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Published: October 17, 2024
Updated: October 17, 2024

Bajaj Auto Loses Its Second Most Valued Group Firm Status After Shares Plummet

Festive Demand Concerns Hit Bajaj Auto Shares

On October 17, 2024, Bajaj Auto experienced a sharp decline in its stock price, plunging as much as 13%. This steep fall came after the company issued a weaker-than-expected outlook for festive demand, which alarmed investors. Early indicators suggest a sluggish start to the festive season, with industry volumes rising by only 1-2% compared to the previous year.

Massive Single-Day Loss Wipes Out Investor Wealth

The stock recorded its biggest single-day loss since March 2020, erasing nearly ₹42,000 crore in market value. Bajaj Auto also emerged as the most actively traded stock on the National Stock Exchange (NSE), with a turnover of ₹3,822 crore. Following the sharp decline, Bajaj Auto’s market valuation fell below ₹3 lakh crore.

Bajaj Finserv Overtakes Bajaj Auto

With this drop, Bajaj Auto lost its position as the second most valuable company within the Bajaj Group, handing over the title to Bajaj Finserv. By the end of Thursday’s trading session, Bajaj Finserv boasted a market capitalisation of ₹2.9 lakh crore, which stood ₹7,329 crore higher than Bajaj Auto’s valuation.

September Quarter Performance and Festive Season Outlook

Although Bajaj Auto's financial results for the September quarter largely met expectations, the company’s management struck a cautious note on festive demand. Despite a net profit increase of 9% to ₹2,005 crore, driven by a 22% rise in net revenue to ₹13,127 crore, the outlook on demand was concerning. The company expects only 3-5% growth in motorcycle sales during the festive period, compared to stronger growth expectations from previous years.

Positives in Export and Electric Vehicle Segments

Despite the gloomy festive demand forecast, Bajaj Auto has some bright spots. The company is seeing a recovery in export volumes and continues to gain market share in the electric two-wheeler (E2W) segment. Following the launch of the affordable Chetak electric scooter in September 2024, Bajaj Auto now holds over 20% of the E2W market, surpassing competitors like TVS Motors.

Analysts’ Reactions and Stock Performance

Foreign brokerage Citi, which maintains a "sell" rating on Bajaj Auto, commented that it was surprised by the subdued festive demand forecast. According to its analysis, the company's second-quarter performance missed expectations slightly due to lower-than-anticipated average selling prices (ASPs) and gross margins. Citi has set a 12-month target price of ₹7,800 for the stock. By the end of Thursday’s session, Bajaj Auto’s shares closed at ₹10,119.45 on the NSE. While Bajaj Auto's September quarter results show resilience with increasing net profits and a strong foothold in the electric vehicle segment, the company is facing challenges in the domestic market. Weak festive demand has impacted investor sentiment, causing a significant drop in its stock price and market valuation. This decline has led to Bajaj Finserv overtaking Bajaj Auto as the second most valuable firm in the Bajaj Group.