Bajaj Finance share price gains as Nomura sees 22% upside; believes concerns over Jio Financial Services are overdone

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Bajaj Finance share price gained 2% in the early trade on Friday after global brokerage firm Nomura initiated coverage on the stock with a ‘Buy’ rating. Nomura has set a target of ₹8,700 for Bajaj Finance shares, which implies an upside of nearly 22% from Thursday’s closing price. Nomura said that Bajaj Finance continues to deliver strong numbers across the parameters with Asset Under Management (AUM) CAGR of 31% over FY13-Q1FY24.

“New product launches, maintaining balance between secured and unsecured loans, and extensive usage of tech are a few of the key reasons for its sustained performance, in our view," Nomura said. The brokerage house believes that the exit of Housing Finance Development Corporation Ltd (HDFC) is a big positive for Bajaj Finance, while the concerns over the entry of Jio Financial Services are overdone. “After the exit of HDFC Ltd., all the exposure of HDFC to the financial system has been moved out of the non-banking financial companies / housing finance companies (NBFC/HFC) classification.

This is a big positive for BAF and Bajaj Housing Finance (BHFL) from a liability-garnering and finer-pricing perspective, given the various regulatory caps on various liabilities streams for NBFCs/HFCs," Nomura said. Meanwhile, Bajaj Finance shares have been under pressure due to concerns about Jio Financial Services, which Nomura believes are overdone. “Setting up a successful unsecured business is relatively difficult for an NBFC, given low ticket size and inferior customer quality.