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    Bajaj Finance Limited Risk and Return Analysis

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    RAVI KUMAR
    Bajaj Finance Limited is analyzed over 5 years. It had an average annual return of 46.01% with a risk of 43.12%, higher than the Sensex's 9.07% return and 19.2% risk. Bajaj Finance's beta of 1.77 indicates it is more volatile than the market. While its EPS and ROE have grown, it has a high P/E ratio of 48.35. In conclusion, as a market leader with strong financials, Bajaj Finance is recommended as a long-term investment.

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    Bajaj Finance Limited Risk and Return Analysis

    Uploaded by

    RAVI KUMAR
    203 views4 pages
    Bajaj Finance Limited is analyzed over 5 years. It had an average annual return of 46.01% with a risk of 43.12%, higher than the Sensex's 9.07% return and 19.2% risk. Bajaj Finance's beta of 1.77 indicates it is more volatile than the market. While its EPS and ROE have grown, it has a high P/E ratio of 48.35. In conclusion, as a market leader with strong financials, Bajaj Finance is recommended as a long-term investment.

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    Bajaj Finance Limited is analyzed over 5 years. It had an average annual return of 46.01% with a risk of 43.12%, higher than the Sensex's 9.07% return and 19.2% risk. Bajaj Finance's beta of 1.77 indicates it is more volatile than the market. While its EPS and ROE have grown, it has a high P/E ratio of 48.35. In conclusion, as a market leader with strong financials, Bajaj Finance is recommended as a long-term investment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    203 views4 pages

    Bajaj Finance Limited Risk and Return Analysis

    Uploaded by

    RAVI KUMAR
    Bajaj Finance Limited is analyzed over 5 years. It had an average annual return of 46.01% with a risk of 43.12%, higher than the Sensex's 9.07% return and 19.2% risk. Bajaj Finance's beta of 1.77 indicates it is more volatile than the market. While its EPS and ROE have grown, it has a high P/E ratio of 48.35. In conclusion, as a market leader with strong financials, Bajaj Finance is recommended as a long-term investment.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    Name – Ravi Kumar

    Roll No. - 19173


    Security Analysis and Portfolio Management

    Assignment

    1. About Company
    Bajaj Finance Limited is one of the largest players in the burgeoning consumer finance
    segment in India and a pioneer in introducing interest free EMI finance options in more than
    50 spread across Consumer, SME & Commercial Lending as well as Wealth Management.

    2. Formulae Used
     Annual Return = {(P1-P0) + D} / P0
     Variance = (Rs – Rms) ^2/ (N – 1)
     Standard Deviation = (Variance) ^.5
     Covariance (Rs, Ri) = {(Rs – Rms) (Ri – Rmi)}/ (N-1)
     Beta = Covariance (Rs, Ri) / Variance (Rs)

    3. Calculation

    i. Bajaj Finance Limited

    F.Y Opening Value Closing Value Dividend Annual Return


    (N) (P0) (P1) (D) (Rs)
    2015-2016 410.00 692.92 36 77.79%
    2016-2017 700.00 1174.10 7 68.73%
    2017-2018 1279.00 1769.75 3.6 38.65%
    2018-2019 1769.75 3024.85 4 71.15%
    2019-2020 3027.50 2216.05 16 -26.27%

    Total Return (Rts) 230.04%


    Average Return (Rms) 46.01%
    Variance 18.59%
    Standard Deviation (Risk) 43.12%

    Bajaj Finance Limited had given a good return of 46.01% with high risk of 43.12 % per year.
    ii. BSE Sensex (Benchmark Index)

    F.Y Opening Value Closing Value Annual Return


    (N) (P0) (P1) (Rmi)
    2015-2016 22455.23 27957.49 24.50%
    2016-2017 25301.70 29620.50 17.07%
    2017-2018 29737.73 32968.68 10.86%
    2018-2019 33030.87 38672.91 17.08%
    2019-2020 38858.88 29468.49 -24.17%

    F.Y Annual Return Average Return Deviation Square of Deviation


    (N) (Ri) (Rmi) (Ri - Rmi) (Ri - Rmi)^2
    2015-2016 0.2450 0.09071 0.1543 0.0238
    2016-2017 0.1707 0.09071 0.0800 0.0064
    2017-2018 0.1086 0.09071 0.0179 0.0003
    2018-2019 0.1708 0.09071 0.0801 0.0064
    2019-2020 -0.2417 0.09071 -0.3324 0.1105

    Total Return (Rti) 45.35%


    Average Return (Rmi) 9.07%
    Variance 3.69%
    Standard Deviation (Risk) 19.20%

    BSE Sensex had given a moderate return of 9.07% at a high risk of 19.20% per year.

    iii. Comparison

    Correlatio
    Stock Benchmark Index Covariance BSE Variance Beta
    n
    Bajaj Finance
    BSE Sensex 6.53% 3.69% 0.99 1.77
    Limited

    Bajaj Finance Manappuram Chola Investment &


    Stocks Muthoot Finance
    Limited Finance Finance
    Gain
    779.03% 603.72% 545.82% 81.13%
    Percentage
    4. Scatter Graph
    Bajaj Finance Limited Vs BSE Sensex
    30.00%

    f(x) = 0.44 x − 0.11


    20.00%
    R² = 0.97
    Bajaj Finance Limited

    10.00%

    0.00%
    -0.4 -0.2 0 0.2 0.4 0.6 0.8 1

    -10.00%

    Bajaj Finance Limited Vs


    -20.00% BSE Sensex
    Linear (Bajaj Finance
    Limited Vs BSE Sensex)
    -30.00%
    BSE Sensex

    5. Interpretation
     Bajaj Finance Limited has Beta greater than 1. 
     It indicates that its price tends to be more volatile than the market.
     It also has higher exposure to systematic risk than the benchmark.
     It has higher return potential.
     It always moves in the same direction with market but with high magnitude.

    6. Key Financials

    Per Share Ratios (Rs) March 2020 March2019 March 2018 March2017 March 2016

    Basic EPS 89.77 69.33 47.54 34.01 242.03

    Diluted EPS 89.07 68.75 47.05 33.67 238.85

    Book Value 538.84 341.46 287.68 175.56 1386.88

    Dividend/Share 16.00 4.00 3.60 7.00 36.00

    Face Value 2.00 2.00 2.00 2.00 10.00


    i. Profitability
    It controls its cost effectively and the PAT margin is around 25.47%.

    ii. EPS growth


    EPS has shown a growth of 40% over the 5 years.

    iii. Return on Equity (ROE)

    It has an average ROE track record with 19.13 % for the latest year.

    iv. P/E Ratio


    It has currently P/E ratio of 48.35 which tells that company will perform better than its
    industry peers going forward. Shareholders should be clearly optimistic but the future is
    always uncertain.

    7. Conclusion 
    Bajaj Finance is surely a multibagger stock for investors with strong
    foundation and market leader in consumer finance. With a strong pedigree, brand equity
    and reliable management, this stock is definitely a buy in sip mode for a long term
    horizon.

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