NBFC-giant Bajaj Finserv skyrocketed by nearly 8% on Tuesday after the shares turned ex-split and ex-bonus ahead of their record date. Investors held a buying sentiment throughout the trading session. The large-cap company has announced 1:1 bonus shares and a 5:1 stock split for eligible shareholders. Through these incentives, Bajaj Finserv encourages small potential shareholders to partake in the company’s future. After the ex-date, Bajaj Finserv shares have become cheaper and affordable for both new and existing investors.
Bajaj Finserv has set September 14 as the record date for both bonus issue and stock split. Accordingly, the shares have corrected on September 13 which is the ex-date for these benefits.
On BSE, Bajaj Finserv shares rose by ₹68.65 or 4% to settle at ₹1784.45 apiece. The shares have touched an intraday high of ₹1846 apiece – resulting in at least a 7.6% jump in the day.
The NBFC’s market valuation is around ₹2,84,229.95 crore.
Last month, while announcing the stock split and bonus issue, Bajaj Finserv said, “the Company and its subsidiaries have grown significantly, in terms of business and performance, over the years. This is reflected in the share price of the Company, which touched a peak of Rs. 19,325 in October 2021. The price since then has hovered around ₹12,200. Currently, the retail/individual shareholders comprise 98% of the total number of shareholders holding around 17.52% of the paid-up value of shares. Amongst its peers, the share price of the Company is one of the highest while having one of the smallest capital bases.”
It added, “As and when the stock price rises further, it will be increasingly difficult for small potential shareholders to partake in the company’s future.”
Bajaj Finserv bonus issue
The NBFC has announced a bonus issue of 796,404,635 equity shares having a face value of Re 1 each fully paid up. The ratio of bonus shares is 1:1, simply put, Bajaj Finserv will issue one bonus equity share for every existing fully paid-up equity share.
Bajaj Finserv’s free reserves required for implementing the bonus issue aggregate to over ₹79.64 crore.
Notably, as of March 31, 2022, the company’s free reserves balance stood around ₹4,185.56 crore.
Bajaj Finserv stock split
The company will split each existing equity share having a face value of ₹5 each into five equity shares having a face value of Re 1 per equity share fully paid up — taking the ratio to 5:1.
The company plans to complete the stock split process on or before September 26, as per the regulatory filing.
Should you buy Bajaj Finserv shares after the ex-split and ex-bonus date?
In its research note on Tuesday, ICICI Direct’s analysts said, “Ex-split & bonus date is today and the record date is September 14. Accordingly, the share price has been adjusted to opening price of ₹1757/share against closing price of ₹17158/share yesterday.”
On stock valuation, the analysts note said, “Bajaj Finserv’s share price has grown by over~3x in the past five years,” adding, “We revise our recommendation from BUY to HOLD.”
“Pick-up in lending AUM and anticipated healthy growth in insurance segment coupled with focus on digitisation remain positives. However, holding company discount has narrowed with recent run-up in stock price. Thus, we value Bajaj Finserv at ~33x FY24E EPS (factoring 10% discount) and revise our target price to ₹1850/share,” the analysts note added.
Among key triggers for future performance as per ICICI Direct’s note are —
– Digital transformation, client additions, and ambitious targets on AUM growth (25-27% CAGR to ₹3.8–4 lakh crore by FY25) to boost profitability
– Product launch and selective product mix to aid premium growth; focus on claims and opex to aid earnings in life and general insurance business
– Healthy traction in all businesses to drive consolidated revenue & earnings
Bajaj Finserv is the holding company for the businesses dealing with financial services of Bajaj Group. The company serves millions of customers in the financial services space by providing solutions for asset acquisition through financing, asset protection through general insurance, family protection, and income protection in the form of life and health insurance, and retirement and savings solutions.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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