Neutral Bajaj Finance; target of Rs 7250: Motilal Oswal

Motilal Oswal's research report on Bajaj Finance

Bajaj Finance (BAF) has decided to exit the co-branded credit card distribution business. RBL Bank (RBK) announced that the bank and BAF have mutually agreed to terminate their co-branded credit card partnership. This would also imply that BAF will potentially terminate its co-branded card partnership with DBS Bank (DBS). What is puzzling is that BAF, which had once articulated its aspirations to become one of the largest card issuers in the country, has now decided to exit the co-branded card distribution entirely. BAF had earlier reported that it had a total of ~4m co-branded credit cards in force (CIF) as of Sep’24. This included ~3.4m RBK co-branded CIF and ~0.6m DBS co-branded CIF. With BAF’s decision to exit the co-branded card distribution business, it will stop incremental sourcing of co-branded credit cards and cease new customer on-boarding on the platform of the co-branded cards.

Outlook

While the valuations are attractive at 3.5x P/BV and 19x FY26E P/E, we do not anticipate any significant upside catalysts until it successfully navigates the asset quality challenges in its B2C loan book and makes concerted efforts to improve the proportion of secured loans in its loan mix. Maintain Neutral with a TP of INR7,250 (3.5x Sep’26E P/BV).