If You'd Invested 100,000 in Bajaj Finance Stock 10 Years Ago, Here's How Much You'd Have Today

Bajaj Finance is known for its innovative financial products.

Established under the esteemed Bajaj Group umbrella, the company has redefined consumer finance, catering to a diverse clientele ranging from individuals to businesses and from urban to rural markets.

With its robust financial management and innovative approach to business, Bajaj Finance has proven its growth abilities.

It has a reliable record of paying consistent dividends.

This has made the company one of the largest wealth creators for investors. Let's take a look...

About Bajaj Finance

Bajaj Finance is one of the largest NBFCs with a customer base of 73 million (m).

The company is mainly engaged in the business of lending and has a diversified lending portfolio across retail, small and medium-sized enterprise (SME) lending, rural, and commercial lending. It also accepts deposits from the public and corporates.

Bajaj Finance has two wholly owned subsidiaries, Bajaj Housing Finance and Bajaj Financial Securities, through which it offers home loans and brokerage services.

Bajaj Finance vs Sensex

If you had invested Rs 100,000 in Bajaj Finance 10 years ago, your investment would be worth Rs 3,533,736.8 today.

This is a whopping 3,433.7% return in 10 years. Sensex on the other hand would have given you a return of 208.5% during the same period.

The stock has also performed consistently since it was listed on the exchanges.

Since its listing in 2002, the company has rallied over 116,196.5%.

Despite the lows caused by the coronavirus pandemic in early 2020, Bajaj Finance's shares have displayed remarkable resilience, bouncing back strongly.

Why did Bajaj Finance Perform better?

Bajaj Finance's outperformance can be attributed to several key factors. First, being part of the Bajaj group grants it a strong brand reputation and trust among consumers.

This credibility translates into higher customer acquisition and retention rates. Second, the company's focus on the affluent segments allows it to offer tailored financial products, tapping into a customer base with higher purchasing power and lower credit risk.

Moreover, Bajaj Finance's robust cross-selling strategy enhances revenue per customer.

Leveraging deep data analytics, the company makes informed decisions, targets the right customers, and personalises offerings effectively.

The company's agility and continuous innovation enable it to adapt swiftly to changing market dynamics.

Embracing digital transformation, Bajaj Finance enhances customer experiences and operational efficiency. By prioritising a customer-centric approach, it fosters long-term loyalty and profitability.

Further, the company maintains a well-diversified revenue stream.

Bajaj Finance operates in consumer, SME, rural, commercial, mortgage, and securities lending. Consumer loans dominate revenue at 45.9%, followed by SME (17.4%), rural (12.7%), mortgages (11.7%), commercial (7.2%), and loans against securities (5.1%).

Robust Financial Performance

The company has demonstrated remarkable growth in its top line, soaring from Rs 40.7 billion (bn) to Rs 549.8 bn in FY24, marking a commendable compound annual growth rate (CAGR) of 29.7%.

Concurrently, its net profit has surged from Rs 7.2 bn in 2014 to Rs 144.5 bn in FY24, reflecting an impressive CAGR of 34.9%.

Additionally, the assets under management (AUM) have witnessed substantial growth, boasting a CAGR of 29.9% from Rs 240.6 bn in 31 March 2014 to Rs 3,306.2 bn in 31 March 2024. This reflects the company's adeptness in managing client funds and implementing effective investment strategies.

Furthermore, the capital adequacy ratio (CAR) consistently surpasses regulatory requirements, indicating a resilient capital base conducive to sustaining growth and mitigating potential losses.

Meanwhile, the leverage ratio has remained within prudent levels, underscoring the company's sound balance sheet and management practices.

Bajaj Finance's Growth Story: From Two-Wheeler Financier to NBFC Giant

From its humble beginnings to becoming a leading NBFC in India, the company has carved a unique path. Here's a glimpse into their impressive journey:

Early Days (1987-2000): The Two-Wheeler Specialist

• Founded in 1987 as Bajaj Auto Finance, the company initially focused on financing two-wheeler purchases from Bajaj Auto, leveraging the brand legacy.
• This laser focuses on a specific market segment helped them build expertise and establish a strong reputation.

Diversification and Expansion (2000-2010): Beyond Two-Wheelers

• Recognizing the potential in the growing consumer durables market, Bajaj Finance strategically diversified its product portfolio.
• They ventured into financing consumer durables like TVs, refrigerators, and washing machines, catering to the rising aspirations of the Indian middle class.
• This diversification not only mitigated risk but also broadened their customer base.

The Digital Revolution (2010-Present): Embracing Technology

• Bajaj Finance understood the power of technology and heavily invested in building a robust digital infrastructure.
• They launched a user-friendly mobile app and online platform, streamlining loan applications, processing, and repayments.
• This digital focus not only enhanced convenience for customers but also improved operational efficiency.

Growth and Innovation (2010-Present): A Multi Product Giant

• By offering a wide range of financial products, including personal loans, SME financing, and loans against property, Bajaj Finance became a one-stop shop for various lending needs.
• They continuously innovated, expanding their reach to rural areas and leveraging data analytics to improve risk management.
• This resulted in significant growth, with a customer base exceeding 83 m and Assets Under Management (AUM) surpassing Rs 3,306.1 bn (as of March 2024).

What Next?

Looking ahead, the company expresses confidence in adding 12-14 million customers in FY25. Anticipating robust growth, the company estimates an AUM increase of 26-28% for the financial year.

This growth will be fuelled by recently introduced secured businesses in FY24, including loan against property (LAP), new car financing, and tractor finance.

The company foresees the cost of funds reaching its peak by July-August 2024, with the AUM composition shifting towards secured assets. Consequently, a 0.3-0.4% moderation in net interest margin (NIM) is expected over the next two quarters from current levels.

For FY25, the company projects the loan loss to average AUM in the range of 1.8-1.9%. While remaining cautiously optimistic about FY25, the company anticipates profit growth to be more rear-ended, attributed to the moderation in NIM in the first half of FY2025.

Conclusion

Bajaj Finance, is a well-diversified financial services company, concentrating on improving its distribution network and physical presence by adding more offices across the country.

It is also expanding its offerings by adding new products to its already diversified portfolio.

Recently, it also added new car financing and medical equipment financing to its portfolio.

As per the National Council of Applied Economic Research (NCAER), the Indian finance sector is anticipated to experience a CAGR of 12.7% from 2022 to 2027.

This growth presents fresh avenues for Non-Banking Financial Companies (NBFCs) like Bajaj Finance to address the evolving needs of businesses and consumers alike.

As NBFCs continue to garner a large share of the credit economy, check out which is the Best NBFC stock: Bajaj Finance vs Bajaj Finserve.

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