Bajaj Finance, Bajaj Finserv shares tumble up to 8% today; here's why

Shares of Bajaj Finance Ltd fell sharply in Friday's trade amid concerns over the shadow lender's profit growth. The stock slumped 7.78 per cent to hit a day low of Rs 6,728 against its previous close of Rs 7,293.90.

The non-banking financial company forecast its assets under management to grow between 26 per cent and 28 per cent in the fiscal year that started April 1, 2024, compared with 34 per cent growth in the previous year. The NBFC said its net interest margin will fall 30-40 basis points (bps) over the next two quarters.

Bajaj Finance reported a 21 per cent rise in fourth-quarter (Q4 FY24) profit but mentioned that it was "cautiously optimistic" about fiscal year 2025 profit growth, which could be more "rear-ended".

In what could be referred as a rub-off effect, Bajaj Finance also dragged shares of its holding company Bajaj Finserv Ltd around 4 per cent lower.

Brokerage views

Brokerage Emkay said the Bajaj Finance reported a good set of numbers in Q4 FY24, against the backdrop of Reserve Bank of India's (RBI's) embargo on EMI and e-com cards which affected PBT by around 4 per cent.

"Overall, we see the company progressing well on its long range strategy targets. To reflect the Q4 developments and management guidance, we slightly tweak our estimates, leading to around (3 per cent)-1 per cent PAT change in FY25E-27E; we reiterate our 'Buy' rating with unchanged Mar-25E target price of Rs 9,000 per share," it further stated.

Religare Broking said the NBFC saw healthy growth in AUM (Asset Under Management) which was led by the secured lending segment, however, margin continued to slide.

"The decline in margin was mainly due to increase in cost of funds by 10bps QoQ/47bps YoY to 7.9 per cent. Going forward, the management expect that margin may see contraction by 30-40 basis points (bps) by H1 FY25 as the company continues to see increasing proportion of secured lending in its portfolio," it stated.

"The management expects that the credit quality shall be sustained and awaits RBI to remove restriction on the cards. Financially, we expect NII/PPOP/PAT to grow at a CAGR of 26%/24%/25% over FY24-26E. We continue to remain positive on Bajaj Finance and thus, maintain Buy with a target price of Rs 8,861," Religare mentioned.