Buy Bajaj Finserv; target of Rs 2150: Emkay Global Financial

Emkay Global Financial's research report on Bajaj Finserv

After media reports indicated that Allianz Group might be looking to exit its 23- year old India Insurance JVs (BALIC and BAGIC) with the Bajaj Group, BJFIN in its exchange filing confirmed that Allianz has communicated to the company its intent of exiting the Indian Insurance Joint Ventures. Allianz's exit from the JVs has been speculated several times since 2016, when Allianz was unable to exercise the option to increase its stake in the JVs to 49% at a pre-determined, formula-based price as per the 2001 agreement with Bajaj, owing to the RBI regulations and unwillingness of the Bajaj Group. At this juncture, this exit does not affect the operations or strategy of BALIC and BAGIC, and will not have any material bearings on BJFIN. If Allianz chooses to exit via IPO or roping in of any strategic investor, then that could lead to price discovery of the insurance entities.

Outlook

If BJFIN buys this stake from Allianz then: 1. the impact on BJFIN share price could be a function of transaction price; 2. This purchase of stake by BJFIN will require capital raise to pay Allianz in cash or Allianz getting shares of BJFIN.