Bajaj Finance Cuts Growth Forecast! Profits Soar - What Investors NEED to Know!

Bajaj Finance Limited announced its September quarter results, showcasing a robust 23.3% year-on-year increase in net profit, reaching ₹4,948 crore. Its Net Interest Income (NII) also saw a significant jump of 22% from the previous year, amounting to ₹10,785 crore.

Despite the strong profit figures, the company's management revised its full-year guidance for Assets Under Management (AUM) growth downwards. The new projection is between 22% and 23%, a decrease from the earlier expectation of 24% to 25%. This adjustment is attributed to lower growth observed in the mortgage and Small and Medium-sized Enterprises (SME) segments. The company now anticipates SME growth to be between 10% and 12%, with MSME growth expected to bottom out in the first quarter of the next financial year.

Furthermore, Bajaj Finance expects credit costs to remain at the higher end of its 1.85% to 1.95% guidance range, with improvements anticipated from the next financial year. These elevated credit cost expectations have led the company to reduce its unsecured MSME volumes by 25%.

On a positive note, asset quality showed sequential improvement, with Gross Non-Performing Assets (GNPAs) dropping to 1.03% from 1.24% last year, and Net Non-Performing Assets (NNPAs) falling to 0.5% from 0.6% in the prior year. Net Interest Margins remained stable compared to the previous year.

Impact: This news is moderately impactful for the Indian stock market. While profit growth is strong, the downward revision in AUM growth guidance and higher credit cost outlook could temper investor sentiment for Bajaj Finance and potentially other NBFCs facing similar segment slowdowns. Rating: 6/10

Heading: Difficult Terms Explained Assets Under Management (AUM): The total market value of all assets that a financial institution manages on behalf of its clients. Net Interest Income (NII): The difference between the interest income generated by a bank or financial institution and the interest it pays out to its lenders. Gross Non-Performing Assets (GNPAs): The total value of loans on which the borrower has defaulted for a specified period, typically 90 days. Net Non-Performing Assets (NNPAs): Gross NPAs minus the interest portion of NPAs and any income that would have been booked on NPAs. Credit Costs: The amount of money a lender expects to lose due to loan defaults and other credit-related losses. SME: Small and Medium-sized Enterprises, businesses that fall below certain thresholds in terms of number of employees and annual turnover. MSME: Micro, Small, and Medium Enterprises, a broader category including very small enterprises.