Shares of Bajaj Finance gained on Friday morning, after the firm reported record quarterly profit in the Apr-June quarter, led by strong growth in net interest income. Bajaj Finance share price gained nearly 6% to hit the day’s high at Rs 3,241. The firm has reported a 43% rise in net profit to Rs 1,195 crore. The company had posted a net profit of Rs 836 crore in the comparable period previous fiscal. Net interest income increased 43% to Rs 3,695 crore from Rs 2,579 crore in the first quarter previous year.The firm’s Consolidated assets under management grew 41% to Rs 1,28,898 crore.

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Taking stock of the reported results, Morgan Stanley said that the consolidated Profit After Tax came in 5% below its estimate of Rs 1,250 crore. Higher provisions in the quarter of 180 bps of average loans was the main reason behind subdued earnings, said the firm. The revenue is up 43% on-year, beating estimates by 3%. The firm has an ‘equal-weight’ rating on the shares with a target price of Rs 2,950.

Jefferies said that while PPoP (Pre-provision operating profit) was ahead of estimates, the increase in provisions surprised negatively. The asset quality remained stable on a qoq basis, said Jefferies. Gross NPA and net NPA stood at 1.60% and 0.64%, respectively, against 1.54% and 0.63% as of March 31, 2019. Operating expense cost levers, stable asset quality should drive strong earnings and returns. Jefferies noted that Bajaj Finance is looking to tighten credit norms in certain segments. The firm has a buy rating on the shares with a target price of Rs 3,600.

Bajaj Finance is all set to raise around $1 billion -1.2 billion through external borrowing in around September and October. Rajeev Jain, Bajaj Finance MD said this was part of the plan to diversify their liability and would take care of their requirement for the next two years growth plans. They are among the three to four NBFCs in the country that are currently able to raise resources, Jain pointed out.

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