Bajaj Finance Q3 results update!
Last updated: 20 Jan, 2021 | 01:30 pm
- Net profit declines: Bajaj Finance has reported a 29% on-year drop in consolidated net profit to Rs 1,146 crore in Q3FY21, primarily on the back of a decline in net interest income and higher provisions. Loan losses and provisions for Q3FY21 stood at Rs 1,352 crore as against Rs 831 crore in Q3FY20. During the quarter, the Company has also done one-time principal write-off of Rs 1,970 crore on account of COVID-19 related stress.
- Net interest income drops: 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. Net interest income for Bajaj Finance dropped 5% YoY to Rs 4,296 crore. This was above street expectations of about Rs 4,050 crore.
- Consolidated AUM: Consolidated assets under management rose to Rs 1.43 lakh crore as compared to Rs 1.37 lakh crore in the previous quarter. The table below shows AUM growth for various segments of Bajaj Finance.
- Asset quality: Overall asset quality improved for Bajaj Finance as Gross NPA as a percentage of gross advances fell 48 bps QoQ to 0.55%, while net NPA was down 18 bps to 0.19%. The RBI had permitted NBFCs to offer a moratorium to borrowers until the end of August to help them mitigate the impact of the pandemic. Following this, the Reserve Bank of India in September permitted one-time restructuring of advances of companies and retail borrowers hit by the Covid-19 pandemic. While these assets don't have to be marked as NPAs, NBFCs have been asked to disclose details of the restructured assets. 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 2.86% (as against 0.55%) and 0.19% (as against 1.22%). The Company expects to revert to pre-COVID Net NPA by H1FY22 except auto finance business which may take longer due to underlying collateral value.
- Liquidity Health of Bajaj Finance: Capital adequacy ratio stood at a robust 28.2% at the end of Q3FY21. The tier-I capital stood at 24.73%. Liquidity surplus stood at Rs 14,347 crore, representing 11.6% of total borrowing. Given stable market conditions, the Company has brought down its liquidity buffer to 11.6% of its total borrowing as of 31 Dec 2020 from 21.9% as of 20 Oct 2020. The Company will slowly dial down its liquidity buffer over the next 3 months and expects to revert closer to pre-COVID-19 liquidity buffer of 7-8% by March 21. It will also ensure that the cost of excess liquidity normalizes by Q4.
- Launch of Bajaj Pay: Bajaj Finance is in the process of launching Bajaj Pay for consumers in Q4. This will offer payment solutions via UPI, PPI, EMI Cards and credit cards. It is also in the process of building Bajaj Pay for merchants.
Going forward as the economy recovers, 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 and balance sheet, the company is very well equipped to navigate these difficult times.