Bajaj Finance share price rises over 4%; should you buy or avoid the stock?

“A meeting of the board of directors of Bajaj Finance will be held on Thursday, 5 October 2023 to consider the proposal for raising funds through any or all of various methods including by way of preferential issue, qualified institutions placement, subject to such regulatory and statutory approvals as may be required, including approval of the shareholders of the company,” Bajaj Finance said in an exchange filing post market hours last Friday.

Bajaj Finance share price has underperformed the benchmark Sensex in the last one year. The stock has gained just about 7 per cent in the last one year against an over 15 per cent gain in the Sensex in the same period.

Bajaj Finance share price hit its 52-week high of ₹7,999.90 on BSE on July 5 this year and its 52-week low of ₹5,487.25 on BSE on March 20 this year.

Experts positive about the stock

Many experts and brokerage firms are positive about Bajaj Finance stock for the long term.

Brokerage firm Motilal Oswal Financial Services believes the stock can rise further after the company announced its plan for a capital raise.

“While we still do not have finer details on the game plan of Jio Financial, it has plans to initially foray into consumer and merchant lending. Some of the channel checks suggest that Jio Financial has already started consumer lending pilots in consumer durable/lifestyle stores owned by Reliance. This capital raise could then be a tacit acknowledgement that Bajaj Finance is readying its capital ammunition for how the competitive landscape is going to evolve over the next few years,” said Motilal Oswal.

The brokerage firm has a buy call on the stock with a target price of ₹8,800, implying an 18 per cent upside potential.

Motilal pointed out that Bajaj Finance’s digital ecosystem and ‘omni-channel’ transformation will provide it with good levers for increasing its fee income in addition to giving it the firepower for strong customer acquisitions and disbursement momentum.

“Management’s long-term RoE (return on equity) guidance stands at 21-23 per cent but at current leverage, it can clock

RoE of 24-25%. This capital raise could also be an attempt to bring the RoE within the guided levels. We model nearly 29 per cent AUM (assets under management) CAGR over FY23-FY25E for a sustainable RoE of 25 per cent,” Motilal Oswal said.

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Among the global brokerage firms, Jefferies has a buy call on Bajaj Finance with a target price of ₹8,830, according to CNBC-TV18.

“Assuming Bajaj Finance raises 10-15 per cent of net worth, the issue size may be about ₹8,000 crore. This would lead to the dilution of 2 per cent whereas FY24 EPS and BVPS may rise 6 per cent and 11 per cent, respectively. RoE may see a slight fall to 22 per cent,” CNBC-TV18 reported Jefferies saying so.

CLSAtoo, as per CNBC-TV18, has a buy call on the Bajaj Finance stock with a target price of ₹9,500.

Technical views on Bajaj Finance shares

Technical experts are also positive about the stock for the long term but they point out the stock’s near-term resistance and advise taking some profit away at this point.

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers pointed out Bajaj Finance share price witnessed a rally from ₹6,800 to ₹7,600.

He said as we advance, there are a couple of overhead resistances seen near ₹7,750, followed by ₹8,000 level. On the support side, ₹7,500, followed by ₹7,400 levels are credible support.

“If already bought then book profit near the resistance zone and wait for a dip to ₹7,400 for further addition of longs,” said Patel.

Gaurav Bissa, VP, InCred Equities underscored Bajaj Finance has been one of the most stable and consistent performers in recent times. It was immune to the incremental pressure seen in the benchmark indices as well as many of the large-cap stocks.

“The stock has gained 10 per cent in a swift manner. However, it is now approaching its most important resistance zone. The stock has failed to cross and close above the ₹8,050-8,100 zone in the last two years with four failed attempts seen which resulted in a strong correction,” Bissa pointed out.

“A weekly close above this resistance zone can propel the stock towards ₹9,000 level. Till the breakout is not confirmed, investors are advised to book partial profit at higher levels and those waiting for a fresh entry should do so only after breakout confirmation,” said Bissa.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Updated: 25 Sep 2023, 10:26 AM IST