Bajaj Finance Q2 Net Profit Falls 36% As Provisions Rise

Consumer financier Bajaj Finance Ltd., on Wednesday, reported a drop in net profit as the lender set aside a larger amount as provisions against stressed assets.

Net profit fell to Rs 965 crore for the quarter ended Sept. 30, down 36% over a year ago, according to an exchange filing. The non-banking finance company had reported a net profit of Rs 962 crore in the quarter ended June 30. The profit was marginally higher than the Bloomberg estimate of Rs 945 crore.

Total income rose 3% year-on-year to Rs 6,523 crore. Bajaj Finance’s net interest income, or core income, rose to Rs 4,105 crore, up 4% from a year ago.

Consolidated assets under management rose to Rs 1.37 lakh crore at the end of the July-September quarter, from Rs 1.38 lakh crore in the preceding quarter. Bajaj Finance owns 100% stake in Bajaj Housing Finance Ltd., which is considered in the consolidated assets under management.

Asset Quality

Loan losses and provisions for the July-September quarter stood at Rs 1,700 crore, as compared with Rs 594 crore a year ago.

Consequent to the ongoing pandemic, the company has further increased its provisions on stage 1 and 2 assets by Rs 1,306 crore to Rs 4,879 crore as of Sept. 30 as against Rs 3,573 crore as of June 30, Bajaj Finance said. Stage 1 assets are those that are overdue up to 30 days, stage 2 assets include those overdue by 30-90 days. Stage 3 assets are overdue by more 90 days.

• Gross non-performing asset ratio stood at 1.03%, down 37 bps from 1.4% as on June 30.
• Amounts categorised as special mention accounts or overdue, where moratorium or deferment was extended stood at Rs 2,127.70 crore.
• Accounts where asset classification benefit was extended under the RBI’s one-time restructuring scheme stood at Rs 1,917.87 crore, as of September 30.
• In addition, as per the Supreme Court’s interim directions, the lender did not classify accounts as NPAs after Aug. 31. If the Company had classified borrower accounts as NPA after 31 August 2020, the gross NPA and net NPA ratio would have been 1.34% and 0.56% respectively, it said.

Selective Loan Growth

While Bajaj Finance saw a small increase in consolidated assets under management in the quarter, it pursued a selective lending approach.

Outstanding loans toward consumer and rural lending in the business-to-business category fell 19% each, on a year-on-year basis. Bajaj Finance’s commercial lending business also contracted 11% compared to last year. Mortgage loans, however, rose 14% over a year ago.

According to Bajaj Finance’s investor presentation:

• In September, loan disbursements were at 62% of last year’s volumes.
• Urban consumption businesses (B2B) were at 72%, rural consumption business (B2B) at 91%.
• Credit card origination was at 73%; ecommerce at 75%; auto finance at 54% of last year’s business.
• The company plans to achieve pre-Covid levels of loan originations by March / April 21.

Deposits, which constitute about 17% of the consolidated borrowings and 22% of Bajaj Finance’s standalone borrowings, stood at Rs 21,669 crore at the end of the second quarter, up 23% year-on-year.

Liquidity And Capital

The lender remained comfortable in terms of liquidity and capital.

Capital adequacy ratio stood at 26.64% at the end of September. The tier-I capital stood at 23.01%.

Liquidity surplus as of Sept 30, 2020 stood at Rs 22,414 crore as against Rs 8, 107 crore a year ago.