Post by : Bianca
Haleem
Bajaj Finance, a prominent non-banking finance institution in India, experienced a nearly 7% decline in its shares during early trading on November 11, following the release of its quarterly earnings. The market reacted to the company's tempered outlook and mounting concerns in its MSME loan sector, raising alarms about immediate growth prospects.
Robust Quarterly Profit Increase
The NBFC announced a consolidated net profit surge of 23%, totaling ₹4,948 crore for the quarter that concluded on September 30. Furthermore, net interest income grew by 22%, reaching ₹10,785 crore, compared to ₹8,838 crore in the same quarter last year.
Concerns Over Asset Quality
Nevertheless, signs of pressure on asset quality emerged, with gross non-performing assets (GNPA) rising to 1.24% from 1.06% last year, and net NPAs increasing from 0.46% to 0.6%. The downturn in MSME and two-wheeler financing has led the company to embrace a more measured approach to credit growth.
Adjusted Credit Growth Projections
Bajaj Finance has revised its credit growth forecast for this fiscal year, now estimating a range of 22-23%, a decrease from the previous expectation of 24-25%. Management anticipates stable net interest margins (NIMs), with fee income projected to grow by 13%-15% and credit costs expected to be between 1.85%-1.95% for FY26.
Market Reactions and Investor Caution
Market analysts expressed caution following these developments. JM Financial lowered EPS projections by 2%-3% for FY26/27 and instituted a new target price of ₹1,140, adjusting its rating from BUY to ADD. Motilal Oswal Financial Services noted that, while PAT growth around 25% from FY25 to FY28 is promising, the stock's high valuation limits near-term prospects, hence maintaining a Neutral rating with a target of ₹1,160.
The current pricing issues highlight investor sensitivity to slowing growth in essential lending volumes, as Bajaj Finance takes a prudent approach toward future growth amid challenging market conditions for NBFCs.
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