Shares of Bajaj Finance Ltd. surged by 6% on Thursday, January 2, after brokerage firm Citi placed a 90-day positive catalyst watch on the stock. This uptick has made Bajaj Finance one of the top performers on the Nifty 50 index.
Citi’s Bullish Call on Bajaj Finance
Citi has maintained a “buy” rating on Bajaj Finance, setting a price target of ₹8,150 per share. This indicates a potential upside of 18% from the stock’s last closing price.
The brokerage explained that after revising its credit cost guidance for FY25 to 2.05% in the September quarter, Bajaj Finance is expected to see only a slight increase in December quarter credit costs, estimated at 2.2%-2.25%. To manage risks, Bajaj Finance has taken proactive steps such as cutting certain segments and reducing exposures.
Growth Despite Challenges
Despite the challenges of rising stress and a decrease in captive two-wheeler and three-wheeler financing, Bajaj Finance is expected to report robust growth. Citi forecasts the company’s Assets Under Management (AUM) to grow by 6% sequentially and 27% year-on-year for the December quarter.
Positive Outlook on Margins
Citi also anticipates a slight improvement in Bajaj Finance’s Net Interest Margins (NIMs) by 3-5 basis points. This is attributed to the Cost of Funds peaking in the September quarter and growth being driven by high-yielding segments.
Focus on Leadership Transition
One of the key factors Citi highlighted was the upcoming management transition at Bajaj Finance. The brokerage believes that updates on this matter will be crucial, particularly regarding the future role of Rajeev Jain, the incumbent MD & CEO, who may take on a broader executive position within the Bajaj Group.
Market Sentiment on Bajaj Finance
Out of 36 analysts covering Bajaj Finance, 26 have given a “buy” rating, while six have a “hold” rating, and four have recommended selling the stock.
Stock Performance
As of now, Bajaj Finance shares are trading at ₹7,340, reflecting gains of 5.8%. The stock delivered negative returns in 2024, marking the second time this has happened in the last three years. Meanwhile, Bajaj Finserv, a related company, has been outperforming Bajaj Finance, with its shares trading up by 7.9% at ₹1,700.7.
