Bajaj Finance shares have fallen by over 4% today, continuing the downtrend that started post the company’s Q1 FY25 results. The stock is now down nearly 8% from its recent all-time high, raising concerns among investors despite the strong rally witnessed over the last two months.
The sharp decline in the stock is primarily driven by management commentary in the post-earnings conference call, where Bajaj Finance highlighted multiple red flags in its lending book.
The company noted that consumer leverage continues to remain an area of concern. Specifically, over-leverage of customers across product segments remains a persistent pain point. Bajaj Finance is taking several corrective measures across its product lines to reduce the contribution from customers who are availing multiple loans simultaneously.
What’s more alarming is that the company acknowledged that stress in its unsecured book could potentially seep into the secured portfolio as well. This suggests that the asset quality risks are not just restricted to high-risk lending but may spill over to relatively safer segments.
Bajaj Finance also pointed out ongoing stress in specific verticals such as two-wheeler (2W), three-wheeler (3W), and MSME lending. As a result, the company has indicated that growth in assets under management (AUM) is likely to remain subdued in FY25.
Another key trigger for the stock decline is the recent spike in the company's non-performing assets (NPAs). In its Q1 results announced yesterday, Bajaj Finance reported that its gross NPA rose to 0.50%, signaling early signs of strain in the quality of its loan book.
Adding to the negative sentiment, global brokerage firm JPMorgan has downgraded Bajaj Finance from “Overweight” to “Neutral”. Notably, JPMorgan was earlier bullish on the stock, and this downgrade marks a significant shift in stance by one of the key institutional watchers.
Despite the strong returns the stock has delivered in the past two months, investors are now turning cautious. With stress emerging in both secured and unsecured portfolios and AUM growth expected to slow down, analysts believe the near-term outlook for Bajaj Finance could remain under pressure.
