Uncategorized – Masked Investor

Bajaj Finance Vs Bajaj Finserv: Which is Better?

Bajaj Finance

As the Bajaj Finance is a CONSUMER financing company, the business is directly proportional to number of consumers it has. Company has a customer franchise of 5crore which is surely not a small number. Now, the important thing is the no of customers are constantly increasing. (They have added 4.4crore customers in 2021 which is heavily affected in covid)
The best part about Bajaj Finance is its cross-selling abilities. In above stated 5crore customers, approximately 70% will cross-sell that means they have a strong base of repetitive customers.
Great data analytics – They knew the spending behaviour of 5crore customers. Bajaj Finance is a NBFC (Non-Banking Finance Company), but it works like a Fin-tech company where they really focus on data analytics. (They are hiring IT guys from IITs just like Google and Amazon)
Asset under management (AUM) stood at 1.8lakh crore which is more than many banks in India.
Company’s deposit book = 30000crore

Bajaj Finserv

Bajaj Finserv is the holding company of Bajaj Finance, Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance.
They have got permission for setting up an AMC (Asset Management Company) from SEBI
It has given 500% return in last 5years.
Company is highly innovative and making constant & continuous improvement in features of products (simple example – offers of Bajaj Finserv cards)
There is an opportunity of value unlocking in this, because Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance are not yet listed in Stock Market. As both companies are really doing great in their respective fields, Bajaj Finserv as a holding company going to get benefits from it.

Bajaj Finance Vs Bajaj Finserv: Which is Better?

Now the million-dollar question is which is better and in which company to invest. Okay, let’s calculate.

Bajaj Finance Market Cap = 4.7 lakh crore

Bajaj Finserv Market Cap = 2.9 lakh crore

FDI’s limit in Insurance Sector in which Life Insurance and General Insurance are included is increased from 49% to 74%. So, we can see the benefit of this announcement in the market. As it is a growing sector in India, the capital requirement is very high. The 74% stake of Bajaj Finserv in Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance will help Bajaj Finserv to get the capital for growth through divesting.

And Bajaj Finserv has Bajaj Finance’s 52% shareholding.

So, to calculate market cap of Bajaj Finserv = 52% of Bajaj Finance + 74% of Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance = more than actual market cap of Bajaj Finserv

So here we conclude that Bajaj Finserv is a value company as it is trading lower than its actual valuation whereas Bajaj Finance is purely dependent on growth.

Are You Confused? I have a simple solution for you

Both are great great great companies. So, what’s my take on this

If you are a Growth Investor, you should look closely at Bajaj Finance
If you are a Value Investor, you should look closely at Bajaj Finserv

Note that your investing period should be more than 5yrs to make really good returns. And if possible just don’t sell these stocks for a really really really long period.

[Disclaimer: Investing in Stocks and Mutual Funds are subject to market risks, read all scheme-related documents carefully. This blog is for educational and informational purposes only. This Blog is not meant for advisory/recommendation purposes.]