DCF Studio

    BAJFINANCE.NS · NSI · Financial Services

    Bajaj Finance Limited

    Also onConsensus Drift

    Implied value per share

    INR 216.82

    Market price

    INR 1040.30

    Implied upside

    -79.2%

    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.
    AdjustedCapital expenditure runs at 2.7% of revenue against depreciation of 2.0%. 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.

    Current EV/EBITDA of 37.1x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    INR 216.82-79.2%
    Exit multiple
    INR 1226.78+17.9%
    Market price
    INR 1040.30

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn150bn300bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 608.8bnINR 746.2bnINR 914.7bnINR 1121.2bnINR 1374.3bn+22.6%
    EBITINR 333.4bnINR 408.6bnINR 500.9bnINR 614.0bnINR 752.6bn+22.6%
    NOPATINR 249.6bnINR 305.9bnINR 375.0bnINR 459.6bnINR 563.4bn+22.6%
    Add depreciation & amortisationINR 12.1bnINR 14.8bnINR 18.2bnINR 22.3bnINR 27.3bn+22.6%
    Less capital expenditureINR -16.5bnINR -20.2bnINR -24.8bnINR -30.3bnINR -37.2bn+22.6%
    Less increase in working capitalINR -112.1bnINR -137.4bnINR -168.5bnINR -206.5bnINR -253.1bn+22.6%
    Free cashflow to firmINR 133.1bnINR 163.1bnINR 199.9bnINR 245.1bnINR 300.4bn+22.6%
    Discount factor0.95530.87170.79540.72580.6623-
    Present valueINR 127.1bnINR 142.2bnINR 159.0bnINR 177.9bnINR 199.0bn+11.9%
    Present Value Of The ForecastINR 805.1bn

    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
    Beta0.536Reported 0.308, pulled toward 1.0 (Blume)
    Cost of equity11.09%Risk-free + beta x equity risk premium
    Cost of debt9.13%Interest expense / average total debt
    Market capitalisationINR 6471.6bn64.7% of capital
    Total debtINR 3528.5bn35.3% of capital, book value as a proxy
    Tax rate25.1%Effective, capped at statutory
    WACC9.59%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 216.82

    83% of EV

    Forecast FCFF, final year
    INR 300.4bn
    Capex at depreciation, working capital in reinvestment
    INR 569.9bn
    Less reinvestment at g/ROIC (26.1% of NOPAT)
    INR -148.6bn
    Capitalised
    INR 421.3bn
    ROIC (WACC floor)
    9.6%
    Terminal value, undiscounted
    INR 6092.0bn
    Terminal value, discounted
    INR 4034.8bn
    Enterprise value
    INR 4839.9bn
    Less net debt
    INR 3488.3bn
    Equity value
    INR 1351.6bn

    Exit at 20.0x EBITDA

    Value per shareINR 1226.78

    93% of EV

    Terminal value, undiscounted
    INR 15598.1bn
    Terminal value, discounted
    INR 10330.8bn
    Enterprise value
    INR 11136.0bn
    Less net debt
    INR 3488.3bn
    Equity value
    INR 7647.7bn

    Spread between methods: 140%.

    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%
    7.59%456.10460.43464.76469.10473.43
    8.59%318.54322.21325.89329.56333.23
    9.59%210.50213.66216.82219.97223.13
    10.59%123.58126.33129.07131.81134.56
    11.59%52.2754.6857.0959.5061.90

    Outlined: this model. Green text: above today's price of 1040.30. 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 year22.6%45.1%+22.5pp
    Discount rate9.6%5.1%-4.4pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.