Bajaj Finance Shares Fall Over 7%: A Detailed Analysis
The shares of Bajaj Finance Ltd. fell over 7% on Tuesday after the company 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.
The Net Interest Margin remained flat compared to the previous quarter. Managing Director Rajeev Jain highlighted that 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. However, the company anticipates a significant improvement in credit costs in FY27.
Bajaj Finance’s MSME Business: A Cause for Concern?
Bajaj Finance also expects the cost of funds to remain stable in the range of 7.5% to 7.55% for FY26. Meanwhile, the size of the MSME business has been reduced by 25% and continues to be closely monitored. The MSME segment is projected to grow modestly by 10–12% during FY26.
It also witnessed some asset quality pressures during the quarter. Asset quality worsened, 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. Loan losses and provisions increased by 19%.
‘Consumer leverage remains an area of concern. The company continues to take ongoing actions to reduce the contribution of customers with multiple loans. The vintage credit performance, as a result, are significantly better except for MSME,’ Bajaj Finance said in a statement.
Consolidated Profit and Net Interest Income: A Mixed Bag
Consolidated profit rose 22% year-on-year to Rs 4,875 crore in the July-September quarter, as per results announced on Monday, compared to an estimate of Rs 4,969 crore.
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%.
What’s Next for Bajaj Finance?
The scrip fell as much as 7.10% to Rs 1,008 apiece on Tuesday. 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.
It has risen 49.22% in the last 12 months and 48.25% year-to-date. Total traded volume so far in the day stood at 7.07 times its 30-day average. The relative strength index was at 55.04.
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%.
Investor Takeaway
While the revised guidance has sent Bajaj Finance’s shares tumbling, it’s essential for investors to look at the bigger picture. The company’s consolidated profit and net interest income have shown significant growth, and the management is taking steps to address concerns around consumer leverage and asset quality.
As an investor, it’s crucial to keep a close eye on the company’s progress and adjust your strategy accordingly. With the Indian stock market being highly volatile, it’s essential to stay informed and make data-driven decisions.
Conclusion
In conclusion, Bajaj Finance’s revised guidance has sent shockwaves through the Indian stock market, but it’s essential to look beyond the short-term volatility. With the company’s strong fundamentals and the management’s efforts to address concerns, it’s an excellent opportunity for investors to reassess their strategy and make informed decisions.