16 Nov 2023 , 10:54 AM
Recommendation: Buy
Target Price: Rs 9,600
Analysts at IIFL Capital Services believe that near term business impact would be limited as restrictions have come after the end of major festive season and BAF can partially make up for lost business by accelerating the off-line channel. However, if the restrictions were to continue for longer, it may impact its medium term growth trajectory.
Event
RBI has directed BAF to cease lending under its two products, “eCOM” and “Insta EMI Card” due to non-adherence to RBI’s digital lending guidelines pertaining to non-issuance of Key Fact Statements (KFS) and deficiencies in KFS on other digital loans. RBI shall review these restrictions on rectification of these grievances to RBI’s satisfaction.
Impacts ~8-10% of quarterly disbursements (by volume); management intends to resolve it within 2-3 weeks at their end
‘eCOM’ business pertains to BAF’s lending through e-com platforms such as Amazon, Flipkart, etc. and ‘insta EMI card’ refers to B2B loans disbursed digitally on BAF’s digital marketplace and partner OEM’s websites. Both these products contribute ~8-10% of BAF’s full quarter disbursements by volume. Company believes that this may not materially impact new customer acquisitions as: a) offline still remains a dominant channel for customer acquisition and b) Digital EMI cards can still be used for no cost EMI at physical stores. RBI has highlighted specific concerns which it intends to resolve by making requisite changes within next 2-3 weeks. However, resumption would be dependent on RBI lifting the restrictions.
IIFL view
Analysts at IIFL Capital Services believe that near term business impact would be limited given that: a) restrictions have come after the end of major festive season (Diwali and Dussehra) and b) BAF can partially make up for lost business by accelerating the off-line channel. However, if the restrictions were to continue for longer, it may lose market share in fast growing digital B2B sales channel, impacting its medium term growth trajectory. For now, timeline for RBI lifting restrictions is a monitorable.
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