Shares of Bajaj Finserv jumped 9.5 percent on Thursday in intra-day trade on the back of strong June quarter results as well as the board approving its maiden bonus issue and stock split plan. The sentiment was also aided by exemplary results posted by its sister firm Bajaj Finance.
In today's trade, the stock rose as much as 9.5 percent to hit its day's high of ₹14,580. Since the announcement of the plan to consider the stock split on July 26, the stock has rallied 15.5 percent or around ₹1,950.
ALSO READ: How are stock splits benefiting companies?
"We're seeing noticeable traction in the Bajaj twins post numbers. Bajaj Finserv has witnessed a breakout from a 2-month-long base formation with a noticeable surge in the volumes. Besides, it has surpassed the resistance zone of major moving averages(100 EMA and 200 EMA) on the daily chart as well. Indications are in the favor of prevailing buoyancy to continue with some intermediate pause. Participants can wait for the potential target of 15,500," said Ajit Mishra, VP- Research, Religare Broking.
Stock price trend
Just in July, the stock has surged 31 percent as against a 6.5 percent rise in benchmark Nifty. However, for the 3 previous months, the stock has been an underperformer. In June, the stock lost 15 percent, in May, it fell 13 percent and in April, it declined 12 percent.
In 2022 YTD, the stock has lost 12 percent while it is down 3.5 percent in the past 1 year. Meanwhile, the Nifty has fallen 3 percent in 2022 YTD and is up 5.7 percent in the past 1 year.
In the June quarter, the stock had fallen 36 percent.
Bajaj Finserv reported a 57 percent YoY rise in its consolidated net profits for the quarter ended June to ₹1,309 crore from ₹833 crore a year ago. Its revenue from operations during the quarter also jumped 14 percent YoY to ₹15,888 crore versus ₹13,949 crore in the same quarter last year.
Meanwhile, its sister firm Bajaj Finance’s consolidated net profit jumped 159 percent YoY to ₹2,596 crore in the June quarter beating Street estimates. Its profit stood at of ₹1,002 crore in the year-ago period. The surge in profit came on the back of strong net interest income (NII) growth and lower loan losses and provisions. This is the highest-ever quarterly profit reported by the lender.
Bajaj Finserv has three subsidiaries - Bajaj Finance, Bajaj Allianz General Insurance Company Limited (BAGIC) and Bajaj Allianz Life Insurance Company Limited (BALIC).
For BAGIC, Bajaj Finserv said that its gross written premium during the quarter jumped 25 percent to ₹3,119 crore and the net earned premium was at ₹1,852 crore against ₹1,815 crore in Q1FY22. Its profit after tax surged 147 percent YoY to ₹411 crore from ₹362 crore a year ago and Assets Under Management (AUM) rose 8 percent to ₹25,362 crore versus ₹23,505 crore as on 30 June 2021.
For BALIC, the firm said, its gross written premium for Q1 advanced 74 percent to ₹4,369 crore and the new business premium more than doubled to ' ₹2,917 crore. Its profit after tax during Q1 stood at ₹124 crore, up 48 percent from ₹84 crore.
The Board of Directors of Bajaj Finserv also approved the sub-division of equity shares of face value ₹5 each. It will be followed by a bonus issue of one share for every share held by shareholders. This is subject to shareholders' approval, the company said.
A stock split is a corporate action, where a company splits its shares into multiple new ones. Split shares neither add any new value nor dilute the ownership stake of the shareholders. However, what they do is increase the number of shares of the company.
The main benefit of a stock split is to increase the liquidity of the stock as well as to reduce its share price to make it more accessible to retail investors.
Meanwhile, bonus shares are basically additional shares issued by a company to its pre-existing shareholders. These are fully paid shares and the shareholders do not have to incur any extra costs to get them. The number of bonus shares you receive depends on the number of shares of the firm you already hold.