Bajaj Finance tumbles 5%, hits 10-month low; extends YTD weakness to 15%

Shares of Bajaj Finance settled 4.17 per cent lower on Tuesday at Rs 6,325.25 per share, amid a sharp downturn in the second half of the session. The stock fell 4.9 per cent intraday to a low of Rs 6,275 per share, breaching its lowest level since May 3, 2023.

By comparison, the benchmark S&P BSE Sensex closed 0.26 per cent down at 73,677 level.

The stock, along with its peer stock Bajaj Finserv, ended as top laggards on the BSE benchmark, accounting for 51 per cnt on today's fall on the index. A combined 1.8 million shares changed hands on the counter on the NSE and BSE on Tuesday. 

So far in the current calendar year, the stock has shed 14 per cent on the BSE as against about 2 per cent rally in the benchmark index. 

Tuesday's fall pushed the stock below key moving averages on the daily, weekly, and monthly charts. The stock is expected faces resistance at Rs 6,605, its 20-day moving average, and Rs 6,994, its 50-day moving average. On the weekly charts, the resistance is seen at Rs 6,793, its 100-week moving average, followed by Rs 7,091, its 50-week moving average.

During the October-to-December quarter, Bajaj Finance reported profit after tax of Rs 3,639 crore, up 22.4 per cent year-on-year (Y-o-Y), despite higher provisions. Further, net interest income (NII) for Q3FY24 increased by 29.2 per cent Y-o-Y (up 6.4 per cent Q-o-Q) to Rs 7,655.3 crore.

As of December 31, 2023, asset under management (AUM) reported a 34.7 per cent Y-o-Y/ 7.1 per cent Q-o-Q growth at Rs 3.1 trillion led by the strong growth in new customer addition during the quarter. The customer franchise stood at 80.4 million as of December 31, 2023, compared to 66.1 million as of December 31, 2022, a growth of 21.7 per cent.

"Bajaj Finance reported a mixed performance in Q3FY24 where the business trajectory remained strong on the back of a successful festive season, the credit cost and impact of regulatory action acted as dampeners for the NBFC. NIMs, however, are expected to see continued pressure led by the increasing cost of borrowings, which is expected to be partially offset by higher funding rates and restructuring of the asset mix," said analysts at KR Choksey. 

The brokerage, while maintaining 'Buy' rating, cut its target price to Rs 8,600 (from Rs 9,475) as it remains cautious about the quality of the assets given the uncertainty and risky unsecured portfolio. 

That apart, Bajaj Finance witnessed a spike in slippage from rural unsecured loans during the quarter under review, which its management had been highlighting since the past couple of quarters but the slippage in urban unsecured loans (due to weak collection efficiency) was a negative surprise, said analysts at InCred Equities.

"Management remains confident of managing credit costs in the range of ~1.6-1.8 per cent in FY24, which is better than the pre-Covid level and remains believable. We are building in ~29 per cent CAGR in PAT over FY23-26F, with return on asset (RoA) of ~4.6 per cent and an average return on equity (RoE) of ~26 per cent," they added.