Encashing a windfall

After the IL&FS crisis jolted the market last September, even a non-banking finance company (NBFC) of Bajaj Finance’s pedigree was not insulated from the shock of the liquidity crisis. From a 52-week high of Rs.2,995.10 on February 10, 2018, the stock plunged to Rs.1,988.05 on October 9. But, since then, the consumer lending behemoth’s stock has staged a spectacular recovery on the back of two consecutive strong quarters. The stock has recovered to Rs.2,700 as of February 8. 

In Q2fy19, Bajaj Finance reported a stellar growth of 63% in assets under management (AUM), adding two million borrowers. The asset quality also remained stable with gross bad loans at 1.5% of the loan book. Subsequently, the NBFC’s PAT grew by 54.46% to Rs.9.23 billion. Even in the third quarter, the company didn’t let the investors down. AUM rose 41% (yoy) and the company also reported a profit growth of 53.55% to Rs.10.59 billion. 

But as the earnings stay strong and stock recovers, Rajeev Jain, MD, Bajaj Finance, has decided to book profit. Between February 5 and 6, Jain offloaded 187,200 shares worth around Rs.490 million, reducing his stake to zero from 0.03%. Before these transactions, Jain had sold off shares worth Rs.180 million in March 2018 in two tranches. He had also sold shares worth Rs.200 million in two instalments in February 2016 and May 2017. 

While Jain sold his shares, Bajaj Allianz Life Insurance Company bought debenture shares worth Rs.2.01 billion on February 1. In August 2018, the Bajaj group’s insurance arm had purchased equity shares worth around Rs.430 million. Analysts share this enthusiasm, citing the NBFC’s superior fee-income contributing capability, opex and liability mix strategy.  

Mutual funds have also continued to put their faith in Bajaj Finance despite fears of the liquidity crunch. They currently hold a 7.5% stake in the firm, up from 7% in December 2017. Axis Mutual Fund, sbi Mutual Fund and uti Mutual Fund have increased their holdings from 1.2%, 0.7% and 0.66% to 1.7%, 1.2% and 0.72% respectively. fiis have marginally cut their stake, reducing it to 20.07% in December 2018 compared to 20.41% in December 2017. Singapore Government — the fii with the largest stake — has cut its holding from 3.94% in December 2017 to 3.71% in December 2018.