Bajaj Finance shares fall 5% as co warns of asset quality deterioration

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The share price of Bajaj Finance fell 5 percent on Monday after the non-banking lender warned of asset quality deterioration amid the second wave of COVID-19.

The share price of Bajaj Finance fell 5 percent on Monday after the non-banking lender warned of asset quality deterioration amid the second wave of COVID-19. The company said that the non-performing assets (NPAs) and credit costs could rise in the first six months of the current financial year.
The stock fell as much as 5.2 percent to its day's low of Rs 5,681.20 per share.
"Forward flows across overdue positions were higher due to constraints on collections amidst strict lockdowns across most parts of India. As a result, the company estimates its GNPA and NNPA in Q1 and Q2 to be higher," the company said in a mid-quarter update.
The NBFC also stated that it estimates an impact of Rs 4,000-5,000 crore on its AUM growth plan for FY22 on account of the disruption caused by the second wave.
It estimates an incremental credit cost of Rs 1,100-1,300 crore versus planned credit cost in FY22.
Brokerages, however, have mixed views on the NBFC after its update. JPMorgan has a 'neutral' call while Citi and Morgan Stanley remained bullish despite the cautious stance.
Citi maintains a 'buy' call on the stock with a target at Rs 5,800 per share. The lender has taken steps to reduce opex and cost of funds, the brokerage said. It is factoring in a 23 percent YoY rise in AUM growth and 2.3 percent in credit costs in FY22 and sees 2 percent gross NPAs in the first quarter.
Morgan Stanley is 'overweight' on the stock with a target at Rs 6,000 per share. However, it expects the stock to be weak in the near term. It cut EPS estimates by 12 percent and 4 percent for FY22 and FY23.
JPMorgan maintains a 'neutral' call on the stock with a target at Rs 5,100 per share. However, it believes the company can make up for lost growth in the second half of FY22.

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CompanyPriceChange%Gain
HUL2,480.75 63.85 2.64
Bajaj Auto4,164.95 105.95 2.61
Bharti Airtel538.90 10.20 1.93
Bajaj Finserv11,998.00 179.95 1.52
IndusInd Bank994.90 10.65 1.08
CompanyPriceChange%Gain
Adani Ports694.35 47.45
Bajaj Auto4,167.10 113.20
HUL2,482.90 65.20
Bharti Airtel538.75 10.10
Grasim1,480.75 22.55
CompanyPriceChange%Gain
HUL2,480.75 63.85
Bajaj Auto4,164.95 105.95
Bharti Airtel538.90 10.20
Bajaj Finserv11,998.00 179.95
IndusInd Bank994.90 10.65

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