Bajaj Finance shares rebound after falling sharply in early trade. Here’s why

Bajaj Finance shares – Bajaj Finance witnessed a 3% decline in its shares during early trade, but later recovered, showing an increase of 1.15% to Rs 7307.40 per share around 11:45 am.

The initial dip followed the Reserve Bank of India’s (RBI) actions against two lending products offered by the non-banking financial company (NBFC), Bajaj Finance.

Bajaj Finance shares (1)
Bajaj Finance shares

Despite the early setback, Bajaj Finance’s shares regained ground after several brokerages dismissed concerns related to the RBI’s actions.

Jefferies, a brokerage firm, maintained its ‘Buy’ rating for the stock and set a target price of Rs 9,470. They viewed the RBI’s directive as a “slight bump” and anticipated the NBFC’s overall earnings trajectory to persist.

Highlighting specifics, Jefferies noted that the Insta EMI Cards segment constituted only 5% of the total customer base and approximately 10% of customers availing EMI products. They estimated that this segment contributes less than 0.5% to the NBFC’s total profit.

However, Macquarie, another brokerage, expressed concerns regarding the number of customers affected by the restricted products.

Macquarie analyst Suresh Ganapathy mentioned, “We believe these figures appear substantial, and thus, we are surprised by the management’s claim of minimal operational impact.”

Ganapathy emphasized potential risks such as a decline in assets under management and a decrease in fee growth, which could impact the NBFC’s profitability due to the RBI’s directive.

Despite these concerns, 29 analysts covering the stock, including Jefferies and Macquarie, maintain an average ‘Buy’ rating for Bajaj Finance, as per LSEG data reported by Reuters.

The RBI’s action on Wednesday instructed the NBFC to immediately halt lending through its ‘eCOM’ and ‘Insta EMI Card’ products, citing violations of its recently introduced digital lending guidelines from last year.

These guidelines necessitate lenders to transparently disclose all charges to borrowers upfront and elucidate their recovery procedures in case of defaults.

In response to the RBI’s directive, Bajaj Finance affirmed compliance with the order through a stock exchange filing, stating that the temporary restrictions are not anticipated to cause a significant financial impact on the company.

Click to rate this post!
[Total: 17 Average: 5]

Leave a Comment