The Reserve Bank of India (RBI) directed Bajaj Finance Ltd., India's largest non-bank lender, to immediately cease the sanctions and disbursal of loans under its eCOM and Insta EMI Card lending products.

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A primary concern highlighted by the central bank was the company's failure to issue key fact statements to borrowers under the specified lending products.

In response, the company has mentioned that the move from the RBI will not have any material financial impact on the company.

While some analysts who track the stock expect some pressure in the near term, some anticipate this issue to be resolved in the next quarter or two.

Brokerage firm CLSA sees this more as an operational breach instead of a major violation of RBI's guidelines. It expects this issue to be resolved in the next one to two quarters. The brokerage expects Bajaj Finance's net profit to be impacted by 6% while the ban is in place.

However, the brokerage has maintained its "buy" recommendation on the stock with a price target of ₹9,500.

The move is negative for Bajaj Finance and comes as a "surprise", said brokerage firm Jefferies in its note. It sees limited financial impact as the Insta EMI Card base of 4 million is 5% of total clients and is estimated to be only 0.2% of the total disbursals.

Jefferies also has a "buy" recommendation on Bajaj Finance with a price target of ₹9,470.

Morgan Stanley expects the stock to remain under pressure in the near term but adds that the issue appears to be one that can be resolved soon, thereby mitigating any potential impact on Bajaj Finance's Earnings per Share (EPS).

"Prima facie, it appears that the new digital EMI card is not affected, which is a key investor question," the brokerage said.

Morgan Stanley is 'overweight' on Bajaj Finance with a price target of ₹10,300. The target is the highest on the street for Bajaj Finance.

Brokerage firm Macquarie said that Bajaj Finance's EMI Cards franchise stood at 41.9 million, while digitally sourced EMI card franchises stood at 4.2 million, nearly 10% of the outstanding EMI card base.

"We think the numbers look high and, for this reason, we are surprised by the management's comment of minimal operational impact," the note said.

The brokerage has an 'outperform' rating on Bajaj Finance with a price target of ₹9,190.

Of the 34 analysts that track Bajaj Finance, 26 have a 'buy' rating on the stock, while four each have a 'hold' and 'sell' rating.

Shares of Bajaj Finance ended 2% lower on Wednesday at ₹7,216.95. The stock is up 10.1% so far in 2023.

(Edited by : Hormaz Fatakia)

First Published:Nov 16, 2023 8:37 AM IST