the Bajaj twins are soaring high

the Bajaj twins are soaring high

pictures look incomplete when there’s something missing. it’s usually abstract, not something tangible. you’re never able to put your finger on it but it’s there. 

that’s a good parallel to the Bajaj Group. there was one missing piece in Bajaj Group’s financial services puzzle: mutual Funds. once this was complete, their stocks went soaring. on August 25, Bajaj Finserv shares hit a 52-week high of  ₹16,807.6 soon after it got the nod to enter the MF business. meanwhile, the Bajaj finance stock continued setting records, closing at a new 52-week high of  ₹7,196.15 on August 30.

the Bajaj twins, Bajaj Finserv and Bajaj Finance could now probably be considered the textbook definition of a complete turnaround.

was Covid to blame?

when Covid hit in April last year, analysts had predicted doom for the Bajaj twins. India was locked down and distributors could no longer meet clients. this hit the financial services industry hard where face-to-face meetings were key to selling loans and insurance. 

then came the job losses and pay cuts which meant people could no longer spend freely. this directly impacted the Bajaj twin firms and saw their stocks hit a 52-week low in September 2020.

some wondered whether their glory days were over while others termed them as being overvalued.

so, what changed?

Bajaj Finserv’s insurance businesses slowly began to benefit from the Covid fears. though there were initial hiccups to online sales, the pickup was quick. 

by December, term plans and health insurance were the top sellers. profits jumped four-fold in Q4 FY21 over the year-ago period with its life and general insurance companies setting sales records.

for Bajaj Finance, the good news was that write offs started getting quicker and bad loans were under control. its profits also grew 42% Y-o-Y in Q4 FY21. 

when the second wave of the pandemic hit, fears of doom loomed large. but the twins saw a minimal impact since customer-spending stayed intact.

is this sustainable?

the twins are on cloud nine with the constant market highs. yes, there have been some temporary blips in the form of higher provisions on bad loan risks. asset quality was also weaker in Q1 of this fiscal. 

but the spotlight shines bright on the Bajaj duo as loan disbursals and insurance sales stay strong. as long as people keep borrowing and pay back on time, their stocks will fly high.