Bajaj Finance, Bajaj Finserv hit over 2-year lows, recover later

Historically, Q1 is the largest contributor to AUM growth for Bajaj Finance
Shares of Bajaj twins – Bajaj Finance  and Bajaj Finserv - declined on Wednesday and hit an over two-year low on the BSE amid concerns that the current April-June quarter (Q1FY20) will be a wash-out quarter for Bajaj Finance.

Historically, Q1 is the largest contributor to assets under management (AUM) growth for Bajaj Finance, with roughly 40 per cent contribution to total AUM growth. Meanwhile, the Reserve Bank of India (RBI) last week extended the moratorium on term loans and interest on working capital loans by three months till August 31.

Shares of Bajaj Finance slipped 2.6 per cent at Rs 1,783, its lowest level since April 2, 2018, while Bajaj Finserv slipped 3 per cent to Rs 3,986, its lowest level since July 28, 2017 on the BSE. Thus far in the calendar year 2020, these stocks have fallen 58 per cent, as compared to 26 per cent decline in the S&P BSE Sensex.

Bajaj Finserv, the holding company of Bajaj Group’s financial services business, is the parent of Bajaj Finance, Bajaj Allianz General Insurance, and Bajaj Allianz Life Insurance.

There was no lending in B2B businesses and auto finance business in April 2020. Biz sourcing has kick-started for both in green and orange zones in May. For B2C and SME business, the company took a cautious stance to not lend till lockdown is lifted. It may evaluate gradual reopening in green and orange zones. Mortgage business is present in top 30 cities and since most of these cities are in Red zone, it is likely to take longer time to gain momentum, analysts at Prabhudas Lilladher said in result update.

“Management’s caution over growth and asset quality would lead to balance sheet consolidation, resulting in revised growth trajectory (25-30 per cent) for Bajaj Finance. The shift will make it a compounding growth story against existing accelerated growth and valuation story. Thus, price consolidation is likely with preference for lower multiple against historic trends,” analysts at Emkay Global Financial Services said in result update.

The brokerage firm appreciates Bajaj Finance’s superior liability franchise and strong collection network. However, clarity over growth and non-performing assets (NPAs) will only come after the lockdowns and completion of the moratorium, it said.

At 10:41 am, both these stocks recovered from their respective lows with Bajaj Finance was trading 3 per cent higher at Rs 1,878, while Bajaj Finserv was up 1 per cent at Rs 4,133 on the BSE. In comparison, the S&P BSE Sensex was up 0.51 per cent at 30,764 levels.


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