Bajaj Finance Q4 Performance: PAT and NII Growth Amid Share Decline

Bajaj Finance, one of India's leading non-banking financial companies, recently reported its financial results for the fourth quarter, showcasing robust growth in Profit After Tax (PAT) and Net Interest Income (NII). However, despite this impressive performance, the company's shares experienced a significant decline.

Despite a previous close of Rs 7,293.90, Bajaj Finance shares plummeted by 7.78% to reach a day low of Rs 6,728. The company, anticipating a financial year starting April 1, 2024, forecasts a growth range of 26% to 28% in assets under management, a decline from the previous year's 34% growth rate. Additionally, Bajaj Finance expects a decrease in net interest margin by 30-40 basis points (bps) over the upcoming two quarters.

Despite reporting a strong 21% increase in fourth-quarter (Q4 FY24) profit, Bajaj Finance remains cautiously optimistic about profit growth for financial year 2025, indicating a potential slower trajectory. This cautious outlook had a spillover effect, dragging down shares of its holding company, Bajaj Finserv Ltd., by approximately 4%.

It is reported that the decline in margin was primarily attributed to a 10 basis points increase in the cost of funds quarter-on-quarter and a 47 basis points rise year-on-year, reaching 7.9%. Looking ahead, management anticipates further margin contraction by 30-40 basis points in the first half of the financial year 2025 due to an increasing proportion of secured lending in the portfolio. They express confidence in sustaining credit quality and await RBI's removal of restrictions on cards. Financially, a growth trajectory is expected with Net Interest Income (NII), Pre-Provision Operating Profit (PPOP), and Profit After Tax (PAT) projected to grow at a Compound Annual Growth Rate (CAGR) of 26%, 24%, and 25% respectively over FY24-26E. With a positive outlook on Bajaj Finance, Religare maintains a buy rating with a target price of Rs 8,861.

While Bajaj Finance's strong performance in Q4 is commendable, the decline in its shares underscores the complexity of stock market dynamics. As investors assess the company's long-term growth potential and risk factors, the stock's performance may fluctuate in response to various internal and external factors.