Bajaj Finance slides over 4% after firm reports mixed Q3 results, brokerages cut targets

Bajaj Finance Share Price: Bajaj Finance started its trading session on Tuesday (January 30, 2024) on a poor note after the firm reported mixed third-quarter results.

The stock was trading down by 4.57 per cent, or Rs 328.75, at Rs 6858.75 at 9:23 am on Tuesday.

Bajaj Finance Q3 Results
 

The company announced its December quarter numbers post market hours on Monday.

The company's net interest income (NII) was up by 29.25 per cent to Rs 7655.3 crore compared Rs 5922.9 crore Year-on-Year (YoY), It beat Zee research estimates of  Rs 7470 crore). 

The consolidated profits jumped by 22.4 per cent to Rs 3639 crore against Rs 2973 crore in the same quarter last fiscal. It was below research estimates of Rs 3720 crore.

The firm's provisions were higher by 48.4 per cent to Rs 1248 crore against Rs 841 crore YoY. On a Quarter-on-Quarter (QoQ) basis, provisions jumped by 15.9 per cent in the December quarter against Rs 1077 crore.

The gross non-performing assets (GNPA) increased by 0.95 per cent compared to 0.91 per cent QoQ. Analysts' estimate was 0.90 per cent for the same. 

The company's net interest margin (NIM) slipped to 10.15 per cent comapared to 10.26 per cent QoQ, above estimates of 10 per cent.

The management commentary is also worrisome, but there is no change in guidance.

What does management says?

• It expressed concerns about rural areas.
• It said that loan losses are very high in rural areas.
• So, the company's focus is on risk in rural areas.
• Along with that, collection efficiency in urban areas remained low during the December quarter.
• Not just in rural areas, loan losses are also higher in urban areas due to low collection efficiency.
• The rate hike is due to increase in risk weight and cost of funds.
• It further says impact on digital business is due to an RBI ban on Insta EMI.
• There is a 31 per cent decline in digital EMI card acquisition.
• B2B loans have also declined due to digital EMI cards.

What does brokerage say?

• It is concerned about asset quality
• It says there is more pressure on unsecured segment
• Credit costs may also increase further

Brokerages on Bajaj Finance

• After Q3 results, Morgan Stanley has maintained an overweight rating on the firm. The target price has been cut to Rs 9600 from Rs 10000.
• JP Morgan has maintained an overweight rating, and cut the target cut to Rs 8500 from Rs 9300.
• Citi has given a buy call, cutting its target to Rs 8975 from Rs 9025.
• Jefferies has maintained a buy call. It cut the target price to Rs 9400 from Rs 9470.

Board Approves

Borrowing limit of fund raising through debt increased to Rs 3.75 lakh crore against Rs 2.25 lakh crore.

Investment in the equity share capital of Bajaj Financial Securities Limited, wholly owned subsidiary of the company up to Rs. 400 crore in one or more tranches.