Bajaj Finance stock drops 3% after Q2 AUM growth slows

Shares of Bajaj Finance dropped by 3% on October 4 after the company reported its slowest Assets Under Management (AUM) growth in six quarters. Despite a 29% rise in AUM to ₹3,73,900 crore for the July-September quarter, the pace was slower compared to previous periods. This decline in growth has raised concerns among investors, especially in the context of share market investment decisions related to Bajaj Finance.

AUM growth deceleration

The 29% AUM growth may seem positive, but it is the slowest pace the non-banking financial company (NBFC) has seen in six quarters. In the same period last year, Bajaj Finance’s AUM stood at ₹2,90,264 crore, showcasing that while the company is growing, it’s doing so at a slower rate. For investors focusing on share market investment, this trend is noteworthy as it reflects potential challenges for the company in maintaining its past growth momentum.

Concerns over credit costs

Brokerage firms like Nomura have pointed out that Bajaj Finance’s credit costs will be a key factor to monitor moving forward. An increase in credit cost guidance for FY25 could negatively impact the stock. Nomura has a neutral rating for Bajaj Finance, with a price target of ₹7,500. Investors planning to engage in share market investment should closely follow these developments, as rising credit costs could affect the stock’s profitability.

Customer franchise and new loans

On a positive note, Bajaj Finance’s customer franchise expanded significantly, reaching 92.09 million by the end of the September quarter, compared to 76.6 million in the same period last year. Additionally, new loans booked grew by 14%, nearly touching 1 crore. These figures indicate a strong customer base and continued loan growth, aspects that could attract those looking for long-term opportunities in share market investment.

Expert opinions and future outlook

While concerns about AUM growth and credit costs are valid, analysts like Morgan Stanley remain optimistic. Morgan Stanley gave Bajaj Finance an 'overweight' rating, with a price target of ₹9,000, implying an upside of 21%. They believe that the company's management is confident about asset quality improvement in the next quarter, which could ease investor concerns. This outlook offers hope for those considering share market investment in Bajaj Finance, despite the current slowdown.

Investment considerations

Bajaj Finance’s stock decline following its slowest AUM growth in six quarters may be a cause for concern among short-term investors. However, the company’s expanding customer base and analyst optimism provide a balanced view. Investors interested in share market investment should carefully evaluate both the risks and potential rewards before making any decisions, particularly in light of ongoing concerns about credit costs and future growth rates.