Bajaj Finance share price crashes 90% today; here's why

Bajaj Finance Ltd (BAF) shares on Monday turned ex-split in the ratio of 1:2 and ex-bonus in the ratio of 4:1. Adjusted for the bonus issue and stock split, the BAF stock was trading 2.26 per cent higher at Rs 954.50 on BSE at open. 

To be sure, Bajaj Finance shares were down 89.99 per cent over Friday's unadjusted closing price of Rs 9,334.15 apiece on BSE. It is possible that trading apps of certain brokerages might be showing this unadjusted Bajaj Finance share price (adjusted price: Rs 933.40) for Friday and, thus, suggesting a 90 per cent-odd fall on the counter.

Since June 16 was set as the record date for the two corporate actions, Bajaj Finance would determine eligible shareholders today only. 

In a stock split, already owned shares are split into shares with smaller face values in a bid to increase liquidity on the counter. A bonus issue also increases the number of outstanding equity shares, but has no impact on face value -- they are issued from free reserves and surplus of the company. 

A stock split of 1:2 means every already owned share is split into two new shares of new face value (FV) of 1/2 of original FV. In Bajaj Finance's case, the prevailing face value is Rs 2. So one share of Bajaj Finance of face value Rs 2 (Friday's closing price: 9,340) got turned into two Bajaj Finance shares with face value of Re 1. The Bajaj Finance stock price got adjusted accordingly. 

Following the subdivision of equity shares, bonus issues in 4:1 ratio came into effect. A bonus issue of 4:1 means if an investor already owns one share, s/he gets four additional new shares. Now since one Bajaj Finance stock turned into two stocks of face value 1 following the stock split, the bonus issue resulted in eight additional shares. 

Bajaj Finance is a NBFC with a wide product portfolio comprising of loans for two-wheelers, consumer durables, housing, and small businesses among others. 

In a note on June 6, Axis Securities said the NBFC has moderated pricing in certain unsecured products which impacted yields. NIMs contraction in FY25, thus, was sharper than anticipated. 

In the current rate cut cycle, BAF expects cost of fund (CoF) to gradually decline by 10-15bps over FY26 (assuming 3three rate cuts) and settle at 7.75-7.85 per cent in FY26.

This decline factors in the lag in the downward repricing of long tenor loans and 75 per cent of borrowings, which are fixed-rate. 

"BAF remains well-placed to navigate the rate cut cycle despite the pricing pressure in certain products and protect NIMs with a scope to improve margins over the medium term," Axis Securities said. 

The brokerage said Rajeev Jain's continuation with BAF in the capacity of Vice Chairman addresses leadership continuity issues and ensures the seamless execution of the strategy. 

"We expect BAF to deliver a strong AUM/Earnings growth of 25/26/25% CAGR over the medium term, driven by steady-to-marginally improving NIMs, operating leverage driving cost ratio improvement, and positive outlook on asset quality, keeping credit costs under control," Axis Securities said. 

It expects BAF to deliver a RoA and RoE of 4.5-4.6 per cent and 19-21 per cent, respectively, broadly in-line with the management's long-term guidance.