Bajaj Finance Q2 results update!
Last updated: 22 Oct, 2020 | 11:32 am
- Net profit declines: Bajaj Finance has reported a 36% on-year drop in consolidated net profit fell to Rs. 965 crore in Q2FY21, primarily on the back of a three-fold rise in provisions in the quarter. Loan losses and provisions for the July-September quarter stood at Rs 1,700 crore, as compared with Rs 594 crore a year ago.
- Net interest income rises: A NBFC’s 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 as to how much a bank is earning from its core operations. Net interest income for Bajaj Finance grew 4% YoY to ₹4,105 crore. This was above street expectations of about ₹3,750 crore.
- Consolidated AUM: Consolidated assets under management rose to ₹1.37 lakh crore as compared to ₹1.35 lakh crore in the year-ago period. The table below shows AUM growth for various segments of Bajaj Finance.
- The total assets under moratorium, as of 30th Sep 2020, reduced to 8% of AUM from 15.7% of AUM in the previous quarter. Bajaj Finance has further increased its provisions on stage 1 (overdue up to 30 days) and stage 2 assets (overdue by 30-90 days) by Rs 1,306 crore to Rs 4,879 crore as of end of the quarter, as against Rs 3,573 crore as of Q1 end.
- Asset quality: Overall asset quality improved for Bajaj Finance as Gross NPA as a percentage of gross advances fell 37 bps QoQ to 1.03%, while net NPA was down 13 bps to 0.37%. As per the orders of the Supreme Court order, Bajaj Finance has not classified any accounts which were not NPA as of August 31, 2020, as NPA after August 31, 2020. If the company had classified borrower accounts as NPA after August 31, 2020, the company's gross NPA and net NPA ratio would have been 1.34% (as against 1.03%) and 0.56% (as against 0.37%).
- Liquidity Health of Bajaj Finance: Capital adequacy ratio stood at a robust 26.64% at the end of Q2FY21. The tier-I capital stood at 23.01%. Liquidity surplus stood at Rs 22,414 crore as against Rs 8,107 crore a year ago. The company is keeping an excess liquidity buffer, especially considering the current economic environment. Given favourable market conditions, the Company will slowly dial down its liquidity buffer over the next 6 months and expects to revert closer to pre-COVID-19 liquidity buffer by March 21. It will also ensure that the cost of excess liquidity normalizes by Q4.
Bajaj Finance has followed a conservative strategy in the quarter. The company focussed primarily on capital preservation, liquidity management, and operating expense management. It followed a selective lending approach, as loans toward consumer and rural lending in the business-to-business category fell 19% YoY.
Going forward as the economy opens up, Bajaj Finance expects AUM growth in the range of 25-27%, and profit growth of 23-24%. The Gross NPA’s are expected in the range of 1.4-1.7%, while NPA’s would be in the 0.4-0.7% corridor.
The ongoing crisis has been especially hard for banks and NBFC’s. However, given its strong leadership position, the company is very well equipped to handle the crisis and has an extremely strong liquidity position.