Bajaj Finance May Rise Further If MD Takes On New Role Within Firm, Says Morgan Stanley

Morgan Stanley has maintained its Overweight rating on Bajaj Finance Ltd. with a target price of Rs 9,300, implying a 10% upside. The brokerage has linked the stock's outlook to Rajeev Jain's management role after his tenure as Managing Director ends on March 31.

While sentiment surrounding management changes could affect valuation multiples, Bajaj Finance's strong fundamentals, including declining credit costs and favorable macro conditions, provide a solid foundation for growth. Morgan Stanley’s bull case target of Rs 11,360 suggests a 35% upside, driven by continued growth in assets and improved profitability.

Jain is expected to assume a new role at Bajaj Finance, with a higher likelihood of continuing within the company rather than moving solely to Bajaj Finserv. Jain has expressed interest in shaping the strategy of Bajaj Finance and its subsidiaries. Anup Saha, the deputy managing director, is expected to become the new MD, as the succession plan has been in place for over a year.

However, talking about Jain, there are three different scenarios given by the brokerage. The first involves a senior role within Bajaj Finance that would positively impact investor sentiment and lead to a stock re-rating. The second scenario is that Jain could hold a role in both Bajaj Finance and Bajaj Finserv that would also be seen positively by investors.

In the third scenario the brokerage expects Jain to take on a role in Bajaj Finserv that would possibly cause a sort-term stock weakness. However, there would be minimal long-term impact, said the brokerage.

Morgan Stanley’s base case expects Jain to stay with Bajaj Finance. This could drive the stock closer to the target price of Rs 9,300, with further upside potential.

The shares of Bajaj Finance fell as much as 1% to Rs 8,494.80 apiece. It pared losses to trade 0.33% lower at Rs 8,552.30 apiece, as of 10:03 a.m. This compares to a 0.98% advance in the NSE Nifty 50 index.

It has risen 31.38% in the last 12 months and 23.40% year-to-date. The relative strength index was at 59.

Out of 38 analysts tracking the company, 28 maintain a 'buy' rating, five recommend a 'hold,' and five suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 1.6%.