The non-banking finance company's stock had consistently outpaced the market in past more than seven years. Thus far in the calendar year 2019, the stock has outperformed the market by surging 41 per cent, as compared to a 10 per cent gain in the S&P BSE Sensex. It hit an all-time high of Rs 3,761 on Friday in intra-day trade on the BSE.
Bajaj Finance believes the current financial year 2019-20 (FY20) may be a challenging year.
“The recent increases in international crude prices; some high frequency indicators — such as growth in manufacturing and capital goods, the Index of Industrial Production, auto sales — suggest a significant moderation in activity, amid a slowing global economy,” the company said in FY19 annual report.
With a large customer franchise, strong liquidity position, diversified portfolio mix, granular geographical distribution and robust risk metrics, the management is confident of successfully dealing with these challenges in FY20, it said.
In the challenging environment for NBFCs, in FY19, Bajaj Finance had posted 41 per cent year-on-year (YoY) growth in consolidated assets under management (AUM) and a 60 per cent YoY growth in consolidated profits.
The zero cost EMI financing segment is witnessing strong competition with private banks entering the space aggressively. Though, growth momentum remained strong for Bajaj Finance (41 per cent in FY19), analysts at ICICI Securities believe growth and margin in this high yield segment can face headwinds, as current liquidity environment favours banks with rich CASA.
“The company’s increasing growth in non-consumer lower yielding book such as housing, rural & SME lending is expected to impact yields & margin in the medium term. On the back of incremental growth in the non-consumer finance book, the consumer book (low risk) in total AUM is reducing from 45 per cent in FY17 to around 39 per cent in FY19. This can also lead to building in of asset quality risk. Therefore, current high yields look unlikely to sustain,” the brokerage firm said in a June 19 report and downgraded rating on the stock from ‘buy’ to ‘reduce’ and revised target price to Rs 3,300 from Rs 3,700 per share.
At 01:09 pm, Bajaj Finance was the biggest loser among the benchmark indices, the S&P BSE Sensex and Nifty 50 index.