Is Bajaj Finance a Good Buy for May 2020?
Bajaj Finance is a growing and stable entity in the Non-Banking Finance Company (NBFC) sector. As an investment opportunity, it has been a rewarding choice with consistent growth and high returns over the past five years.
Strengths of Bajaj Finance
Bajaj Finance boasts a remarkable customer base, with over 16.66 million customers holding a wallet account and 12.98 million customers having a Unified Payments Interface (UPI) handle. Additionally, the company recorded 15.92 million bill payment transactions through their bill pay service during the fiscal year 2022-2023, showcasing its robust customer engagement and the reliability of their financial services.
Furthermore, the company has demonstrated financial resilience, having disbursed 29.6 million loans during the same period, marking a 20% increase over the previous year. This growth trajectory is a clear indicator of the company's financial health and its capacity to sustain its operations even during economic fluctuations.
Financial Ratings and Reputation
The financial health of Bajaj Finance is further validated by the high credit ratings it has received. Bajaj Finance holds CRISIL's AAA/Stable and ICRA's AAA/Stable ratings. These ratings reflect the company's commitment to sound financial management and its ability to meet financial obligations, reinforcing its reputation in the market.
Investment Strategy
While the stock has shown a strong performance and is a promising investment, the current market conditions and economic slowdown necessitate a strategic approach. Following a buy on dip strategy can be particularly beneficial. This strategy entails purchasing shares when they experience temporary price drops due to market volatility or economic downturns, thus helping to average the purchase price over time. This is especially useful in a pandemic situation where buying opportunities can arise.
Outlook and Valuation
Bajaj Finance has experienced extraordinary growth, delivering returns of over 50 times in just four years. While the stock has already reached significant heights since 2015, it still presents an investment opportunity for those looking for long-term gains. At a current valuation of around 10 times the Book Value and a Price to Earnings (P/E) ratio of about 50, it might not attract those seeking a cheap entry point currently.
Nonetheless, fundamentally, Bajaj Finance stands out. Over the past year, the company has delivered consistent and robust performance, providing more than a 40% net profit every quarter. This consistent profitability positions it as one of the best stocks in the NBFC sector, making it a strategic investment option.
Conclusion
Bajaj Finance remains a robust choice for long-term investment due to its strong fundamentals, customer base, and financial performance. While it may not be a cheap buy, the stock's consistent returns and market position make it a notable investment for those willing to hold it for the long term.
Notes: Investment decisions should always be made after careful analysis and consideration of current market conditions, risk factors, and your personal investment goals. This article is for informational purposes only and should not be considered financial advice.