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MOSL: BAJAJ FINANCE (Buy)-BAJFIN and the entire Financial Services group set to benefit from the new AMC license in the parent entity

BAJAJ FINANCE: BAJFIN and the entire Financial Services group set to benefit from the new AMC license in the parent entity

(BAF IN, Mkt Cap USD56.4b, CMP INR6943, TP INR7700, 11% Upside, Buy)

 

• Bajaj Finserv has got an in-principle approval from SEBI for sponsoring a Mutual Fund (MF). While the opportunity is huge, given the under penetration and financialization of savings in the country, the competitive intensity in the industry is high with 44 players.
• Bajaj Finserv has inherent advantages in its business model, given its presence in the Retail Finance, Life Insurance, General Insurance, and Securities businesses. Strong brand presence and wide distribution reach are key pillars for garnering AUM, where BAGIC, BALIC, and BAF have proved their expertise. Cross-sell to the existing customers of these businesses is a huge opportunity.
• Technology investments will be a key differentiator, given the emergence of new-age Fintech players. Akin to the strong growth displayed in other lines of businesses, Bajaj Finserv will be able to deliver an industry-leading growth in the AMC business as well.
• Barring any new COVID-related disruptions, we expect BAF to deliver ~21% AUM growth in FY22E and 25% CAGR thereafter. This Financial Services group already had Lending products, General and Health Insurance, Life Insurance, and Broking services. With an AMC in the fold, the missing piece of a captive MF investment product (other than deposits/traditional savings/ULIP products) will also be complete. This should aid the fee and commission (particularly distribution) income of BAF, which was already exhibiting high growth until Mar'20 when COVID-19 struck.