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May 3, 2024

Bajaj Finance Surges 8% as RBI Lifts Ban on eCOM and Insta EMI Card: Analysts Bullish on FY25 Prospects

Bajaj Finance’s stock witnessed a remarkable surge of 8% following the Reserve Bank of India’s unexpected decision to lift the ban on two of its crucial products, eCOM, and the online digital Insta EMI Card. This move came as a surprise to many and marked the stock’s biggest single-day rally in three years, reaching Rs 7,400 in Friday’s intraday trade, compared to a mere 0.6% rise in the benchmark S&P BSE Sensex.

The ban, imposed in mid-November last year due to deficiencies in the Key Fact Statement (KFS) of these products, had a significant impact on Bajaj Finance’s profitability in the previous fiscal quarter (Q4FY24). Analysts noted that Bajaj Finance’s profit before tax (PBT) was down by 4% in Q4FY24, and its new loan book saw a decline of 0.8 million in Q4 and 1.2 million in FY24.

However, the recent decision by the RBI to lift these restrictions earlier than expected is seen as a positive start for Bajaj Finance in the fiscal year FY25. Analysts at Emkay Global expressed their optimism, stating, “The recent development in the beginning of FY25 itself is a positive start for Bajaj Finance for the fiscal, and is expected to boost investor confidence on processes, commitment of management in making things right, and the company’s ability to adapt to the changing regulation and business environment.”

Bajaj Finance announced on Thursday that the RBI has lifted the restrictions on ‘eCOM’ and online digital ‘Insta EMI Card’ with immediate effect. This means that the Non-Banking Financial Company (NBFC) will resume sanction and disbursal of loans through both these business segments, including the issuance of EMI cards.

The lifting of the ban is expected to result in higher customer acquisition and improved fee income for Bajaj Finance. Additionally, the early resolution of the restrictions has further bolstered analyst confidence in the company’s ability to promptly address regulatory challenges and course-correct when necessary.

Emkay Global also noted that the removal of restrictions ahead of schedule increases confidence in the outlook for FY25 and raises hopes for the approval of Bajaj Finance’s co-branded credit card renewal with RBL Bank by the RBI.

Despite the surge in stock price and positive outlook, Emkay Global kept its FY25-27 estimates unchanged and reiterated its ‘BUY’ rating on the stock, maintaining an unchanged target price of Rs 9,000.

In conclusion, Bajaj Finance’s stock rally following the RBI’s decision underscores the market’s positive response to the lifting of restrictions on its key products. Analysts remain bullish on the company’s prospects for FY25, emphasizing its resilience in adapting to regulatory changes and its commitment to delivering value to investors.

Jhumpa Lahiri

Jhumpa Lahiri

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