- Profit surprises dominate: Bajaj Finance profit down 6%, Aditya Birla Capital profit up 41%.
- Credit growth vs asset quality: Net interest income jumps, but NPAs creep higher for some lenders.
- Sector ripple effects: Paint, pharma, and tech earnings signal divergent recovery paths.
- Valuation angles: Earnings beats may justify premium multiples; misses could trigger sell‑offs.
- Actionable stance: Bull and bear cases laid out for the top movers.
You missed the fine print on today’s earnings—now you can turn that oversight into an edge.
Bajaj Finance Q3: Profit Dip Amid Rising Net Interest Income
Bajaj Finance reported a 6% YoY profit decline to INR 4,066 crore, yet its net interest income (NII) surged 21% to INR 11,317 crore. The paradox stems from an aggressive provisioning episode: an accelerated expected credit loss (ECL) of INR 1,406 crore and a new labour‑code impact of INR 265 crore, both non‑recurring items that ate into earnings.
What this means for valuation: Adjusted EBITDA, stripped of one‑off provisions, still shows a healthy top‑line trajectory. The NII boost suggests higher yield‑earning assets, but the uptick in gross NPA to 1.21% (from 1.12%) and a slight rise in net NPA to 0.47% indicate credit quality pressure.
Competitor lens: Tata Capital’s Q3 NII grew 18% with a flatter NPA profile, while HDFC Bank’s loan book expanded 12% with NPAs stable at 0.45%. Bajaj’s higher NPA relative to peers hints at a risk‑reward tilt that valuation models must price in.
Aditya Birla Capital Q3: Profit Surge Fuels Lending Boom
Aditya Birla Capital delivered a 41% profit jump to INR 983 crore, driven by a 30% revenue surge to INR 14,181 crore. The company’s total lending portfolio exploded 30% to INR 1.90 lakh crore, outpacing the industry’s average 20% growth.
Key drivers include higher cross‑sell ratios in its wealth and insurance arms, and a robust consumer loan pipeline. Unlike Bajaj, Birla Capital’s gross NPA held steady at 1.08%, and net NPA improved marginally to 0.31%.
Historically, Birla Capital’s earnings have been cyclical, with a similar 38% profit jump in Q3 FY2023 following a strategic push into digital lending. The repeat performance reinforces confidence in its operational momentum.
Sector Trends: Credit Growth vs Asset Quality in Indian Financial Services
The earnings landscape paints a split picture. Lenders like Bajaj and Kotak are aggressively expanding balance sheets, but provisioning spikes signal caution. Meanwhile, diversified financial houses (Aditya Birla Capital, Mahindra Finance) are balancing growth with tighter credit underwriting, keeping NPAs in check.
Regulatory backdrop: The new labour code is now being reflected as a line‑item expense for many firms, as seen in Bajaj’s INR 265 crore impact. Investors should monitor how this cost evolves, as it will affect profitability margins across the sector.
Technical Snapshot: Translating Numbers into Stock Valuations
Using a forward‑PE framework, Bajaj Finance’s current FY24E PE sits around 22x, versus an industry average of 18x. The earnings downgrade could pressure the multiple unless NII growth sustains.
Aditya Birla Capital trades at roughly 16x forward‑PE, reflecting its stronger earnings trajectory and lower asset quality risk. A 10% earnings upgrade could justify a 1.5‑2 point PE expansion, translating to a 5‑7% upside.
For paint and pharma peers, Kansai Nerolac’s 82% profit plunge and Castrol India’s 9.8% dip signal sector‑specific headwinds—overcapacity in paints and raw‑material cost volatility in lubricants. Their stock valuations may compress further if earnings recovery stalls.
Investor Playbook: Bull and Bear Cases
Bull Case: If Bajaj Finance’s NII growth outpaces provisioning, the stock could rebound, especially as the labour‑code impact normalizes. Aditya Birla Capital’s loan book expansion may accelerate earnings, supporting a re‑rating.
Bear Case: Persistent NPA creep for Bajaj and a potential second‑half slowdown in credit demand could erode margins. For Birla Capital, any slowdown in consumer credit appetite or regulatory tightening could blunt growth.
Actionable moves:
- Consider adding Aditya Birla Capital on dips; target price upside 8‑10% on earnings momentum.
- Trim exposure to Bajaj Finance if price breaches INR 5,600, pending confirmation of NPA stabilization.
- Stay cautious on Kansai Nerolac and Castrol India; monitor inventory levels and raw‑material pricing before re‑entry.
By aligning your portfolio with the nuanced earnings narratives, you can capture upside while sidestepping the hidden traps embedded in today’s results.