Bajaj Finance Q2 Update: AUM Grows by 29%, Morgan Stanley Targets ₹9,000

Bajaj Finance Ltd. has delivered a strong performance for the September 2024 quarter, with Assets Under Management (AUM) showing a notable 29% year-on-year increase. AUM as of September 30, 2024, reached approximately ₹3.73 lakh crore, up from ₹2.90 lakh crore during the same period last year. This growth was accompanied by a 5.6% quarter-over-quarter rise, surpassing market expectations and reflecting the company's strong standing in the non-banking financial company (NBFC) sector.

Morgan Stanley’s Bullish Target

Global brokerage Morgan Stanley has maintained an ‘Overweight’ rating on Bajaj Finance, citing a price target of ₹9,000 per share, which implies a potential upside of 21% from its current levels. According to Morgan Stanley, Bajaj Finance's continued AUM growth and increasing customer base highlight its long-term potential. The stock closed at ₹7,417.60 on Thursday, and despite a slight drop of 3.71% on the day, the company remains a key focus for investors.

Key Metrics: AUM and Customer Growth

Bajaj Finance’s update reveals impressive growth in its customer base, which stood at 92.09 million by the end of September 2024, compared to 76.56 million a year earlier. This represents an addition of 3.88 million customers during Q2 FY25, underscoring the company’s ability to expand its reach in the financial market. The number of new loans booked also surged by 14% to 9.69 million during the quarter, reflecting higher lending activity compared to 8.53 million loans booked in the same quarter last year.

Liquidity and Deposits

Bajaj Finance's net liquidity surplus stood at ₹20,100 crore as of September 30, 2024, demonstrating a strong liquidity position. The company’s deposit book also witnessed growth, reaching approximately ₹66,100 crore, up by 21% compared to ₹54,821 crore in the previous year. This growth in deposits further strengthens the company's financial stability and funding base, ensuring it remains well-capitalized to meet future demands.

Brokerage Views on Credit Costs

While Morgan Stanley remains optimistic, Nomura has maintained a 'Neutral' stance on Bajaj Finance, with a price target of ₹7,500 per share. The firm emphasized the importance of credit costs as a key determinant for the company’s performance in Q2 and beyond. Analysts are particularly interested in management’s outlook on asset quality and whether improvements are expected in Q3 FY25.

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Any upward revisions in FY25 credit cost guidance could be viewed negatively by the market, while lower-than-expected credit costs might boost investor confidence. Analysts will closely monitor how the company navigates potential challenges in the coming quarters.

Bajaj Finance’s Stock Performance

So far in 2024, Bajaj Finance shares have experienced a flat performance, which is in contrast to the broader market rally. While the BSE Sensex has jumped 14% year-to-date, Bajaj Finance’s stock has not mirrored this growth. However, with a strong Q2 update and a positive outlook from key brokerages, the stock could see renewed investor interest in the coming months.

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Bajaj Finance's Q2 performance demonstrates its resilience and ability to grow in a competitive market. With AUM up by 29% and strong customer additions, the company is well-positioned for future growth. However, credit costs and asset quality will remain key areas to watch in the coming quarters. For investors, the stock’s potential upside of ₹9,000 per share, as projected by Morgan Stanley, presents a compelling opportunity, especially as Bajaj Finance continues to expand its footprint in the financial sector.

[Disclaimer: This article is for informational purposes only. Investors are advised to conduct their own research before making any investment decisions.]