Bajaj Finance shares to turn ex-bonus, ex-split today; key details

Shares of Bajaj Finance Ltd will turn ex-dates for stock split and bonus issue on Monday. The NBFC had earlier announced a stock split in the ratio of 1:2 and a bonus issue in the ratio of 4:1. 

A stock split differs from bonus shares as already owned shares are split into smaller shares (lower face value) in the first case, while free additional shares (no impact on face value) are given to existing shareholders in the second case, based on number of shares owned.

A stock split of 1:2 means every already owned share will end up splitting into two new shares of new face value (FV) of 1/2 of original FV. In Bajaj Finance's case, the prevailing face value is Rs 2. So one share of Bajaj Finance of face value Rs 2 (Friday's closing price: 9,340) would turn into two Bajaj Finance shares with face value of Re 1. The Bajaj Finance stock price will adjust accordingly. 

Following the subdivision of equity shares, bonus issues in 4:1 ratio will come into effect. A bonus issue of 4:1 means if an investor already owns one share, s/he gets four additional new shares.

Now since one Bajaj Finance stock would turn into two stocks of face value 1 following the stock split, the bonus issue would result in eight additional shares. 

Bajaj Finance is a NBFC with a wide product portfolio comprising of loans for two-wheelers, consumer durables, housing, and small businesses among others. 

In a note on June 6, Axis Securities said the NBFC has moderated pricing in certain unsecured products which impacted yields. NIMs contraction in FY25, thus, was sharper than anticipated. 

In the current rate cut cycle, BAF expects cost of fund (CoF) to gradually decline by 10-15bps over FY26 (assuming 3three rate cuts) and settle at 7.75-7.85 per cent in FY26.

This decline factors in the lag in the downward repricing of long tenor loans and 75 per cent of borrowings, which are fixed-rate. 

"BAF remains well-placed to navigate the rate cut cycle despite the pricing pressure in certain products and protect NIMs with a scope to improve margins over the medium term," Axis Securities said. 

The brokerage said Rajeev Jain's continuation with BAF in the capacity of Vice Chairman addresses leadership continuity issues and ensures the seamless execution of the strategy. 

"We expect BAF to deliver a strong AUM/Earnings growth of 25/26/25% CAGR over the medium term, driven by steady-to-marginally improving NIMs, operating leverage driving cost ratio improvement, and positive outlook on asset quality, keeping credit costs under control," Axis Securities said. 

It expects BAF to deliver a RoA and RoE of 4.5-4.6 per cent and 19-21 per cent, respectively, broadly in-line with the management's long-term guidance.