Bajaj Finance stock jumps 8% after RBI lifts ban on eCOM, Insta EMI Card

The Reserve Bank of India's decision to lift curbs on Bajaj Finance's two products, earlier than expected, sent the stock on a tear. Bajaj Finance stock soared 7.5 per cent to Rs 7,400 in Friday's intraday trade as against 0.6 per cent rise in the benchmark S&P BSE Sensex. This was the stock's biggest single-day rally in three years.

Bajaj Finance stock had hit a record high of Rs 8,190 on October 6, 2023.

The move, analysts said, comes as a huge positive surprise as the restrictions have been lifted in less than six months, relative to the RBI's recent actions where similar restrictions were removed after at least one year.

"The recent development in the beginning of FY25 itself is a positive start for Bajaj Finance for the fiscal, and is expected to boost investor confidence on processes, commitment of management in making things right, and the company's ability to adapt to the changing regulation and business environment," wrote analysts at Emkay Global.

On Thursday, Bajaj Finance said the RBI has lifted restrictions on 'eCOM' and online digital 'Insta EMI Card' with immediate effect. With this, the Non-Banking Financial Company (NBFC) will resume sanction and disbursal of loans through both these business segments, including issuance of EMI cards.

The restrictions, which were put by the RBI in mid-November last year, on account of deficiencies related to the Key Fact Statement (KFS) of these products, had a significant impact on Bajaj Finance's profitability in the January to March quarter (Q4) of the previous fiscal (FY24). Bajaj Finance's profit before tax (PBT) was lower by 4 per cent in Q4FY24, and its new loan book was lower by 0.8 million in Q4 and by 1.2 million in FY24.

Lifting of this ban, thus, would result in higher customer acquisition, along with improved fee income. That apart, the earlier-than-anticipated removal of restrictions endorses the Management's ability to course-correct promptly when needed, analysts added.

Emkay Global said the early resolution of the restriction increases confidence on the FY25 outlook and raises hopes of approval by the RBI for renewal of Bajaj Finance's co-branded credit card with RBL Bank.

"We keep our FY25-27 estimates unchanged and reiterate our 'BUY' rating on the stock, with an unchanged target price of Rs 9,000," the brokerage said.