So far this year, both the Sensex and Nifty have risen nearly 6 percent, but Bajaj Finance shares have dropped 4.8 percent, the first such underperformance since 2008. This was also the first negative annual return since 2011. Bajaj Finance (NBFC), Non-Banking Financial Corporation, is an organization mainly focused on providing loans to consumers for personal needs. However, this year Bajaj Finance Ltd. shares have underperformed in the market since its establishment. Even being the most preferred investment option for investors, it didn’t show the expected performance.
Previous Performance Status
Bajaj Finance has been a multi-bagger for investors and is well known for its quickly expanding asset book. Prior to a dramatic decline to just 4% in FY21 when the pandemic struck, its asset under management (AUM) growth averaged 30% over the preceding three years. Despite the fact that COVID-19 restrained consumer loan growth and consumption expenditure growth, the company was nonetheless able to post a respectable growth in FY22.
Roadmap Ahead
Shares of Bajaj Finance are currently selling at Rs 6,620 per share, down from a career-high of Rs 7,929 in October 2021. In comparison to HDFC Bank’s valuation of 2.83 times and ICICI Bank’s valuation of 2.88 times, this places its valuation at 6.08 times the anticipated book value for FY24. The consumer B2B and B2C markets, in particular, will face fierce competition, which would put a strain on Bajaj Finance’s medium-term profitability.
“Buy now, pay later” financing is the aim of private banks. But, according to a recent Kotak Institutional Equities research, as they move their focus to personal loans, yields in the B2C book would continue to be under pressure.
All of this explains why the performance of the Bajaj Finance stock has been subdued this year.