Bajaj Finance Share Price Gains After Q2 Profit, NII Growth

Bajaj Finance Ltd.'s share price jumped over 4% after its net profit rose in the second quarter of fiscal 2025. The profit was up 13% year-on-year at Rs 4,014 crore, meeting the Bloomberg's estimates of Rs 4,118 crore.

The growth was primarily driven by a 23% rise in net interest income, which reached Rs 8,838 crore, alongside a 29% increase in assets under management, totaling Rs 3.73 lakh crore.

However, the company faced challenges with rising provisions and a decline in asset quality. Provisions for loan losses surged by 77% year-on-year to Rs 1,909 crore, attributed to a rise in net stage 2 and 3 assets across retail and small to medium enterprises. The gross non-performing assets ratio increased to 1.06%, up from 0.86% in the previous quarter and 0.91% a year ago. The net NPA also rose to 0.46%, compared to 0.38% in the prior quarter.

During a post-earnings conference call, management expressed cautious optimism about asset quality, anticipating improvements in the coming quarters. They highlighted significant growth in car loans, which soared 128% year-on-year to Rs 9,906 crore, and gold loans, which increased by 74% to Rs 6,363 crore.

Looking ahead, Bajaj Finance aims for AUM growth of 27-28% for fiscal 2025, despite some stress in the rural B2C segment. The company's new business lines have begun contributing positively, accounting for 2-3% of AUM growth.

With deposits rising 21% year-on-year to Rs 66,131 crore and a slight increase in the cost of funds, funding costs have peaked, indicating a stable margin outlook moving forward, management said.

Shares of Bajaj Finance rose as much as 4.19% before paring gains to trade 3.40% higher at Rs 6,904.75 apiece, as of 09:46 a.m. This compares to a 0.21% decline in the NSE Nifty 50.

The stock has fallen 11.47% in the last 12 months. Total traded volume so far in the day stood at 3.9 times its 30-day average. The relative strength index was at 41.

Out of 35 analysts tracking the company, 26 maintain a 'buy' rating, five recommend a 'hold' and four suggest 'sell', according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 17.6%.