-time ad spend of Rs 8 cr on brand campaign. Cost to income
ratio increased to 45.9% in Q1FY15 vs 45% in Q1FY14.
2W financing de grew 13% (20% last quarter) whereas three wheeler
business de grew 20 (38% last quarter) % in Q1FY15.
Market share of BFL in the 3W business stood at 22% which is lower than
27% last quarter due to slowdown in commercial vehicle industry.
CMP (16/07/2014) Rs.2,186
Target Price Rs.2,410
Sector NBFC
Stock Details
BSE Code 500034
NSE Code BAJFINANCE
Bloomberg Code BAF IN
Market Cap (Rs cr) 10,965
Free Float (%) 38.39
52- wk HI/Lo (Rs) 2370/965
Avg. volume NSE+BSE
(Quarterly)
53,630
Face Value (Rs) 10
Dividend (FY 14) 160%
Shares o/s (Crs) 5.01
Relative Performance 1Mth 3Mth 1Yr
Bajaj Finance 10.1% 23.9% 47.7%
Sensex 0.2% 11.5% 25.9%
200
700
1200
1700
2200
2700
Shareholding Pattern 30
th
June 14
Promoters Holding 61.61%
Institutional (Incl. FII) 19.28%
Corporate Bodies 7.04%
Public & others 12.07%
Silky Jain (+91 22 3926 8178)
Research Analyst silky.jain@nirmalbang.com
Year NII
(Rs cr)
Growth
(%)
PBP
(Rs cr)
PAT
(Rs crs)
Margin
(%)
EPS (Rs) PE (x)
Adj BVPS
(Rs)
P/ABV
(x)
RoE
FY 13A 1,717 37.4% 1,053 591 31.1% 135.0 16.19 670 3.26 21.9%
FY14A 2,215 29.0% 1,349 719 28.8% 143.4 15.23 782 2.79 19.5%
FY15E 2,711 22.4% 1,659 885 29.1% 176.5 12.38 928 2.35 20.2%
FY16E 3,359 23.9% 2,089 1131 30.3% 225.6 9.69 1121 1.95 21.4%

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Bajaj Finance Limited
QQ11FFYY1155RReessuullttUUppddaattee––1177tthh
JJuullyy22001144
Source: Company data, Nirmal Bang Research
Asset under management grew by 40.1% YoY and 12.0% on QoQ basis. The growth was primarily driven
by the SME segment followed by consumer durables segment. Going forward, management expects
balance sheet to grow at 20-25%+ for FY15E.
Overall disbursements witnessed growth of 48.3% YoY largely driven by SME which increased 53.9% and
Consumer Durable which grew by 48% YoY. In consumer electronics financing, the company has retained
its market share at 15%.
The pace of growth in Loan against property moderated this quarter after fraud was reported in the
segment in May 2014. BFL has taken various steps to ensure that such type of occurrence does not arise
again. It is in the process of hiring operational risk head for newly formed division and will closely
monitor the activities. In the current quarter the growth in LAP has picked up again.
Commercial Infra business continued to de-grow due to sectoral stress. BFL continued to grow its auto
component finance business.
Lifestyle financing witnessed robust 216% growth with disbursement of 56,000 loans in Q1FY15.
Quarterly comparison
Financial Details (Rs cr) Q1FY15 Q1FY14 YoY (%) Q4FY14 QoQ (%)
AUM 26,943 19,229 40.1% 24,061 12.0%
Customers acquired 1,252,294 969,447 29.2% 768,137 63.0%
Disbursements 9,266 6,250 48.3% 7,042 31.6%
Consumer Durables 5,052 3,413 48.0% 3,179 58.9%
SME business 3,279 2,130 53.9% 3,019 8.6%
Commercial 885 707 25.2% 808 9.5%
Rural 50 0 N/A 36 N/A
Net Interest Income 680.5 552.3 23.2% 553.2 23.0%
Non interest income 65.9 48.7 35.2% 91.8 (28.2%)
Total Income 746.3 601.0 24.2% 645.0 15.7%
Total operating expenses 342.8 270.3 26.8% 306.1 12.0%
Cost to income ratio 45.9% 45.0% 47.5%
Operating profit 403.5 330.7 22.0% 338.9 19.1%
Provisions 82.9 63.9 29.8% 62.2 33.4%
Profit before tax 320.6 266.9 20.1% 276.8 15.8%
Tax 109.2 91.1 19.9% 94.7 15.4%
Profit after tax 211.4 175.7 20.3% 182.1 16.1%
EPS 42.2 35.3 19.4% 36.3 16.1%
Capital adequacy ratio 18.0% 21.5% 19.1%
Gross NPA 1.13% 1.14% 1.18%
Net NPA 0.27% 0.25% 0.28%
Provision coverage ratio 76.0% 78.0% 76.0%

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Bajaj Finance Limited
QQ11FFYY1155RReessuullttUUppddaattee––1177tthh
JJuullyy22001144
Cross sell momentum across businesses continued to perform good.
Digital product sales contributed 10% to total Consumer durable business.
Within the Rural Lending business BFL disbursed 50 Crs in Q1FY14. It also launched 14 new branches &
52 spokes in central Maharashtra & Gujarat.
Distribution fee based income continues to remain strong with growth in fee based products like life and
general insurance, wealth management and CRISIL ratings.
BFL continued to increase its focus on garnering fixed deposit. Fixed Deposit during the quarter stood at
Rs 137 cr taking the total deposit book to 345 Crs. Average deposit size is 2.78 lakhs and tenor is 26
months. The average cost stands at 9.84%.
Current mix of bank & debt markets for BFL stands at 56:42. Balance 2% is from retail deposits.
Gross NPA and net NPA remained broadly stable at lower levels. Provision coverage ratio stood at 76%.
The company made an accelerated provision of 5 Crs for stressed Infra account in Q1FY14. Furthermore
provision of Rs 5 cr was made for misrepresentation of LAP account in the month of May. As per the
management, the actual liability should be around Rs 1.5 cr and the balance Rs 3.5 cr is likely to be
reversed going forward.
Capital consumption was higher in the quarter with rapid growth in the consumer durable segment.
Source: Company data, Nirmal Bang Research
Source: Company data, Nirmal Bang Research
19,229 19,829
22,461
24,061
26,943
11,000
15,000
19,000
23,000
27,000
Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15
AssetUnder Management
54.5%35.4%
9.6%
0.5%
Break up of disbursement
Consumer
SME
Commercial
Rural
40.0%
53.0%
7.0%
Break up of AUM
Consumer
SME
Commercial
82%
18%
Portfolio composition
Secured Unsecured

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Bajaj Finance Limited
QQ11FFYY1155RReessuullttUUppddaattee––1177tthh
JJuullyy22001144
Source: Company data, Nirmal Bang Research
Source: Company data, Nirmal Bang Research
0
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P/E - Forward
CMP 3.0 X 6.0X 9.0 X 12.0X 15.0 X
0
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Apr-14
P/BV- Forward
CMP 0.5X 1.0X 1.5X 2.0X 2.5X
0.25% 0.26%
0.23%
0.28% 0.27%
78.0%
78.0%
80.0%
76.0%
76%
74.0%
75.0%
76.0%
77.0%
78.0%
79.0%
80.0%
81.0%
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
0.30%
Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15
Movement of NPA
Net NPA Provisioncoverage ratio
45.0%
47.6%
44.3%
47.5%
45.9%
42.0%
44.0%
46.0%
48.0%
Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15
Costto Income Ratio

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Bajaj Finance Limited
QQ11FFYY1155RReessuullttUUppddaattee––1177tthh
JJuullyy22001144
Financials
Profitability (Rs. Crs) FY13 FY14 FY15E FY16E Balance Sheet (Rs. Crs) FY13 FY14 FY15E FY16E
Interest earned 2,923 3,789 4,898 6,045 Equity capital 50 50 50 50
Interest expended 1,206 1,573 2,187 2,686 Warrants money 0 0 0 0
Net interest income 1,717 2,215 2,711 3,359 Reserves and surplus 3,317 3,941 4,721 5,734
Non interest income 187 285 330 378 Net worth 3,367 3,991 4,770 5,784
Total income 1,904 2,500 3,041 3,736 Secured Loans 7,503 10,478 13,732 16,840
Marketing exp 183 231 284 349 Unsecured Loans 2,080 5,473 6,462 7,217
Staff costs 245 341 426 528 Total Loans 9,583 15,950 20,193 24,057
Other Op Exp 423 580 672 770 Curr Liab 4,764 4,509 5,955 8,329
Profit before prov 1,053 1,349 1,659 2,089 Long Term Liab 107 168 176 185
Provisions 182 258 317 374 Total liab and equity 17,821 24,618 31,095 38,355
Profit before tax 872 1,091 1,342 1,715 Cash and bank bal 416 777 477 649
Taxes 280 372 457 584 Investments 5 28 28 28
Net profit 591 719 885 1,131 Receivables 16,744 22,971 29,696 36,729
Quarterly (Rs. Crs) Sep.13 Dec.13 Mar.14 June.14 Fixed assets 176 220 242 266
Net interest income 519 618 553 680 Other assets 303 371 389 409
Non interest income 63 54 92 66 Other Long Term Assets 177 252 263 275
Total income 582 672 645 746 Total assets 17,821 24,618 31,095 38,355
Operating expenses 277 298 306 343
Operating profit 305 374 339 404 Key Ratios FY13 FY14 FY15E FY16E
Provisions 52 79 62 83 Yield Ratios
Profit before tax 253 295 277 321 Avg Yield on Assets 20.1% 19.1% 18.6% 18.2%
Taxes 86 101 95 109 Cost of Int Bearing Liab 12.8% 12.3% 12.1% 12.1%
Net profit 167 194 182 211 NIM/ Spread 7.3% 6.8% 6.5% 6.1%
Profitability Ratios FY13 FY14 FY15E FY16E Gross NPA 1.3% 1.2% 1.3% 1.4%
Cost / Income Ratio 44.7% 46.0% 45.4% 44.1% Net NPA 0.25% 0.28% 0.30% 0.35%
Net profit margin 31.1% 28.8% 29.1% 30.3% Per share data FY13 FY14 FY15E FY16E
RONW 21.9% 19.5% 20.2% 21.4% EPS 135.0 143.4 176.5 225.6
Return on Assets 3.8% 3.4% 3.2% 3.3% BVPS 679 796 951 1154
Growth Ratios FY13 FY14 FY15E FY16E Adj BVPS 670 782 928 1121
Advances growth 36.3% 37.2% 29.3% 23.7% DPS 15 16 18 20
NII growth 37.4% 29.0% 22.4% 23.9% Valuation Ratios FY13 FY14 FY15E FY16E
PAT growth 45.5% 21.6% 23.1% 27.8% P/E 16.19 15.23 12.38 9.69
Pre prov profit growth 39.2% 28.1% 23.0% 25.9% P/BV 3.22 2.75 2.30 1.89
Non interest inc growth 6.2% 52.6% 15.7% 14.6% P/ABV 3.26 2.79 2.35 1.95
Source: Company data, Nirmal Bang Research

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Bajaj Finance Limited
QQ11FFYY1155RReessuullttUUppddaattee––1177tthh
JJuullyy22001144
NOTES
Disclaimer:
This Document has been prepared by Nirmal Bang Research (A Division of Nirmal Bang Securities PVT LTD). The information, analysis and
estimates contained herein are based on Nirmal Bang Research assessment and have been obtained from sources believed to be reliable. This
document is meant for the use of the intended recipient only. This document, at best, represents Nirmal Bang Research opinion and is meant for
general information only. Nirmal Bang Research, its directors, officers or employees shall not in anyway be responsible for the contents stated
herein. Nirmal Bang Research expressly disclaims any and all liabilities that may arise from information, errors or omissions in this connection. This
document is not to be considered as an offer to sell or a solicitation to buy any securities. Nirmal Bang Research, its affiliates and their employees
may from time to time hold positions in securities referred to herein. Nirmal Bang Research or its affiliates may from time to time solicit from or
perform investment banking or other services for any company mentioned in this document.
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