In the dynamic world of finance, NBFCs play a crucial role in providing financial services to a broad spectrum of customers. Two prominent players in this sector are Tata Capital Limited and Bajaj Finance Limited (BFL). Both companies have demonstrated strong business fundamentals and impressive growth trajectories. However, a closer look at their valuation metrics reveals a significant disparity, raising questions about whether Tata Capital’s high valuation is justified.
About Tata Capital Limited
Tata Capital Limited (“TCL”), the flagship financial services company of the Tata Group, is a subsidiary of Tata Sons Private Limited and carries on business as a non-banking financial company.
Tata Capital and its subsidiaries are engaged in providing a wide array of services and products in the financial services sector. They operate across various areas of business, including commercial finance, consumer loans, wealth services, and the distribution and marketing of Tata Cards.
Introduction to Bajaj Finance Limited
Bajaj Finance Limited (BFL) is a leading non-banking financial company headquartered in Pune, India. Established as a subsidiary of Bajaj FinServ Ltd., BFL has emerged as a key player in India’s financial sector. With a vast customer base of 83.64 million and assets under management amounting to ₹330,615 crore (US$40 billion) as of March 2024, BFL offers a wide range of financial products and services.
Similarities
- Both Tata Capital and Bajaj Finance exhibit similar growth in their loan book sizes.
- They offer comparable products.
- Both are supported by well-known brands, Tata and Bajaj.
Financial Performance of Bajaj Finance
₹ in crores
| Particulars | FY24 | FY23 | Y-o-Y Growth |
| Total Income | 54990 | 41398 | 33% |
| PAT | 14451 | 11508 | 25% |
| AUM | 3,30,400 | 2,47,379 | 34% |
Financial Performance of Tata Capital
₹ in crores
| Particulars | FY24 | FY23 | Y-o-Y Growth |
| Total Income | 18198 | 13637 | 33% |
| PAT | 3326 | 2945 | 13% |
| Loan Book | 1,57,761 | 1,16,789 | 35% |
Key Ratios
| Particulars | Tata Capital | Bajaj Finance |
| Current Market Price (19/06/2024) | ₹1000 | ₹7149 |
| P/B Ratio | 21 | 8 |
| P/E Ratio | 118 | 38 |
| Market Cap | 3,50,357 Crs. | 4,32,100 Crs. |
Tata Capital has a P/E ratio of 118, which is significantly higher than Bajaj Finance’s 38. These valuation metrics indicate that Tata Capital is trading at a much higher premium relative to its earnings than Bajaj Finance.
This disparity in valuation metrics raises questions about whether Tata Capital’s high valuation is justified. If there are changes in market conditions, its stock price could face significant downward pressure. Conversely, Bajaj Finance, with its relatively lower P/E and P/B ratios, appears more reasonably valued, potentially offering a better risk-reward profile for investors.
In summary, while both Tata Capital and Bajaj Finance exhibit strong business fundamentals and growth trajectories, Tata Capital’s high valuation metrics warrant a more cautious approach. Investors should be mindful of the potential risks associated with high valuations and closely monitor the companies’ performance to make well-informed investment decisions.
GET IN TOUCH WITH US
For any query/ personal assistance feel free to reach out at support@Altiusinvestech.com or call us at +91-8240614850.
For Direct Trading, Visit – https://trade.altiusinvestech.com/