Bajaj Finance Shares Fall As Lower AUM Growth In Q3 Drags Analysts' Sentiments

Shares of Bajaj Finance Ltd. fell the most in 21 months after its quarterly report showed that the growth of assets under management, or AUM, had slowed down. This raised concerns among analysts tracking the company.

"Softer loan growth can weigh on the stock in the near term," Jefferies said in its investor note, after highlighting the moderation in the growth of the company's AUM. 

Bajaj Finance, in a stock exchange filing yesterday, said its AUM grew by 27% to approximately Rs 230,850 crore as of Dec. 31, 2022, compared to Rs 181,250 crore a year earlier.

However, when compared to the second quarter, the growth shows a "tad moderation" from the 31% year-on-year and 7% sequential growth recorded in the September quarter, according to Jefferies. 

The growth in AUM last quarter was "below expectations" despite healthy new customer additions, said Motilal Oswal.

Bajaj Finance Q3 Update Highlights:

• Assets under management rose 27% year-on-year to Rs 2.3 lakh crore as of Dec. 31, 2022.

• AUM rose by Rs 12,500 crore in Q3.

• Highest ever new loan accounts booked in Q3 at 7.8 million.

• Deposit book rose 41% year-on-year to Rs 43,000 crore.

Source: Exchange filing

Shares of the company closed 7.17% lower on Thursday, compared with 0.28% decline in benchmark Nifty 50.

The stock fell as much as 8.31% during early trade.

The total traded volume was 5.8 times its 30-day average volume. The relative strength index is 28.

Of the 31 analysts tracking the stock, 20 maintained a 'buy', five analysts suggested 'hold' while six recommended 'sell', according to Bloomberg. The 12-month consensus price target implies an upside of 32.8%.

Here's What Analysts Have To Say:

Jefferies

• Maintains a 'hold' rating with target price Rs 8,160. This implies and upside of 24%.

• Company's Q3 FY23 pre-quarter update shows some moderation in AUM growth.

• Growth in new loan booking was also slower at 5% year-on-year; sequential growth of 15% is due to favourable seasonality (festive-period).

• Will watch out if this is due to shorter-term securities lending business or retail/ SME loans in Q3 results.

• Softer growth can weigh on stock in near-term.

• Deposits grew by 41% year-on-year and liquidity position improved.

Morgan Stanley

• Kept an 'overweight' call on the stock with price target Rs 8,900, implying a 35% upside.

• Sequential growth is a tad softer than the 7-7+% usually seen in the third quarter.

• This is likely due in part to strong 7% sequential growth in second quarter and other factors.

• Need to see some composition of growth that could help net interest margin.

CLSA

• Maintained a 'sell' rating on the stock, with target price Rs 6,000, implying an 8.7% downside.

• AUM growth slowing sequentially is odd as Q3 is stronger quarter due to festivals.

• Should look out for spreads and loan mix in its results.

• Stock is unjustifiably expensive despite 20-25% underperformance versus the Bank Nifty over the past year.

Motilal Oswal

• Kept a 'buy' call.

• Says healthy new customer acquisitions, but AUM growth below expectations.

• AUM growth suggested that disbursements were strong across product segments. 

• CRAR was flat quarter-on-quarter at 25.1%, suggesting weaker growth and lower utilization of capital.

• Robust deposit growth suggested that company continued to prioritize deposit growth. 

• A higher liquidity buffer at the end of a festive quarter emphasizes weak AUM growth.

• New customer acquisition run-rate was healthy in Q3 FY23.