Bajaj Housing Finance Shares Drop 6% Amid Analyst Downgrades and Margin Pressures

Bajaj Housing Finance Ltd. shares fell by 6% on Friday, 25 April 2025, trading at ₹124.50, down from the previous close of ₹132.30. This sharp drop comes despite the company’s robust financial performance in the March quarter, reflecting broader concerns about its future growth trajectory and profitability.

Strong Q4 Performance Overshadowed by Margin Concerns

The company reported a 54% year-on-year surge in profit after tax to ₹587 crore for Q4 FY25, with net interest income rising 31% to ₹823 crore. Assets Under Management (AUM) grew by 26% to ₹1.14 lakh crore, and asset quality remained stable, with gross and net NPAs at 0.29% and 0.11%, respectively. However, these positive results were overshadowed by concerns about rising costs and narrowing net interest margins (NIMs).

Analyst Downgrades and Cautious Outlook

A key driver behind the recent decline in the stock is a series of analyst downgrades following its Q4 earnings report. Of the analysts covering the stock, a majority have issued "sell" recommendations, while only a few remain optimistic with "buy" or "hold" calls. Several brokerages have sharply lowered their price targets, some suggesting potential downside of up to 24% from recent closing levels. The most conservative estimates peg the stock's fair value close to its initial public offering (IPO) price.

There are three primary concerns for their cautious outlook:

Pressure on AUM Growth: While AUM has grown strongly, analysts expect the pace to moderate due to increased competition in the housing finance sector.

Compression in Net Interest Margins: Rising competition is leading to yield compression, making it harder for the company to maintain its profitability.

Normalisation of Credit Costs: As credit costs normalise post-pandemic, profit growth may slow, impacting earnings per share (EPS) projections.

Technical and Market Factors Add to Pressure

The stock’s decline also reflects technical factors, with shares now trading below their 5-day simple moving average, though still above longer-term averages. The end of the one-year post-IPO lock-in period earlier this month released a significant number of shares for trading, increasing supply and adding to downward pressure.

Conclusion

Bajaj Housing Finance’s 5% share price drop is driven by a confluence of analyst downgrades, concerns over margin compression, and technical market factors, despite strong reported earnings. The market’s focus has shifted from headline growth figures to the sustainability of margins and future earnings, with heightened competition and normalising credit costs weighing on sentiment

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