Bajaj Finance Results: Bajaj Finance Quarterly Results for Q1 (FY21-22)

Slight increase in profit: Bajaj Finance has reported a 4% increase in net profit to Rs 1,002 crore for the period ended June-21 compared to Rs 962 crore in the same quarter last year. The current net profit is below the analyst's expectations of Rs 1,356 crore. On a quarterly basis the profits fell by nearly 26% from Rs 1,346 crores in last quarter. The decline in bottomline of the company was largely on account of rise in loan losses and provisions in the quarter.

Bajaj Finance Q1 earnings: Trend of Profit and revenue 

Increase in NII: An NBFCs primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. This is an extremely important number to truly find out how much a company is earning from its core operations. The Net Interest Income rose by 8% to Rs 4,489 crore for the Apr-June 21 quarter against Rs 4,152 crore in the same quarter last year. It is slightly higher than the street estimation of Rs 4,390 crore. However, on a quarterly basis there was a minor fall of 1%.

Bajaj Finance results: Segment-wise revenue 

Consolidated AUM: Bajaj Finance reported a total AUM (Asset Under Management) of Rs 1.59 lakh crore in line with the analyst expectations. The AUM rose by 15%  against Rs 1.38 lakh crore last year. In absence of a third wave, the Company expects quarterly AUM growth rate for balance of the year to be at pre-COVID levels . 

Asset quality deteriorates: The company reported higher Non Performing Assets numbers for the Apr-June quarter. Bajaj Finance’s Gross NPA ratio stood at 2.96% for Apr-June quarter compared to 1.79% in the last quarter, while its net NPA rose to 1.46% of its total advances, against 0.75% in the preceding quarter. Loan losses and provisions for the first quarter stood at Rs 1,750 crore, compared to Rs 1,686 crore in the same quarter last year. The worst-hit business for the company was auto finance where the NPA increased to Rs 2,426 crore from Rs 1,199 crore.

Liquidity health: Bajaj Finance has reduced its liquidity buffer to Rs 10,857 crore for the quarter ended June 21 against Rs 16485 in the previous quarter. This represents 8% of its total borrowings. The Capital Adequacy ratio stood at 28.57% in this quarter.

Increase in customer base - The company has reached a milestone number of 50.45 million in April-June quarter against the  42.95 million, a 17 % YoY rise. The company has acquired 1.88 million new customers in just the first quarter of this financial year.

Growth in Deposits: Bajaj Finance’s Deposits grew 39% year-on-year to Rs 27972 crore in Apr-June 21 period. Deposits now account for more than 20% of the company’s consolidated balance sheet. Its contribution to consolidated borrowings was 21%. Retail : Corporate mix stood at 77 : 23 in Q1 FY22 as against 73: 27 in Q4 FY21 in line with the company’s strategy of reducing its reliance on corporate deposits.

Liquidity health: Bajaj Finance has reduced its liquidity buffer to Rs 10,857 crore for the quarter ended June 21 against Rs 16485 in the previous quarter. This represents 8% of its total borrowings. The Capital Adequacy ratio stood at 28.57% in this quarter.

Guidance: The company has guided for AUM growth in the corridor of 25%-27% over the long-term. It has also maintained a robust guidance for profit growth in the range of 23%-24%. Bajaj Finance expects to report a Return on assets in corridor of 3.3%-3.5%, and Return on equity in corridor of 19%-21%. 

Bajaj Finance quarterly results review

Despite the lockdown and the second wave, the company has reported decent numbers. However, asset quality has deteriorated, which may be a cause for concern. The company said that if there is no third wave, it will try to bring the Gross NPA down to 1.7-1.8% and Net NPA to 0.7-0.8% by the end of FY22. However, if there is a third wave, the NPA numbers may further deteriorate. During the quarter, the Company has done accelerated write offs of  113 crore of principal outstanding on account of COVID-19 related stress. The Company holds a management overlay and macro provision of  483 crore as of 30 June 2021.

The second wave has also led to a marginal increase in EMI bounce rate (1.08X of Q4 FY21). The bounce rate for July 2021 has improved to 0.96X of Q4 FY21, as various states announced further relaxations. The ongoing crisis has been especially hard for banks and NBFC’s. However, given its strong leadership position and balance sheet, Bajaj Finance is very well equipped to navigate these difficult times.