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Home / Markets / Stock Markets /  Bajaj Finance surpasses Kotak Mahindra Bank in terms of mcap

MUMBAI: Bajaj Finance Ltd has surpassed Kotak MahinBank in terms of market capitalisation, following a surge in its share price, which hit a 52-week high on Wednesday.

At 10 am, Bajaj Finance's valuation stood at 3.52 trillion which was higher than that of Kotak Mahindra Bank's 3.51 trillion market cap.

Shares of Bajaj Finance gained 0.4% to 5,844 on BSE while Kotak Mahindra Bank fell 1.2% to 1,771.30 a share.

At present, Bajaj Finance is at ninth place in the overall m-cap ranking on BSE. It is ahead of blue chips such as Wipro, Bharti Airtel Ltd, ITC, Asian Paints, and HCL Technologies.

So far this year, shares of Bajaj Finance have gained nearly 10%, while Kotak Mahindra Bank has lost nearly 12%.

Reliance Industries Ltd is the country’s most-valued firm with a market cap of 13.76 trillion, followed by Tata Consultancy Services Ltd 11.53 trillion and HDFC Bank 8.28 trillion.

Bajaj Finance’s fourth quarter net profit grew 42% year-on-year (y-o-y) and 18% quarter-on-quarter (q-o-q) to 1,350 crore. The proforma gross non performing loan (GNPL) ratio declined from 2.9% to 1.8% q-o-q. Bajaj Finance wrote off debt worth 1,500 crore (1.0% of loans).

"A clean book post large write-offs and restructuring bodes well, particularly in view of headwinds from a second, stronger covid wave. As the company resumes its growth push, its large base may constrain its ability to deliver on the high multi-year growth implied in its valuations," said Kotak Institutional Equities in a note to its investors.

Kotak Mahindra Bank March quarter net profit was at 1,680 crore (33% y-o-y and -6% q-o-q) was below analyst estimates driven by higher provisions. Net interest income increased 8% y-o-y to 3,840 crore. Net interest margin declined to 4.39% q-o-q (-12bps q-o-q & -33bps y-o-y), despite benefit of cost of deposit.

Slippage 5,400 crore (2.4%) during FY21 compared to 3,400 crore (1.55%) in FY20. Gross NPA was steady at 3.25% versus 3.27% sequentially for the bank.

"We believe the stock is fairly expensive, trading at 4.2x P/B (Mar-21F) and 31.3x P/E (12m to Mar-22F) vs last 10-year average of 3.9x P/B and 25.7x P/E, on a consolidated basis. We value the stock at 3.6x P/B (Mar-22F) and 26.7x P/E (12m to Mar-23F) for a slightly reduced TP of 1,700 (from 1,710). The implied P/B of the core bank is 4x. We largely maintain our EPS forecasts for the bank. Downside risks include higher credit costs, while upside risks include better NIM performance," said Nomura Research in its note to investors.

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