Bajaj Finance tumbles on slow Q3 AUM growth, despite peak customer franchise

Domestic brokerage firm Motilal Oswal Financial Services noted that AUM growth was below expectations

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Share price of consumer financier Bajaj Finance on January 5 opened 5 percent lower as investors were unimpressed by the company’s low AUM (assets under management) growth in October-December quarter.

At 9:30 am, the stock was quoting at Rs 6204 apiece on the NSE, down by 6 percent. Trading volume stood at 1.4 million on the exchange.

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Bajaj Finance’s AUM rose 27 percent from last year to Rs 2.3 lakh crore from Rs 1.8 lakh crore. During the quarter, the company’s AUM increased by Rs 12,500 crore, up only 5.7 percent quarter-on-quarter.

Broking firm CLSA has a ‘Sell’ call on Bajaj Finance with a target price of Rs 6000 per share. “Q3 AUM growth was nearly 200 basis points lower than our estimate of 7.5% QoQ. Q3 is usually a strong quarter due to festivals, so either there was some impact at end of Q2 or the company lost some market share,” the foreign brokerage firm noted.

Domestic brokerage firm Motilal Oswal Financial Services also noted that AUM growth was below expectations. “Capital adequacy ratio (CRAR) was flat on a quarterly basis at 25.1%, suggesting weaker growth and lower utilization of capital,” it said. The firm has a Buy rating on the stock.

According to its business update, the company reported the highest-ever quarterly increase in its customer franchise in the December quarter. Customer franchise increased by 3.1 million during the quarter. The customer franchises of the finance company stood at 66 million as of December 2022, compared to 55.4 million in the year-ago period.

The company said that new loans booked by it in quarter-ended December were the highest ever at 7.8 million, up 5.4 per cent from the year-ago period.

Deposit books stood at approximately Rs 43,000 crore as of 31 December 2022 as compared to Rs 30,481 crore as of 31 December 2021, a YoY growth of 41 percent.

Net liquidity surplus stood at nearly Rs 12,750 crore as of the December quarter.

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