Why did investors dump Bajaj Finance shares post Q4 results? Stock tanks 5%

Bajaj Finance shares: Bajaj Finance stock has "limited catalysts" for any meaningful upside in the stock in the near-term, said analysts

Bajaj Finance share price today: Bajaj Finance’s move to moderate its guidance for asset growth in financial year 2025-26 (FY26) has disappointed investors, marked by its shares tumbling nearly 6 per cent on the BSE during Wednesday’s intraday trade.

 

Shares on the BSE fell to a low of ₹8,560 during the day, before settling at ₹8,635.7, down 4.99 per cent. By comparison, the benchmark BSE Sensex closed 0.06 per cent lower.

 

“Moderation in growth guidance was a major negative for Bajaj Finance in Q4. Though we like Bajaj Finance for its ability to navigate across cycles, the revised growth guidance makes the stock's current valuation look rich. It provides limited upside in the near-term,” said analysts at JM Financial Institutional Securities in a note. 

 

Bajaj Finance on Tuesday revised its assets under management (AUM) growth guidance to 24-25 per cent for FY26, compared to 25-27 per cent projected earlier. While announcing its Q4 results on Tuesday, the company also lowered the return on equity (RoE) guidance to 19-20 per cent compared to 21-23 per cent earlier.

 

The non-banking financial company (NBFC) made the revisions despite expecting stable net interest margin (NIM), cost of finance easing by 10-15 basis points (bps), and improvement in cost to income (C/I) ratio by 40-50 bps in FY26.

 

It, however, guided for a lower growth in fee income at 13-15 per cent and credit costs in the range of 1.85-1.95 per cent.  CATCH OUR LIVE MARKET COVERAGE HERE

 

Analysts at Motilal Oswal Financial Services said Bajaj Finance has “limited catalysts” for upside in the near term as the stock trades at rich valuations of 4.1 times FY27 E (estimated). 

 

“Our FY26 and FY27 net profit estimates remain broadly unchanged, and we believe that the credit costs have now peaked and will remain below the upper end of the guided range. We estimate a compound annual growth rate (CAGR) of around 25 per cent each for AUM and profit after tax (PAT) over FY25-FY27. We hope Bajaj Finance will deliver return on assets (RoA) of 4.1 per cent and RoE of 21 per cent in FY27,” said the brokerage.

 

The brokerage cited the lack of near-term re-rating triggers to retain its 'neutral' rating for the stock. It has a share price target of ₹10,000 based on 4.5-times March 2027 estimated book value per share. 

 

Outlook divided

 

Bajaj Finance reported a net profit of ₹4,546 crore in Q4, up 19 per cent year-on-year (Y-o-Y) and 6 per cent quarter-on-quarter (Q-o-Q).

 

Net interest income (NII) grew 5 per cent Q-o-Q to ₹9,807 crore, while NIM fell 10 bps to 9.6 per cent Q-o-Q.

 

The NBFC’s customers increased to 101.8 million in Q4, growing 22 per cent Y-o-Y and 5 per cent Q-o-Q. As many as 4.7 million customers were added in the quarter.

 

New loans grew 23 per cent Y-o-Y to 10.7 million (compared to 8.7 million in Q4FY24). This takes the total AUM to ₹4.17 trillion. AUM was up 26 per cent Y-o-Y and 5 per cent Q-o-Q.

 

Analysts at Kotak Institutional Equities raised Bajaj Finance's earnings estimates in the range of 1.6- 3.4 per cent over FY26 and FY27. This would reflect marginally higher loan growth (25-26 per cent), lower expenses, and tweaking of credit costs. The brokerage has an 'add' rating for the stock (target ₹9,500).

 

Emkay Global Financial Services, meanwhile, has cut earnings estimates by 2-3 per cent over the same period, accounting for minor cuts in NIM and fee income, unchanged operating expenses, and minor increase in credit costs. It, too, has an 'add' rating (target: ₹9,200).