Bajaj Finance and Bajaj Finserv, often referred to as the “Bajaj twins”, recently announced their Quarter 4 FY25 results, showcasing solid growth. However, despite the impressive figures, both stocks experienced a notable decline, leaving investors puzzled.
Bajaj Finance: Robust Growth Amid Margin Concerns
Bajaj Finance reported a 19% year-on-year (YoY) increase in net profit, reaching ₹4,546 crore for Q4 FY25. The company’s net interest income (NII) rose by 22% YoY, amounting to ₹9,807 crore. Assets under management (AUM) expanded by 26% YoY to ₹4.16 lakh crore, and new loans booked surged by 36% to 10.7 million.
Bajaj Finance announced a ₹56 per share dividend consisting of a ₹12 per share special dividend and a ₹44 per share final dividend, with record dates being 9th May and 30th May, respectively. The company also announced a 1:2 stock split and a 4:1 bonus issue. Assuming today’s close price of ₹8,634 per share and accounting for the said stock split and bonus issue, the stock is likely to trade at ₹863 per share on the record date.
Despite these positive indicators, the stock declined by over 5% in early trading. Analysts have attributed this to concerns over a 10 basis point (0.01%) sequential drop in net interest margins (NIM) to 9.65% and elevated credit costs. Additionally, a ₹290 crore tax reversal boosted profits, leading to questions about the sustainability of earnings amid a one-time gain.
Bajaj Finserv: Steady Performance with Market Skepticism
Bajaj Finserv posted a 14% YoY increase in consolidated net profit, totaling ₹2,417 crore, with revenue also up 14% to ₹36,595 crore. The company declared a ₹1 per share dividend.
Despite these results, the stock fell nearly 6% post-announcement, similar to its twin. Market participants expressed concerns over rising expenses, which grew by 15% YoY to ₹30,603 crore, and the potential impact of regulatory changes on future earnings.
Market Reaction: High Expectations Meet Reality
The Bajaj twins’ stock declines highlight a broader market sentiment where high valuations as a result of high expectations from companies in regard to earnings leave little room for error. While both companies delivered commendable performances, investors seemed to focus on margin pressures and the sustainability of growth. This earnings season, like the last for companies overall, will be about justifying their high valuations perceived by the markets in the lure of exceptional growth in top and bottom line.
Analysts remain divided: some maintain a positive long-term outlook, reasoning strong fundamentals and brand name, while others advise caution due to valuation concerns and potential regulatory headwinds. The company guides that they are on track to reduce their cost of borrowings and maintain stable margins by FY26.
