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Fazed by selloff, investors seek comfort in Bajaj Finance

The nervous mood among investors is because of concerns over surging oil prices, weakening rupee and rising bond yields.

, ET Bureau|
Last Updated: May 25, 2018, 09.47 AM IST|Original: May 25, 2018, 09.39 AM IST
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Bajaj Finserv, which derives a significant value from Bajaj Finance, has also risen 7.4 per cent in the past month.
Mumbai: Bajaj Finance has managed to weather the storm on Dalal Street in the past few weeks as investors lapped up the stock on expectations the finance company’s strong earnings will help it standout in difficult market conditions. The stock has gained 9.2 per cent in the past month while the Nifty has lost nearly 1 per cent during the same period.

The nervous mood among investors is because of concerns over surging oil prices, weakening rupee and rising bond yields.

Analysts said the strength in the stock despite concern over rich valuations is because of the increasing demand for companies with steady earnings prospects amidst a challenging business environment.

“Their numbers are good. They will be affected by rising rates but the growth aspect is likely to overshadow that. That’s why the market is willing to pay a premium to it,” said Suresh Ganapathy, head of financial services research at Macquarie.

Bajaj Finserv, which derives a significant value from Bajaj Finance, has also risen 7.4 per cent in the past month.

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Bajaj Fin snip

Shares of Bajaj Finance have outperformed the Nifty index not just in the last one month, but also from a one year, three-year and five-year perspective. In the last one year, shares of Bajaj Finance have gained 66 per cent compared to Nifty gaining 10.6 per cent in the same period. Bajaj Finance’s shares ended up 0.7 per cent at Rs 2,092.65 on Thursday while Bajaj Finserv ended up 0.6 per cent at Rs 5,833.60.

“These companies have delivered on the numbers consistently. Bajaj Finance has seen strong growth on loan book front and has operating leverage. The profit growth of 60 per cent was far above estimates. Its relative impact is being felt in Bajaj Finserv as it is parent company of Bajaj Finance,” said Kajal Gandhi, analyst at ICICI Securities.

The latest round of outperformance came on the back of strong growth in the March quarter. Earlier this month, Bajaj Finance reported a 61 per cent year-on-year rise in profit at Rs 721 crore for the March quarter while Bajaj Finserv reported a 36 per cent rise in consolidated net profit to Rs 1,113.83 crore for the March quarter.

Bajaj Finance’s profit grew to Rs 2,674.11 crore in the financial year ended March 2018 from Rs 719 crore in FY14.

Analysts say that the premium that Bajaj Finance commands over its peers is likely to be sustained going forward as well.


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