Analysts express concerns about the ban’s impact on Bajaj Finance’s new customer acquisition strategy. The digital EMI cards affected by the ban contribute significantly, accounting for 18-20 per cent of new customer acquisitions, with quarterly digital EMI card acquisitions averaging around 35 lakh. This has led to apprehensions about potential profitability drags if the embargo persists.
RBI had asked Bajaj Finance to stop sanctioning and disbursing loans under the ‘eCOM’ and ‘Insta EMI Card’ products, with immediate effect.
“If the embargo continues for a longer period, it may impact new customer acquisition as quarterly digital EMI cards acquisition account for 18-20 per cent of Bajaj Finance’s new customer acquisitions of around 35 lakh per quarter,” IIFL Securities said.
The Insta EMI card, providing pre-approved sanctions up to Rs 2 lakh for online and offline purchases, is a cornerstone product for Bajaj Finance. The ‘eCOM’ product, facilitating online personal and business loans, has played a crucial role in financing 28 lakh e-commerce purchases in the fiscal year 2022-23. The ban on these products raises questions about the potential impact on the company’s loan disbursements and overall business trajectory.
Analysts optimistic
Several prominent financial institutions, including CLSA, Jefferies, and Motilal Oswal, continue to maintain a ‘buy’ rating on Bajaj Finance stock. While acknowledging the concerns raised by the RBI directive, these analysts believe that the impact on quarterly Assets Under Management (AUM) growth is expected to be in the mid-single digits.
“We earlier estimated a 10 per cent y-o-y growth to 31 lakh e-COM transactions in FY24. The silver lining is that this RBI Ban has come after the festive period, wherein Bajaj Finance generates 3.5-4.0 lakh loans monthly on e-commerce platforms,” Motilal Oswal Securities said.
Brokerages like Citi, Morgan Stanley, and Macquarie express positive sentiments, with stock price targets ranging from Rs 8,375 to Rs 10,300. The market appears to view the non-adherence as an operational issue rather than a fundamental flaw, with expectations of a corrective course in the next few quarters.
