Sector : NBFC CMP : Rs. 1266

1. 7th May 2013 STRONG BUY Bajaj Finance Ltd. TARGET Rs. 1450 The Hidden Jewel from the House of Bajaj • Investment rationale • Bajaj Finance Ltd. (BFL), a part of the prestigious Bajaj Group headed by Mr. Rahul Bajaj, has emerged as a well diversified NBFC. BFL has consolidated its pan India reach with over 225 points of contact across India and more than 4000 distribution partners and dealers. • BFL boasts of Assets Under Management (AUMs) of Rs. 16,844 crs for 9MFY13. BFL has registered a quantum leap in AUMs from a mere Rs. 2,478 crs in 2008 to Rs. 16,844 crs as on date, a stellar 7x increase in a span of 5 years. • BFL’s NPA levels are among the lowest in the industry, with a gross NPA at 1.0% and net NPA at 0.2%, which is an indicator of BFL’s improving asset quality and stringent standards followed by the company. • BFL has clocked an impressive increase in NII from Rs. 398 crs to Rs. 507 crsfor 9MFY13 (34% YoY). The growth in deployments stood at 12% PoP to Rs 5,200 crore in Q3FY13. • BFL reported its highest ever quarterly PAT of Rs 160 crore (+33.4% YoY) in Q3FY13 driven by growth across consumer and SME business. The company has had a liberal dividend payout record, with the payout being 120% for FY12. • Recommendation: BFL is currently trading at a low P/E of 8.62, and a P/BV of 2.43. With a tiny capital base of only Rs. 41 crsvis-a-vis the AUMs of Rs. 16,844 crs, BFL offers an excellent value proposition to investors.Hence, we recommend a ‘STRONG BUY’ on BFL with a target price of Rs. 1,450. Sector : NBFC CMP : Rs. 1266 1 Year TP : Rs.1450 SENSEX : 19,849 SENSEX P/E: 17.36 NIFTY: 5,928 NIFTY P/E : 18.19 Bajaj Finance Industry P/E 8.62 16.55 Scrip Details Market Cap : Rs. 5,419 Crs Nominal Value : Rs. 10/Share Share Capital : Rs. 42.8 Crs. 52 Week H/L : Rs 1416 /Rs 786 BSE Code : 500034 NSE Code : BAJFINANC  Shareholding Pattern (%) CategoriesMar’13 2-Mar’13 Promoters 62.07 62.32 FII 6.93 6.68 DII 11.20 11.63 Others 19.80 19.37 TOTAL 100.00100.00 Script Performance vs. Broader Indices FINANCIAL PERFORMANCE (Q3FY13) (Rs. In Crs.) Bajaj Finance Ltd. NVS Research

2. BFL Rights Issue • BFL is raising funds in March 2013 through a rights issue of 67.60 lakh shares at a premium of Rs. 1090 per share aggregating to Rs. 744 crs and augmenting the share capital from Rs. 42.81 crs to Rs. 43.48* crs. (*Company approved the allotment of 67,59,258 equity shares of the Company to the successful applicants in the rights issue in terms of Letter of Offer dated January 22, 2013 and the basis of allotment approved by the stock exchange for the rights issue. Dispatch of physical share certificates and demat credit in respect of the aforesaid shares will be effected on receipt of necessary approvals from the stock exchanges.) • We believe that the BFL rights issue price of Rs. 1100 would serve as a benchmark for the stock price of BFL and would offer a reasonable cushion in terms of price to BFL investors. Peer Comparison Financial performance (in Rs. Cr.) • BFL is currently trading at a low P/E of 8.62x, which is the lowestas compared to its peers, and at a P/BV of 2.57. This indicates that BFL has immense potential to appreciate in order to catch up in valuations of its peers. • Higher PAT/MCAP ratio of BFL than its peers indicates that the company is undervalued. BFL’s PAT/MCAP ratio is higher at 11% when compared to the other companies in the peer set. • Recommendation • BFL has a vastly diversified and well-managed portfolio, with AUMs consistently increasing over the years and currently standing at Rs. 16,844 crs. • BFL is currently trading at a low P/E of 8.62, and a P/BV of 2.43. With a tiny capital base of only Rs. 41 crsvis-a-vis the AUMs of Rs. 16,844 crs, BFL offers an excellent value proposition to investors.Hence, we recommend a ‘STRONG BUY’ on BFL with a target price of Rs. 1,450. Bajaj Finance Ltd. NVS Research

3. Bajaj Finance Ltd. NVS Research