Investec shares 'Hold' call for Bajaj Finance, Can Fin Homes, 'Buy' for CreditAccess

About 1,887 shares rose, 1,570 fell and 56 were unchanged.

Investec analysts have issued a 'hold' recommendation for Bajaj Finance and Can Fin Homes due to expected weak financial performance for these non-bank lenders, setting target prices at Rs 7,600 and Rs 800 respectively. However, they are optimistic about small bank financiers, giving CreditAccess a 'buy' rating with a target price of Rs 1,900.

So far this year, shares of Can Fin Homes surged over 16 percent, but Bajaj Finance and CreditAccess Grameen declined in the range of 0.9-17 percent. In comparison, benchmark Nifty 50 rose 10 percent during the same period.

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Investec analysts anticipate a weak April-June quarter for major financial institutions, with the exception of gold financiers, affordable housing finance companies, and Cholamandalam Investment and Finance.

"We expect loan growth to slow in Q1FY25 due to seasonal factors and events like elections and risk-weight norms. Asset quality is likely to deteriorate with higher credit costs for most players, and margins will further contract amid rising funding costs," the brokerage firm noted.

Despite this, analysts remain positive on AU Small Finance Bank, CreditAccess Grameen, and Equitas Small Finance Bank for the medium term, viewing weak Q1 trends as an opportunity to invest in these stocks.

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Data from FIDC and CIRF shows that loans sanctioned by finance companies in the consumer credit and gold loan categories decreased sequentially in Q4 FY24, following a cautionary note from the RBI about the pace of credit expansion.

Consumer loan sanctions dropped by 16.2 percent in Q4 FY24 compared to Q3, with non-banking finance companies (NBFCs) sanctioning loans worth Rs 25,358 crore in Q4, down from Rs 30,269 crore in Q3.

Several consumer lending sectors, including education, consumer, and gold loans, experienced negative QoQ growth, likely reflecting the RBI's cautionary advice, according to FIDC.

Overall, NBFC loan sanctions grew by just 2.6 percent QoQ in Q4 FY24, compared to 7 percent in Q4 FY23.

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