Why is Bajaj Finance share falling today (-7%) even after reporting a net profit growth of 23.9%?
Bajaj Finance reported nearly 24% profit growth, yet the share fell sharply today. Why is the stock price crashing? I am confused why even such a good news is not able to stop this huge price drop of -7% in a day?
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The Bajaj Finance share dropped sharply despite strong profit growth because investors focus heavily on the company’s future health and expectations.
There were three main reasons for the confusion and crash:
- Reduced Growth Targets: Management lowered its outlook for future loan growth (AUM) for the full year. They cut the guidance from 24-25% down to 22-23%. This signals a slowdown in future business.
- Rising Bad Loans (NPAs): The asset quality of Bajaj Finance got worse. Gross NPAs rose to 1.24% from 1.06% previously. This is indicative of the fact that the stress in the loan portfolio is increasing. The stress is more in segments like MSME loans. The company also expects future credit costs to remain high.
- Very Expensive Valuation: Bajaj Finance already trades at a very high price. Experts say that the price of Bajaj Finance is such that it is kind of “priced for perfect performance.” Any news hinting at slower loan growth or credit risk (growing NPAs) will trigger a sharp selloff and result in such a large price correctionion (like -7% in a day).
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