Bajaj Finance Shares Fall Over 7% After AUM Guidance Cut: A Detailed Analysis
The shares of Bajaj Finance Ltd. fell over 7% on Tuesday after it revised its assets under management growth guidance to 22-23% from the earlier 24-25% for this fiscal. This move has sent shockwaves through the Indian stock market, with many investors wondering what this means for the company’s future prospects.
Understanding the Revision in AUM Guidance
The revision in AUM guidance is a significant development, as it indicates a slowdown in the company’s growth momentum. Bajaj Finance had earlier guided for an AUM growth of 24-25% for the fiscal year, but has now revised it downward to 22-23%. This reduction in guidance is likely to impact the company’s profitability and investor sentiment.
According to the company’s management, the revision in AUM guidance is due to various factors, including macroeconomic challenges and competitive landscape. The company expects to add around 1.7 crore new customers during the fiscal year, which is a positive development, but may not be enough to offset the impact of the revised AUM guidance.
Net Interest Margin and Credit Costs
The Net Interest Margin (NIM) remained flat compared to the previous quarter, which is a positive development. However, the credit costs were elevated in the second quarter and are expected to stay at the higher end of the guidance range of 1.85%–1.95% for the full year. This is a concern, as higher credit costs can impact the company’s profitability.
Managing Director Rajeev Jain highlighted that the company anticipates a significant improvement in credit costs in FY27, which is a positive development. However, the company needs to be cautious and take steps to manage its credit costs effectively.
MSME Business and Asset Quality
The size of the MSME business has been reduced by 25%, which is a significant development. The company continues to monitor the MSME segment closely, as it is a high-risk area. The MSME segment is projected to grow modestly by 10–12% during FY26, which is a positive development.
However, the company witnessed some asset quality pressures during the quarter, with the share of gross non-performing loans rising to 1.24% from 1.03% in the previous quarter. Net NPA came in at 0.60% versus 0.50% in the June quarter, which is a concern. Loan losses and provisions increased by 19%, which is a significant development.
Consolidated Profit and Net Interest Income
Consolidated profit rose 22% year-on-year to Rs 4,875 crore in the July-September quarter, as per results announced on Monday. This is a positive development, but the company’s net interest income also jumped 22% to Rs 10,785 crore, against a forecast of Rs 10,955 crore. Pre-provisioning operating profit increased by 21%, which is a positive development.
Stock Price Movement
The scrip fell as much as 7.10% to Rs 1,008 apiece on Tuesday, which is a significant development. It pared gains to trade 6.72% lower at Rs 1,012 apiece, as of 9:31 a.m. This compares to a 0.18% advance in the NSE Nifty 50 Index.
The stock has risen 49.22% in the last 12 months and 48.25% year-to-date, which is a positive development. Total traded volume so far in the day stood at 7.07 times its 30-day average, which is a significant development. The relative strength index was at 55.04, which is a neutral development.
Analyst Ratings and Price Target
Out of 37 analysts tracking the company, 19 maintain a ‘buy’ rating, 12 recommend a ‘hold,’ and six suggest ‘sell,’ according to Bloomberg data. The average 12-month consensus price target of Rs 1,311.32 implies an upside of 29.8%, which is a positive development.
This development is significant, as it indicates that analysts are still bullish on the company’s prospects, despite the revision in AUM guidance. However, investors need to be cautious and consider various factors before making any investment decisions.
Conclusion
In conclusion, the revision in AUM guidance by Bajaj Finance is a significant development that has sent shockwaves through the Indian stock market. While the company’s consolidated profit and net interest income have risen, the revision in AUM guidance and elevated credit costs are concerns that need to be addressed.
Investors need to be cautious and consider various factors before making any investment decisions. It is essential to keep a close eye on the company’s developments and market trends to make informed decisions. For more information on Indian stock market and financial news, please visit our website.