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Before starting the video I would like to thank you all Without your support, the growth that we have made in the past 6 months, we would not have been able to do that And I hope we continue to get this support from you all Because we have a very long journey ahead and going through it without your support will be very difficult And after this, the first video after 100k subscribers, I have brought for you In which I am going to talk about one stock Such a large cap stock Which in the past year has given more than 80% returns If I talk about the past five years Then that stock in the past five years has given more than 1000% returns The name of this stock is Bajaj Finance ltd I, Jagdeep Singh, welcome you to the Groww channel Let us start today's video In which we are going to talk about Bajaj Finance ltd We are going to talk about its business model About its financials And we will conduct a valuation and see the growth that it has had in the recent times How good that is And how it can perform in the coming time And at the end of the video I will also tell you The recent quarter result that came out, how Bajaj finance performed in it In the past year, there were a lot of problems in the NBFC sector Because of which very big companies Like DHFL IIFL And Indiabulls housing finance ltd Who were very famous at one time Their share price came down a lot Like if I talk about DHFL At one time their share price used to trade at around 400-500 If I talk about its share price today That trade at 11 or 12 Rs But even in this environment how was Bajaj finance able to give its investors an 80% return What was different in their business model And how do they operate because of which they were able to give their shareholders such good returns First, I will talk about NBFC's business model How does NBFC business model operate If I talk about NBFC then it is a financial intermediary Which takes money from different places and keeps it with them And further lends that money Like if I talk about Bajaj finance it is a deposit taking NBFC Which means that it takes money from retail investors in the form of deposit And apart form this it takes money in the form of bonds and also takes loans They take that money and further lends it to people The borrowers who need money, they give it to them And their interest margin, works like income for them If I talk a little about Bajaj finance's history then it used to operate with Bajaj auto But after that they were separated Because its founder thought that they have a big opportunity in the NBFC sector By which they can make themselves a separate company and capture the opportunity And because of this, Bajaj finance did good work as well Not only did they give their promoters a lot of money but also their shareholders Now I will talk about that small difference That was in Bajaj finance that made it different form the other NBFC's And even in this bad environment, it made good returns If I talk about Bajaj finance, it focused a lot On lending to consumers or retail investors And it is said that a company that lends to retail investors They give money in very small ticket sizes But their risk becomes very less Their risk becomes diversified So here like I told you Bajaj finance lends its money in different sectors First we will talk about how much their asset under management is And in which sector have they given money in how much percentage And how much growth has taken place in the recent times First if I talk about Baja finance's AUM which is Asset under management How much money do they have under their management I will compare that to the financial year 2015 In the financial year 2015 Their AUM used to be 32,000 crores But if I talk about 2019 So this number increased from 32,000 crores And reached 1,15,000 crores Which means there was a lot of growth here, the growth happened exponentially In their AUM As you can see on my screen, I have taken this graph from Bajaj finance's annual report Which tells us that in Bajaj finance's consolidated AUM How the growth was from financial year '15 Financial year 2019 The growth rate in their AUM is a CAGR of 32% Which is a very big number Now you must have understood that the money and the AUM That Bajaj finance had has increased a lot in the past few years But now the question comes that if Bajaj finance Has an AUM of around 1,15,000 crores How did they distribute it? Because one NBFC lends money in every sector And it becomes very important for risk management How much money the NBFC gave and in which sector And in the recent times, in that AUM in that particular sector Was their growth or did the NBFC reduce Let us talk about how much money Bajaj finance has put and in which sector If I talk about where and how much money Bajaj finance has put So the largest amount of Bajaj finance's money has been in the form of mortgages Now you must be thinking what mortgage is It is lending money at a place where you have a collateral Now consider that you came to me to get some money And I said that I will give you the money but for that you have to give some collateral Which means that you have to keep something as mortgage And against that I will give you money The biggest benefit of this for me, an NBFC or for any company is That if the opposite party defaults there I have something in collateral because of which my risk reduces a lot So if I talk about Bajaj finance 30% of their AUM is in the form of mortgage And if I compare this number to the last financial year In the last financial year around 23,000 crores was in the form of mortgage Which has increased now to become 33,000 crores Which means that even in the mortgage sector, their growth was around 40% In the past year After mortgage the second sector in which Bajaj finance paid a lot of attention The name of that sector is b2c consumer business Bajaj finance paid a lot of attention to this sector And out of their AUM which is 1,15,000, 20% They have put in consumer business b2c And here their risk reduces a lot And this is the same differentiation because of which When the other NBFCs went into problems Bajaj finance didn't go into that problem Because any business that focuses on this sector a lot Their risk is very high Because here the counter parties are very small ticket sizes And if there is some failure here, there isn't much loss If I talk about the finanical year '18, then Bajaj finance's AUM in b2c consumer business was 15,000 crores Which has increased now to become 23,000 crores Which means that they have had a growth of 49% in this sector In the past year After b2c consumer business the sector in which they had a lot of growth Under AUM, in the past year then that sector is SME sector Small and medium enterprise sector Where their loan book has grown a lot in the past year If I talk about their loan book currently Then out of that 15,000 crores of investment has happened in the SME sector Apart from this there is another sector which at one time was their main sector Auto sector As you know that Bajaj finance came out of Bajaj auto In the starting time, their main focus was in the auto sector Even today their growth in the auto sector was very good If I talk about their AUM in the past year If I talk about their AUM then that has increased from 6000 crores to 9000 crores in the past year And even here their growth has been around 50% Which means that their core business of the auto sector Even today they have kept it fully intact But even today there is some problem in the auto sector and it hasn't recovered fully So if in the coming time, the auto sector recovers properly It is possible that their AUM in the auto sector can grow very well in the coming time As you can see on my screen, this is that chart about which I told you in great detail How Bajaj finance's AUM is divided and in which sector But from this chart I am going to tell you a very interesting thing That in rural b2c business Bajaj finance's AUM has grown by 70% From financial year '18 to financial year '19 Because in the financial year '18, their AUM in this sector was 4000 crores Which has increased now to become 7000 crores Which means that Bajaj finance has penetrated a lot in the rural b2c business The reason for this is that there wasn't much penetration of NBFCs in rurual b2c businesses At the level that people were expecting Bajaj finance is taking good advantage of this And they believe that this sector can be targeted well in the coming time The benefit of this happens in two ways, first They are able to give loans at better interest rates Second, their risk reduces a lot because their ticket size is smaller And the chances to default also reduce a lot Now friends, I told you how much of Bajaj finance's AUM is in which sector But it is very important for any NBFC For a deposit taking NBFC, how much deposit they are going to take Because the amount of deposits people make in the form of FDs Better it is for the liquidity position of that NBFC They will get more money at a lower interest rate Which they can further lend If I talk about Bajaj finance's deposit book then that is around 13,000 crores And if I compare this to the financial year '18 Here their growth is around 69% Which means that there was good growth in their deposit book In the past financial year Let us talk about Bajaj finance's financials Let us find out how this company has performed financially in the past year In the recent quarter And what are those parameters that are very important When you want to valuate any NBFC Before getting into the financial I will talk again about the business models of NBFCs I told you in the beginning of the video itself that they take money and further lend it It is very important here that the money they got They got it at a lower interest rate And the money they further lend, the should be able to lend it at a higher interest rate Because the different between the two is the source of their income Like I will give you a very simple example There is an NBFC A And they get the money at a 10% interest rate And the company lends the money at a 20% interest rate And that difference of 10% is the profit for the company In the same way it is very important for Bajaj finance how their net interest margin is So if I talk about Bajaj finance net interest margin then that is around 11% That is most of the time stayed constant, there isn't much deviation there If we compare it to the previous financial year Even if we compare it to the current quarterly result So this number of their being 11% is a very good number And in the case of their net interest margin, it is one of the best numbers in the NBFC sector After net interest margin, we will talk about the total revenue How Bajaj finance's revenue has increased in the past year If I talk about Bajaj finance's revenue, so the result that came out in 2019 They had reported their revenue to be more than 18,000 crores But if I compare it to the previous year which is financial year 2018 Their revenue was around 12,700 crores Which means there was more than a 40% increment here After total revenue if I talk about the income they reported in the financial year 2018 The company has reported an income of 3995 crores And the last year was above 2000 crores Which means even here there was increment of their income by around 60% The increment in their revenue was around 45% And the increment in their net income was around 60% Which means the company has performed very well in the past year in terms of financial numbers Now let us talk about NPAs, Non performing assets Like I always tell you when you talk about a bank or an NBFC Any company that lends its money, their NPA is very important for them Non performing assets which tell us that if they give someone Rs 100 from their AUM Now much have the chances lowered for their money to come back Now consider that any bank or NBFC, if their NPA increases That can be a little dangerous And a higher NPA can be very bad for an NBFC And for any financial institution If I talk about Bajaj finance's NPA today then that is around 0.6% Which is a very low number which you can compare with very good banks I haven't compared this to any NBFC because Because the NPAs for other NBFCs is a very high number Apart from this it is very important for us to compare it to last year Whether their NPA has increased to decreased So if I talk about Bajaj finance's NPA in 2018, that was aroun 4.3% Which means that Bajaj finance's NPA had reduced from 4.3% to 0.6% In the past financial year After financials let us talk about the recent quarterly result of Bajaj finance How Bajaj finance has performed in this quarter So if I talk about how much Bajaj finance reported its AUM to be in the recent quarter So Bajaj finance has said that their AUM has increased from 1,15,000 crores to become 1,45,000 crores Which means that in comparison to the last financial year, in the past three quarters There was a lot of growth in Bajaj finance's AUM After this I will talk about NPA, like I just told you That the NPA that Bajaj finance reported in the recent financial year '19 That was 0.6% If I talk about the quarterly result of this financial year In the report of this quarterly result they have reported their NPA to be around 0.7% Which means that their NPA has increased a little in the past year Now what is most important for a company is to see how their profit was in the past year If I talk about Bajaj finance's profit in the past year They have reported a profit of 1,614 crores If I compare it to the same quarter of last financial year That time their profit used to be 1,016 crores Which means that their profit has increased by around 60% In the past quarter on quarter financial year So this video we got was on Baja finance so that you can get an understanding About how NBFCs operate and what the financials of Bajaj finance is And we tried to explain this to you in the form of a case study So that you can apply this same knowledge on any NBFC And do a fact check to see how this company can perform in the coming time And how they performed in the previous year And I will end this video with a very interesting fact You must have heard a lot of time that Bajaj finance does a lot of deals on different things That you can go and buy something at a 0% interest rate So you must be thinking that if Bajaj finance lends something to someone at a 0% interest rate How do they earn? So here, Bajaj finance does a direct deal with a lot of manufacturers When those manufacturers want to push a product So they push that product through Bajaj finance at a 0% interest rate Through which they both get a benefit Manufacturers can push those items in one way And Bajaj finance get a little profit from those manufacturers, and apart from that They get new customers and Bajaj finance often tries That they can cross sell new products and loans to their existing customers So that their risk also reduces there So when they give a 0% interest rate, it is a win win situation for them Both for manufacturers as well as for Bajaj finance So this video we got was purely for educational purposes so that you can get an idea about how NBFCs perform We absolutely do not give any recommendation of buying or selling in any video And at the end of the video I would like to thank you all again That you have supported us and we have reached 1 lakh subscribers Please continue to support us in the coming time I would like to tell you again There is only one objective for your videos and that is to educate you And to help you become a good and an intelligent investor If you haven't yet subscribed to our channel then please subscribe So that you don't miss any of our videos If you liked this video, press that like button and comment and answer our question Do you think we should invest in Bajaj finance in the coming time or not? And whatever your answer is, tell us the reason behind that And tell us why you gave that answer so that we can all learn from each other Happy investing!