Bajaj Finance Sees 8% Decline Despite Strong Q4 Performance

Bajaj Finance shares experienced an 8% decline following the release of their Q4 results, despite reporting significant growth figures. On Friday, the shares opened at ₹7,008.60, dropping to ₹6,728 during the day’s trading session. This decline comes as a surprise considering the company’s strong financial performance.

Post the market close on Thursday, Bajaj Finance unveiled a 21% year-on-year increase in their consolidated net profit for Q4FY24, reaching ₹3,825 crore. Additionally, the net interest income (NII) grew by 28% to reach ₹8,013 crore for the same period.

However, investors seem concerned about Bajaj Finance’s net interest margin (NIM) contraction in Q4, which contracted by 21 basis points from the previous quarter. The company also disclosed that its gross and net NPAs as of March 31, 2024, stood at 0.85% and 0.37%, respectively.

Following the Q4 results, Motilal Oswal Financial Services downgraded Bajaj Finance stock to ‘neutral’, with a target price of ₹7,800. They indicated limited upside potential despite a healthy projected PAT CAGR over the next few years and an RoA and RoE of 4.3% and 22%, respectively, in FY26E.

Kotak Institutional Equities, however, maintained their ‘add’ call on Bajaj Finance with a target price of ₹7,800. They noted that the Q4FY24 earnings were in line with expectations, as the company achieved a strong 34% loan growth. Kotak also highlighted various factors such as NIM compression and increased credit costs affecting the company’s near-term performance.

Bajaj Finance’s expansion into new product segments like cars, tractors, commercial vehicles (CVs), and potentially microfinance institutions (MFI) has left investors cautious about potential vulnerability to market cyclicality despite a well-diversified product mix.