Bajaj Finance hits lowest level since May 2018; stock tanks 59% in 2 months

Historically, the June quarter is the largest contributor to Bajaj Finance's AUM growth

Shares of Bajaj Finance fell below Rs 2,000 mark for the first time in nearly two years after plunging 9 per cent to Rs 1,972 on the BSE on Friday amid concerns of elevated uncertainties around the company's growth and asset quality.

The NBFC's stock was trading at its lowest level since May 17, 2018. In the past two months, the stock has tanked 59 per cent, as compared to 22 per cent decline in the S&P BSE Sensex.

Historically, the April-June quarter (Q1) is the largest contributor to assets under management (AUM) growth for Bajaj Finance, with roughly 40 per cent contribution to the total AUM growth, which will be a wash-out quarter during FY21. Also, the Reserve Bank of India (RBI) moratorium poses a greater risk for Bajaj Finance by providing longer disruption in the financial discipline of low-income borrowers of the company.

Analysts at Emkay Global Financial Service expect further clarity on growth and asset quality only after the lockdown and moratorium period (most likely post Q1FY21 earnings). The brokerage firm expects stock performance to be muted till then. Post the crisis, Bajaj Finance may have a revised growth trajectory (sub around 30 per cent), considering its current AUM size and the limited scope for asset expansion, the brokerage firm said in stock update.

Last week, S&P Global Ratings revised the outlook on Bajaj Finance to negative and affirmed the 'BBB-/A-3' ratings.
 

“The negative outlook on Bajaj Finance reflects our view that there is a one-in-three chance that we will lower the rating over the next 12 months due to rising economic risks in the Indian financial sector. We do not factor any extraordinary support from the group given that the group entities are regulated or listed entities, which restrict their ability to provide support to Bajaj Finance in the case of an extraordinary event,” S&P Global Ratings said in release dated April 17.

The rating agency further said it may downgrade Bajaj Finance if they believe that the current economic crisis is sharper and longer than they envisage such that it substantially weakens the company's asset quality and sharply increases its credit costs beyond our expectations. The agency may revise the outlook to stable if economic risks reduce and the credit profiles of both Bajaj Finance and group companies don't deteriorate materially, it added.