Saurabh Mukherjea cut position in Bajaj Finance after Q2 earnings concall. Here's why

Saurabh Mukherjea (File pic)

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26 Aug, 2025 12:21

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Much ahead of Reserve Bank of India's directive on increased risk weights on consumer loans, Saurabh Mukherjea and his team at Marcellus Investment Managers had trimmed their stake in Bajaj Finance. He switched this to increased allocation towards HDFC Bank.

"The management had flagged concerns in the B2C portfolio in their Q2 earnings concall in October. When Bajaj Finance flags off something like this, the industry must pay attention. We had trimmed our position in the stock, right after that," Mukherjea said in a conversation with Moneycontrol.

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The non-banking financial corporation's management had said that risk metrics remained green except B2C, which was yellow as of September 2023. The company also said that they have been closely monitoring the Stage-2 rural B2C segment and taking corrective actions, which has resulted in moderate growth in this segment.

"When we (my team and I) were travelling across the country, we realised that small, unsecured loans of Rs 20,000 - Rs 30,000 ticket sizes were growing 25-30 percent. Over 90 percent of mobile phones are being bought with credit, that too by low income consumers. This was worrying for us. So, we took heart from Bajaj, HDFC Bank and Chola Finance when they said they were cutting back on this segment," Mukherjea said.

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A month later, on November 17, the Reserve Bank of India (RBI) increased the risk weight on consumer credit exposure of all commercial banks and NBFCs to 125 percent from 100 percent earlier. While most analysts termed it as a double whammy for Bajaj Finance, coming just days after a product ban, Mukherjea does not see this as a big worry.

"Bajaj Finance has a big book for housing finance too, on which risk weight has not been increased. Moreover, it borrows more from bonds than banks so the quantum by which cost of funds will go up is not as high as other NBFCs," he said, adding that cost of funds can go up by 20-30 basis points.

As of September 2023, Bajaj Finance borrowed 32 percent from bank loans and 33 percent from non-convertible debentures.

When it comes to unsecured consumer loans, Mukherjea believes fintech will soon see their day of reckoning. "Fintechs have aggressively disbursed unsecured loans and they do not have the wherewithal to collect that back. While they (fintechs) do it in partnership with listed banks, it only makes for a small amount of the bank's large book," he said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.