Friends, a large-cap company has given its investors a return of 500% in 3 years till Feb 2020 but when the COVID situation came, this company came down by 7% and came down from Rs. 4800 to Rs. 800 It again starts its journey from there and makes a return of 60% to 70% which currently trades at Rs.3300 Friends, I am talking about an NBFC company which investors trust a lot with their investments This company's name is Bajaj Finance Limited Today we are going to talk about Bajaj Finance's fundamental analysis, its quarterly results after which we will discuss the difference between Bajaj Finance and Bajaj Finserv At the end of the video, I will tell you whether to invest in Bajaj Finance or not I, Jagdeep Singh, Welcome you to Groww's Youtube Channel Friends, before beginning this video, if you have not subscribed to Groww's channel yet then first subscribe to Groww's Channel cause in this channel we put two to three videos on educational purposes which can help you to become a good investor Let's start our today's video on fundamental analysis of Bajaj Finance Friends, Let's start with what is the difference Bajaj Finserve and Bajaj Finance? cause you might have noticed every time Bajaj Finance's shares goes up, Bajaj Finserv goes up as well and people get confused about what is the difference between these two so at the beginning of the video, we will try to explain the overall structure of Bajaj Companies which company has how much stake in other companies Friends, this screenshot has been taken from Bajaj Finance's investment presentation which explains you really well on which company is under which company under how much percent of stake If we talk about Bajaj Holdings & Investment Limited (BHIL) in the top, you can see companies which have a stake in Bajaj If we talk about Bajaj Holding & Investment Ltd, it has two companies under it The first company is Bajaj Finserv which is the Financial Services arm of Bajaj Holdings Bajaj Holdings has 39.16% stake in it The second company in which Bajaj holdings has a stake in is Bajaj Auto Limited at overall 33.43% If we talk about Bajaj Finserv, there are more extension of companies The company under Bajaj Finserv in which it has a share of 52.82% stake, Bajaj Finance Ltd There are two companies under Bajaj Finance Ltd, Bajaj Housing Finance Ltd, and Bajaj Financial Securities Ltd under both these companies, Bajaj has a stake of 100% so whenever you see the consolidated report of Bajaj Finance, their annual results or quarterly results in that result, Bajaj Housing Finance and Bajaj Financial Securities result is also added The other companies under Bajaj Finserv are Bajaj Allianz Life Insurance Company Ltd and Bajaj Allianz General Insurance Company Ltd These two companies also come under Bajaj Finserv, under which they have around 74% stake If you work under Bajaj Finserv, the overall return you will get into consideration with company's profitability in life insurance company and general insurance company, their results matter as well here If you invest in Bajaj Finance which is a listed company in which the impact falls onto that particular company Friends, If we talk about any NBFC, you might know its business model NBFC takes money from a place and gives to customers, the money lent to the customer by NBFC gets 10% return then and NBFC have to give a return of 5% on the amount then the difference of 5% becomes an earning for NBFC It is very important for any NBFC to know their Asset Under Management Asset under management tells us on the amount being lent by the NBFC ahead the more the growth in it, the more the chances of growing profit and business growth in the NBFC sector Now let's talk about Bajaj Finance's AUM what was the growth in this AUM in the last few years in which we will include financial year 2020's result too You can see on my screen on how did Bajaj Finance's AUM grow from the financial year 2016 to 2020 Overall CAGR has been at 35% which is considered to be a big no.
In AUM growth percentage In 2016, AUM was around 44k Crore which doubled by the financial year 2018 at Rs. 82,422 crore If we talk about it as in today in 2020 then the AUM has risen up to Rs. 147k crore It is a consolidated AUM wherein Bajaj Housing Finance is also included You can see the increase in growth percentage in asset under management in Bajaj Finance Now you know how Bajaj Finance's AUM grew but the important thing for you to know is in which sector is Bajaj Finance growing the most cause NBFC can lend their money in any sector but it needs to prioritize on different sectors depending on its business objectives Let's talk about how consolidated AUM of Bajaj Finance is distributed in different sectors from which we can get an idea of its focus sector in the coming days The biggest portion of Bajaj Finance has been given to mortgages As you know there's a lot of saving of money by lending to mortgages In the financial year 2020, total AUM in mortgages is 46,166 Cr and If I compare it with financial year 2019 then we can see an increment of 36% After this let's talk about B2C businesses wherein Bajaj Finance has put in a large amount from its AUM the amount is of Rs.31,256 Cr.
If we compare it with the financial year 2019 then this no. was Rs. 23k crore We can see an increment there of around 36% Except for B2C, there is one more place wherein there has been a 50% growth The name of this business is Rural B2C business It has an AUM of Rs 10,659 Cr as FY 2020 and if we compare it with FY 2019 then it was Rs. 7101 Cr Overall we can see an increment of 50% here Here we can see it has started giving more of its focus in Rural B2C business in comparison to before so we can expect a good increment in the days to come if it continues its focus on Rural area So friends, if we consider companies like banks or NBFCs then they are trying to enter rural sector cause friends, there are two benefits to the rural sector. First, the chances of losing money here are lesser cause the money invested here or are lent by companies are done in small ticket sizes so any companies when they give money in small ticket sizes then say if 1 or 2 parties didn't give the money back then overall their NPA doesn't get affected so like I told you there are two big benefits of investing in the rural side Firstly, As the ticket sizes are small, if the parties are defaulting, it doesn't impact the NPA of the company Secondly, it charges high interest here cause of which we can see a good improvement in the NIM Let's talk about Bajaj Finance's profit as now you understand the company grew itself really well It grew its AUM, diversified itself well in different sector so that downtime in any sector doesn't impact them But now let's talk about how its profit grew Friends, the snap on the screen will show you how Bajaj Finance's profit grew throughout FY 2016 to FY 2020.
This screenshot has been taken from Bajaj Finance's annual report so that you know of the correct numbers Like you can see the overall profit CAGR growth has been 40% which is considered to be a big no. which outperforms its AUM growth as well means its AUM grew by 35% but its profit has been growing at CAGR 40% So you can learn about company's efficiency from this In FY 2016, the profit was of Rs. 1279 Cr and If I talk about FY 2019 then the profit is multiplied by 3 times This no.
Becomes Rs. 3890 Cr and if I talk about FY 2020 overall result then its profit has increased to Rs. 4881 Cr which is a very good improvement as compared to FY 2019 when its profit was around Rs 3890 Cr Friends, for every bank or NBFCs, it's Capital Adequacy Ratio is important which tells us about its Tier 1 capital if any bank or NBFC cannot meet these ratios then it is impossible for it to keep functioning For example, Yes Bank, it's capital adequacy ratios were bad because of which it has to raise money time to time If you are planning to invest in Bajaj finance then it's important for you to know the Capital Adequacy Ratio and to know how it performs according to the regulatory requirements If I talk about Bajaj Finance Tier 1 ratio then this percentage is of around 22.6% it is way higher than the set regulatory requirement of around 11% to 12% which is very safe If I consider the total adequacy ratio, it's around 26% which is considered to be a really good no.
Other than this, If I talk about Tier 2 capital then Bajaj finance has really reduced its Tier 2 capital from 5.1% to 4.71% in the recent quarter which can be considered as a good sign Let's talk about the recent result of Quarter 1 of FY 2020 after which Bajaj Finance's shares went down by a bit Let's talk in result about the quarterly results Friends, If we talk about Q1 of financial year 21, the AUM reported was an increase from Rs 128k Crore to 138Cr thus we can see an increase of 7% in AUM After this, the total income of Bajaj Finance's has gone up from Rs 5800 crore to Rs. 6650 Cr wherein we can see a 14% increment The Profit after Tax of Bajaj Finance has been reported at Rs. 962 Cr in comparison with FY19 at Rs 1195 Cr thus we can see a decrease here of 19% which means its net profit has gone down Now you would be thinking that AUM and total income increased but why not the overall profit You might know how important is provisioning for any NBFC Provisioning tells us that if their money won't be returned by any party then it books it as a loss so that their balance sheet doesn't get impacted negatively in the future Here if I talk about BajajFinance then the provisioning of stage 1 and stage 2 has increased overall by 1000% about FY 2020 Q1 then the provision under particular stages was of Rs 130 Cr which has now increased to Rs 1430 Cr cause of which its net profit has gone down Friends, at the end of the video, I am going to talk about a very important thing which would be very important in the days to come if you are analyzing on any Bank's or NBFC's performance You might know in the recent time Government has fixed a moratorium If you have lent money then you won't have to give EMI which had a huge impact on banks and NBFCs It's very important to analyze how much AUM of that bank or NBFC is in the moratorium The meaning of being under moratorium is that they won't know at the right time of how much NPA they have Asset under Moratorium as of 30th April 2020, then 27.1% of its total AUM was under moratorium If I talk about the recent quarter, 30th June 2020 then its AUM has got down from 27.1% to 15.7% which is lower than its past but if I compare it with other banks then this no.
Is still on the higher side If in the future the moratorium gets extended then it will have a major impact on Bajaj Finance but that we will come to know in time if the moratorium will get extended or not Bajaj Finance's Net NPA is nearly about 0.5% which is good no. in comparison with other banks and NBFCs Its a fact that there is no NBFC even closer to this no. Friends, I hope you would have liked this video If you liked this video, Press Like! Comment and tell us whether you should invest in Bajaj Finance or not I leave this decision on you. I can tell you facts but you should analyze by yourself before investing whether to go for it or not whether to go for it or not Friends, If you have not subscribed to Groww's channel yet then Subscribe It! cause we put 3 to 4 videos on educational purposes here which can help you be a good and intelligent investor Happy Investing!