Bajaj Finance Drops 3% Post Q2, Analysts Bullish on Asset Quality Gains

Bajaj Finance Faces Short-Term Pressure Despite Strong Q2 Results

Despite a robust performance in its latest quarterly results, Bajaj Finance’s stock has seen a decline, reflecting market dynamics and investor sentiment.

Quarterly Performance Highlights

Bajaj Finance’s consolidated net profit surged by 29% year-on-year to ₹6,367 crore for the July-September quarter, driven by a robust increase in net interest income (NII) and assets under management (AUM). The NII rose to ₹13,335 crore, marking a 24% increase from the previous year, while total income climbed 23% to ₹15,974 crore. The AUM reached ₹5.85 trillion, reflecting a 26% growth, with the company adding ₹37,680 crore to its AUM during the quarter and booking 13.45 million new loans, a notable 11% increase from last year.

Market Reaction and Stock Performance

Following the announcement of its Q2 results, Bajaj Finance’s stock fell by approximately 3%, trading at ₹935 per share, with intraday lows reaching ₹930. This decline occurred even as the broader Nifty 50 index saw a gain of 0.71%. Analysts suggest that the stock’s performance may be influenced by broader market trends and investor sentiment rather than the company’s strong fundamentals.

Analysts’ Perspectives on Asset Quality

Despite the stock’s decline, analysts from various brokerages remain bullish on Bajaj Finance’s asset quality. Jefferies noted that while stressed loans saw a slight uptick, particularly from gold loans, the impact on profit and loss was negligible, and the overall asset quality remains strong. They have slightly adjusted their earnings estimates for FY28 and FY29, reflecting higher interest rates and lower bancassurance fees, but maintain a positive outlook with a projected 25% compound annual growth rate in profit over the next few years.

Growth Outlook and Future Guidance

DAM Capital echoed similar sentiments, highlighting that Bajaj Finance’s growth trajectory remains strong, with the company expecting an increase in growth guidance to 26-27%. They noted that the growth was broad-based, although SME finance lagged behind. The slight increase in stressed assets is viewed as temporary, primarily linked to shorter-term gold loans. Overall, the brokerage anticipates a slight upgrade in FY27 estimates while keeping FY28 projections unchanged.

Key Highlights

• Bajaj Finance reported a 29% YoY increase in net profit for Q2FY27, reaching ₹6,367 crore.
• Net interest income grew by 24% YoY to ₹13,335 crore, contributing to strong financial performance.
• Assets under management rose 26% to ₹5.85 trillion, with 13.45 million new loans booked.
• Despite strong fundamentals, the stock fell 3% post-results, reflecting market sentiment.
• Analysts remain optimistic about asset quality, with projections for continued growth.

Investor Note: The recent decline in Bajaj Finance’s stock may present a buying opportunity for investors, given the company’s strong fundamentals and positive growth outlook. However, potential investors should remain cautious of market volatility and monitor the evolving economic landscape.