DCF Studio

    BAJAJFINSV.NS · NSI · Financial Services

    Bajaj Finserv Ltd.

    Also onConsensus Drift

    Implied value per share

    INR 1137.52

    Market price

    INR 1852.50

    Implied upside

    -38.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 1.4% of revenue against depreciation of 0.9%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    INR 1137.52-38.6%
    Exit multiple
    INR 5257.63+183.8%
    Market price
    INR 1852.50

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    -135930112798-679650563990FY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 1685.8bnINR 2072.2bnINR 2547.1bnINR 3130.9bnINR 3848.5bn+22.9%
    EBITINR 351.7bnINR 432.3bnINR 531.3bnINR 653.1bnINR 802.8bn+22.9%
    NOPATINR 263.1bnINR 323.3bnINR 397.4bnINR 488.5bnINR 600.5bn+22.9%
    Add depreciation & amortisationINR 15.7bnINR 19.3bnINR 23.8bnINR 29.2bnINR 35.9bn+22.9%
    Less capital expenditureINR -24.0bnINR -29.5bnINR -36.2bnINR -44.5bnINR -54.7bn+22.9%
    Less increase in working capitalINR -314.3bnINR -386.4bnINR -474.9bnINR -583.8bnINR -717.6bn+22.9%
    Free cashflow to firmINR -59.5bnINR -73.2bnINR -90.0bnINR -110.6bnINR -135.9bn-22.9%
    Discount factor0.95900.88190.81100.74580.6858-
    Present valueINR -57.1bnINR -64.5bnINR -73.0bnINR -82.5bnINR -93.2bn-13.0%
    Present Value Of The ForecastINR -370.3bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate6.80%INR assumption - no free live source available for this market (assumption)
    Equity risk premium8.00%Market assumption
    Beta0.579Reported 0.371, pulled toward 1.0 (Blume)
    Cost of equity11.43%Risk-free + beta x equity risk premium
    Cost of debt8.74%Interest expense / average total debt
    Market capitalisationINR 2964.5bn45.1% of capital
    Total debtINR 3613.8bn54.9% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC8.74%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareINR 1137.52

    108% of EV

    Forecast FCFF, final year
    INR -135.9bn
    Capex at depreciation, working capital in reinvestment
    INR 604.3bn
    Less reinvestment at g/ROIC (28.6% of NOPAT)
    INR -172.8bn
    Capitalised
    INR 431.5bn
    ROIC (WACC floor)
    8.7%
    Terminal value, undiscounted
    INR 7084.7bn
    Terminal value, discounted
    INR 4858.7bn
    Enterprise value
    INR 4488.4bn
    Less net debt
    INR 2659.7bn
    Equity value
    INR 1828.6bn

    Exit at 20.0x EBITDA

    Value per shareINR 5257.63

    103% of EV

    Terminal value, undiscounted
    INR 16742.4bn
    Terminal value, discounted
    INR 11481.9bn
    Enterprise value
    INR 11111.6bn
    Less net debt
    INR 2659.7bn
    Equity value
    INR 8451.9bn

    Spread between methods: 129%.

    Sensitivity

    Value per share (INR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.74%2321.752342.532363.312384.092404.87
    7.74%1632.101649.451666.811684.161701.52
    8.74%1108.031122.781137.521152.261167.01
    9.74%698.15710.85723.54736.24748.93
    10.74%370.21381.27392.32403.37414.43

    Outlined: this model. Green text: above today's price of 1852.50. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year22.9%31.4%+8.5pp
    EBIT margin20.9%24.6%+3.7pp
    Discount rate8.7%7.4%-1.3pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.