Bajaj Finance vs Bajaj Finserv: The Non-Zero Sum Game (2023)

Bajaj Finance versus Bajaj Finserv:In the current era, NBFC plays a very crucial role in terms of the country's development, especially in these difficult times after the pandemic.

When it comes to NBFC investments, Bajaj Finance and Bajaj Finserv shares top the list thanks to impressive returns of +108.433% and +1.904% since 2002 and 2008 respectively.

In this article, we will cover a detailed comparison of Bajaj Finance vs Bajaj Finserv, two of the largest companies in the insurance and NBFC segments of India. Read on to learn the differences between the two as we break them down!

Introduction to NBFCs

Before we get into the two actions, have you ever wondered if banks already exist and make loans, take deposits and provide financial services, so why do we have the NBFC? Do these make a difference? So let's understand what NBFCs do.

NBFCs or Non-Bank Finance Companies offer bank-like services but do not have a banking license. This prevents them from issuing cash checks and money orders.

The economy is divided into a wide range of subsectors with different sets of needs and wants. Banks alone cannot serve everyone with the same vision.

This is where NBFCs come into play. NBFCs function as intermediaries to channel resources from the lender (banks) to the economically scarce sector, mainly the unorganized sector.

NBFCs are more customer-oriented or personalized, which is not within the scope of banks. Through this service, they generate income from the difference in interest rates of the loans.

Consumer lending was the area where Bajaj Finance capitalized. Here most of the banks were not interested in joining the industry.

Now, let's compare Bajaj Finserv VS Bajaj Finance.

People tend to confuse a lot between these two as they both belong to the same domain and offer similar products only in different subsets. As? We answer below!

CURRENT ISSUES

Bajaj Finance vs Bajaj Finserv: Resumen del sector

Bajaj Finance is under the umbrella of Bajaj Finserv. Formerly known as Bajaj Auto Finance, it was the investment arm of Bajaj Finserv, one of the biggest players in the NBFC segment in India.

Bajaj Finserv has a 52.49% stake in Bajaj Finance and a 74% stake in Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance. Let's take a look at their organizational structure.

Even in times of liquidity crisis, the company has been able to manage its operations with financial stability and longevity. Higher standards by government agencies have made companies in this industry more resilient to the economic shocks and turmoil of recent years.

Many companies like IIFL, DHFL and SREI Infrastructure Finance have been struggling in these tough times. SREI Infrastructure Finance and DHFL, the third largest NBFC in this segment, went bankrupt!

Bajaj Finance and Bajaj Finserv have stood their ground amidst all the challenges and dominated this segment with their consistent performance.

Bajaj Finance:income streams

personal finance

The personal finance or consumer loan segment deals with credit to consumers for personal or household use. Bajaj Finance offers durable consumer loans, lifestyle home loans, credit cards, two- and three-wheeler loans, construction equipment loans, etc.

In the pie chart above, we can see that the consumer credit segment contributed more than 45.9% of the majority of the revenue.

loans to SMEs

Bajaj Finance promotes small and medium businesses with unsecured loans for SMEs and easy capital requirements at low interest rates. This segment contributes around 17.4% of total revenue.

farm loans

Bajaj Finance also covers the remote rural area and provides a credit line specifically for farmers in the rural sector. Bajaj Finance's New Kisan Credit Card Scheme offers loans and mortgages for land development and farm equipment at a low interest rate and a hassle-free incorporation process. With attractive growth in rural areas, this segment contributes 12.7%.

commercial loan

India is emerging as the startup capital of the world. Today, more and more companies require short-term loans, such as covering operating expenses, purchasing machinery, etc. Bajaj Finance offers up to Rs.45 lakhs. with a competitive interest rate that contributes 7.2% to revenue.

mortgage loans

Mortgage loans or secured loans are given against collateral. Bajaj Finance offers loans up to Rs 5 crore against property. Very popular in urban areas and this item contributes 11.7% of the total revenue.

loans against securities

Similar to property loans, Bajaj Finance is also involved in providing financial assistance against securities. This contributes 5.1% of the total revenue.

Bajaj Finserv:income streams

Bajaj Finserv is a financial services division of Bajaj Holding and Investment Ltd. Unlike Bajaj Finance, it focuses on a larger scale by offering services in the asset management, wealth management and insurance sectors.

Life insurance

In the graph above, we can see that 26% of the contribution is paid by the life insurance industry to the revenue. Bajaj Finserv has been in a joint venture with the German multinational Allianz SE since 2001. Bajaj Allianz Insurance offers products in the life insurance sector related to financial planning and security.

general titles

With the joint venture with Allianz SE. Bajaj Finserv offers general insurance products that cover all insurances except life insurance such as car health, fire travel, etc. and are known as Bajaj Allianz General Insurance. This segment contributes with 29% of revenues.

Retail Financing

Retail financing contributes 44% of total revenue and mainly offers credit lines to customers. Drawing its popularity from cities, it has become one of the biggest contributors to the credit cycle in India.

windmills

Bajaj Finserv owns and operates 138 wind turbines with a capacity of 65.2 MW. Bajaj Finserv is taking steps towards a green and renewable future. It contributes about 0.04% of revenue.

other investments

Bajaj Finserv's investments account for 0.8% of revenue.

basic measurements

Let's compare Bajaj Finance vs Bajaj Finserv with financial parameters from investment point of view

Income (Increase at top)

• Bajaj Finserv, the parent company of Bajaj Finance, has the highest turnover, but if we compare the CAGR over 5 years, Bajaj Finance leads with 23.00% earnings growth and Bajaj Finserv with 11.45%.
• Revenue for Bajaj Finserv grew 15.79% 3-year CAGR and for Bajaj Finance was 19.94%.
• Bajaj Finance saw continued growth in AUM over the year. In FY21-22, Bajaj Finance grew by 26.3% (YoY) to Rs.181,300 Cr.

Net income (bottom line growth)

• The share price of Bajaj Finance has increased 3.5 times over the past 5 years and is trading at Rs. 1,701 in July 2017. It is now at Rs. 6255!! While the share price of Bajaj finserv increased by about 2.5 times
• Bajaj Finserv is highly dependent on the performance of its subsidiaries, which affects its profitability. Although Bajaj Finance is an independent company, its performance is reflected in its earnings growth
• Taking into account the future potential of the insurance industry. Bajaj Finserv is expected to benefit greatly from its insurance division.

Let's compare Bajaj Finance vs. Bajaj Finserv for today's finance

last savings

bajaj finance

• In FY21-22, Bajaj Finance net income grew by 84% (YoY) with a profit of Rs. 2125 Cr. with the largest contribution from Net Interest Income (NII) growing by 40% (YoY) to Rs.6335 Cr.

And the income 8532 Cr.

• Bajaj Finance showed improvement on the asset quality front with its net NPA showing a steady decline currently at 0.78%. in the third quarter of 21-22.
• Bajaj Finance has increased its client base by 26 lakhs with a total client base of over 5.54 Cr.
• The liquidity buffer was reduced to 14,300 Cr, reflecting the company's more aggressive approach to lending.

Bajaj Finserv

• In FY21-22, Bajaj Finserv reported a net profit of Rs. 2,349 Cr. and revenue of Rs. 17,586 Cr.
• In the third quarter of 21-22, Bajaj Alliance General Insurance continued its strong performance, while Bajaj Alliance Life Insurance performed exceptionally well with 68% growth in newly assessed premiums.
• Total revenue increased 10.4% (y/y) but auto sales remain disappointing

With Bajaj's impressive financial performance, let's look at the other 2 subsidiaries:

General Insurance Bajaj Allianz

• Net premium increased by 5% to Rs.1930 Cr.
• AUM increased by 10% to Rs. 23977 Cr.
• High solvency ratio of 333%

Bajaj Allianz Life Insurance

• Net premium grew by 39% to Rs.2377 Cr.
• 18% AUM growth to Rs. 83149 Cr.
• High solvency ratio of 604%

Let's compare Bajaj Finance vs Bajaj Finserv with a more realistic approach

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Technical analysis

bajaj finance

• Looking at the Bajaj Finance price chart, it shows a gradual increase in stock prices over the period.
• The trendline and 200-day moving average were never broken, except during a Covid holiday, but they rebounded with even greater force.
• Bajaj Finance gave 200% higher returns compared to the Nifty 100 indices.
• Being a multi-exchange investment for at least 5 years that has attracted a large number of PEs among its peers is a red flag.

Bajaj Finserv

• Bajaj Finserv has a similar pricing schedule to Bajaj Finance. As holding.
• Bajaj Finserv envisions growth-oriented approach with EPS of 286 and ROE of 12.
• Equity prices remain above trend and have a 200-day moving average over the period, excluding Covid 19.
• After an excellent run in FY21-22 with the market correction since January. Bajaj Finserv has taken a huge hit with high net worth (HNI) and retail individuals reducing their holdings from 9.55% to 7.38% today.
• This drop in participation is reflected in share prices.

recent developments

• Looking at the current scenario, the insurance sector appears to have a promising growth outlook with opportunities to achieve greater penetration in the core segment of regions that present a favorable scenario for Bajaj Finserv.
• Keeping its liquidity ratio on the high side, Bajaj Finance operates in a comparatively low risk market.
• Bajaj Finserv plans to enter the digital health sectors, which will allow the company to reach a wider range of populations.
• Bajaj funding is being raised aggressively now, raising funds through debt issuance up to the cap of 2.25 lakh Cr.

Closing: Final Verdict

Analyzing the above, both companies have solid fundamentals. Since both companies are growing, they have moved aggressively in their business segment, so although their PE may be high, they promise to deliver the same growth in the future as well.

But considering the growth during the period, the steady increase in AUM and the future prospects of far reaching customer centric services, Bajaj Finance looks like a much more favorable choice over Bajaj Finance versus Bajaj Finserv.

But in Bajaj Finserv's favor is the growth of its subsidiaries, Bajaj Finserv should also prosper.

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