On October 18, Bajaj Finance’s share price witnessed a notable 2 percent decline during early trading on the Bombay Stock Exchange (BSE) in response to the company’s Q2FY24 quarterly performance report. The trading day commenced at ₹8,080.95, marking a slight decrease from the previous day’s closing price of ₹8,091.35. Subsequently, the share price experienced a 2.05 percent drop, swiftly reaching ₹7,925. At 9:25 am, the stock was down 1.36 percent, trading at ₹7,981.35 on the BSE.
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Underperformance Relative to Benchmark Sensex
Bajaj Finance’s shares have notably underperformed the equity benchmark Sensex over the past year. During this period, the stock registered a modest gain of approximately 10 percent, while the Sensex reported an approximately 14 percent increase.
The company’s share price reached its 52-week high of ₹8,190 on October 6 this year, in stark contrast to its 52-week low of ₹5,487.25 on March 20, as recorded on the BSE.
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Bajaj Finance’s Strong Q2 Results
Bajaj Finance reported its Q2FY24 consolidated net profit after the market closed on October 17. The company revealed a substantial 27.7 percent year-on-year (YoY) increase in its net profit, which amounted to ₹3,550.80 crore compared to ₹2,780.65 crore for the corresponding quarter of the previous year.
The non-banking finance company (NBFC) also reported a YoY growth of 26 percent in its net interest income (NII) for Q2FY24, which amounted to ₹8,845 crore, up from ₹7,002 crore. Furthermore, the company’s assets under management (AUM) experienced a notable YoY growth of 33 percent, reaching ₹2.9 lakh crore, and the interest income showed a strong YoY growth of 38 percent, amounting to ₹11,734 crore. The company expanded its customer base by adding 35.8 lakh new customers during Q2FY24, bringing the total customer count to 7.7 crore as of September 30.
Business Strategy Adjustment and Acquisition
In a strategic move, Bajaj Finance reduced its business by 8-14 percent in both urban and rural areas, specifically targeting customers who already had multiple small ticket loans. This adjustment was confirmed by Rajeev Jain, the company’s Managing Director.
Additionally, on Tuesday, Bajaj Finance announced its acquisition of up to 26 percent equity stake in Pennant Technologies Private Limited for approximately ₹267.50 crore.
Brokerages’ Views on Bajaj Finance
Various brokerage firms have maintained their earlier views on Bajaj Finance’s stock following the release of its Q2 earnings. Motilal Oswal Financial Services has reiterated its buy call on the stock, setting a target price of ₹9,600, reflecting a 19 percent potential upside. Motilal Oswal emphasized the strong customer acquisitions and new loan trajectory, particularly in the context of the digital ecosystem.
Nirmal Bang upgraded the stock to a ‘buy’ and raised the target price to ₹9,520, signaling an 18 percent upside potential. Nirmal Bang expects substantial AUM growth in the upcoming fiscal years, driven by balanced growth across segments.
Global brokerage firms also maintained their views on Bajaj Finance. CLSA maintained a buy call with a target price of ₹9,500, Jefferies upheld a buy rating and raised the target price to ₹9,470, while Macquarie maintained an underperform rating with a target price of ₹8,033. Goldman Sachs retained a ‘sell’ call with a target price of ₹7,205.