Bajaj Finance Q3: Stellar results backed by improvement in strong core income

Net profit rises: Bajaj Finance has reported an 84.4% year-on-year jump in net profit to Rs 1933.85 crore for Oct-Dec 21 period. On a consolidated basis, net profit increased Rs 2,215 crore Y-o-Y, an increase of 85%. Analysts had earlier estimated a consolidated net profit of about Rs 2,156 crore for the period between Oct and December.

Net interest income increase: 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 as to how much a company is earning from its core operations. Standalone net interest income for Bajaj Finance increased 27.38% over the preceding year to Rs 6,335 crore. Interest income reversal for the quarter was Rs 241 crore as compared to Rs 450 crore in Q3FY21. Consolidated AUM rose to Rs 1.81 lakh crore from Rs 1.43 lakh crore, an increase of 26.57% year-on-year. The net Interest Income (NII) for Q3FY22 increased by 40% to Rs 6,000 crore as against Rs 4,296 crore in Q3FY21.

Asset Quality improves: The consolidated gross NPA ratio for Q3FY22 stood at 1.73%. It was 2.45% for the period between July and September. The net NPA ratio stood at 0.78%, an improvement of 32 basis points sequentially. 

Management said, "During the quarter, the Company has changed its NPA classification criteria from number of EMI outstanding to Days Past Due approach in line with the RBI circular. This change did not have any negative impact on the Company's NPA."

Loan Losses and provisions: For Q3FY22, loan losses and provisions were Rs 1,051 crore as against Rs 1,352 crore in Q3FY21. The company did accelerated write-offs of Rs 163 crore of principal outstanding on account of COVID-19 related stress.

Business Growth: All the businesses under Bajaj Finance did extremely well in the third quarter. The consumer B2C business increased by 25% YoY. Rural B2B and B2C businesses grew by 64% and 31% respectively. The commercial lending business was up by 40%, while auto finance contracted 16% Y-o-Y.

Increase in the customer base: Customer franchise stood at 55.36 million as of 31 December 2021, as compared to 46.31 million as of 31 December 2020, a growth of 20%. During the quarter, customer franchise grew by 2.56 million. 

Other Updates: New loans booked during Q3FY22 were 7.44 million as against 6.04 million last year in the same period. The capital adequacy ratio (including Tier-II capital) as of 31 December 2021 was 26.96%. The Tier-I capital was 24.44%. 

Subsidiaries Update

• Bajaj Housing Finance Limited - The AUM grew by 39% to Rs 49,203 crore as of 31 December 2021 from Rs 35,492 crore as of 31 December 2020. Net Interest Income for Q3 FY22 increased by 30% to Rs 429 crore from Rs 329 crore in Q3 FY21.
• Bajaj Financial Securities Limited  - BFin acquired approximately 65K retail and HNI customers in Q3FY22. Customer franchise as of 31 December 2021 stood at approximately 269K. During the quarter, BFin changed its acquisition strategy to focus on a higher activation rate. Total Income for Q3 FY22 was Rs 38 crore as against Rs 8 crore in Q2FY21. BFin generated a profit after tax of Rs 7 crore in Q3FY22. 

Bajaj Finance Q3 Results Review:

Bajaj Finance has reported an excellent set of numbers in Oct-Dec 21 period, aided by improvement in strong core income. The boost to Bajaj Finance's bottomline in the quarter came from a decline in loan-loss provision to Rs. 995 crore from Rs. 1,245 crore in the year-ago quarter. Bajaj Finance said that competitive intensity across products has increased rapidly after the second wave of the pandemic. So far, the company has been able to protect its margin profile across businesses. Shares of the non-bank lender ended 1.1% lower at Rs. 7,770 on the NSE.