Buy Bajaj Finance; target of Rs 8400: Emkay Global Financial

Emkay Global Financial's research report on Bajaj Finance

The Board of RBL Bank has decided to terminate its 8-year old co-branded credit card agreement with Bajaj Finance (BAF), resulting in BAF selling nearly 8mn cards cumulatively and logging 3.4mn outstanding cards as of H1FY25. During the concall, the management of RBL Bank stated that this decision was taken after intimation from BAF expressing its preference for exiting the partnership as part of its broader strategy to withdraw from any co-branded card origination. Following the regulatory changes that have compelled the transfer of the collection process of co-branded credit cards to the issuing bank, the economics of co-branded cards changed materially, leading to RBL Bank limiting sourcing via the BAF channel to ~40K cards a month from the past year runrate of 120-140K cards a month. Given the already scaled down speed of card acquisition, we see limited earnings impact on BAF from this decision.

Outlook

However, the elevated credit cost and moderating growth have caused a ~4-5% cut to FY25-27E earnings; we reiterate BUY with our revised down Dec-25 TP of Rs 8,400 (from Sep-25E TP of Rs8,800 earlier).