Can Bajaj Finance Overcome Regulatory Hurdles? Q3 Results in Focus

India's largest non-banking financial company (NBFC), Bajaj Finance, is going to release its financial results for the December quarter on 29th January. The performance of the company is expected to be robust, despite facing some challenging conditions.

What are the thoughts of analysts?

According to analysts, the Bajaj Finance's net profit is projected to increase by 25% year-over-year (YoY) to Rs 3,716 crore. The net interest income (NII) is also expected to surge by 26% YoY to Rs 9,344 crore. The growth in these numbers can be attributed to the company's strong assets under management (AUM) and stable asset quality.

The AUM has increased by 35% YoY to cross Rs 3 lakh crore, and the deposit book has grown by 35% to reach Rs 58,000 crore. Additionally, in the quarter, 98.6 lakh new loans were booked, indicating a 26% YoY growth.

Despite these positive developments, the company may face some challenges.

The margins and costs are expected to decline sequentially due to the increasing cost of funds. Furthermore, the RBI regulatory action has resulted in the stoppage of new loans through "eCOM" and "Insta EMI Card" due to non-compliance with guidelines.

Additionally, there is a potential impact on Bajaj Finance's lending mix due to RBI's caution on unsecured lending.

How are investors reacting to the recent surge?

Investors will be closely watching for management commentary on the impact of regulatory challenges, any changes in the borrowing mix due to slowing bank lending to NBFCs, and the performance of new products and any signs of stress in specific segments.

Conclusion

In the last quarter of 2021 and year-to-date, Bajaj Finance stock performance has been lackluster or we can say lacking when compared to Nifty's. However, with the upcoming Q3 results that are expected to be robust, coupled with the positive management comments regarding regulatory challenges, and future growth plans, there is a strong possibility that the company's stock performance may begin to exhibit a promising trend.