Bajaj Finance Is Still ‘Up There’ Among NBFCs That Will Survive The Pandemic

Bajaj Finance Ltd. lost around 3.5 lakh customers and Rs 4,750 crore in assets in the first 10 days of the lockdown to contain the new coronavirus. The non-bank lender’s management blamed it on the hazards of the loan moratorium and the uncertainty caused by the pandemic.

Yet, for Pramod Gubbi, founder of Marcellus Investment Managers, among the non-banking financial companies likely to survive the crisis, Bajaj Finance is “up there”.

While it is appreciated that the management spoke about the uncertainties, it’s important to focus on facts as well, Gubbi said in a conversation with BloombergQuint. Bajaj Finance has perhaps the strongest balance sheet among NBFCs and its capital adequacy ratio is around 25 percent and leverage ratio is between four to five times, he said, adding its cost of funds is much lower than that of its peers, he said.

Shares of Bajaj Finance, which offers loans to buy household appliances to homes, have tumbled 45 percent in the last month compared with a slide of 20 percent in the S&P BSE Sensex. That came as global equities dropped in the worst selloff since the 2008 financial crisis as the new coronavirus outbreak stalled trade and India went into a three-week lockdown. The central bank announced a moratorium on loans and while that could provide relief from bad loans, demand for credit will take time to recover.

“Their [Bajaj Finance] consumer lending was the darling of lending,” said Chakri Lokpriya, managing director at TCG Asset Management. In a post corona world, for the next couple of quarters, consumer spends are likely to moderate. “Yes, they will bounce back later, plus they have the moratorium on repayment of existing loans. Yes, that is short term; but that kind of derails the next two quarters.”

For select players, bad loans can go up in the short term and companies who commanded premium are also likely to see their multiples come down, according to Lokpriya.

Here are their views on other sectors:

Pramod Gubbi

• Pharmaceuticals do well for years to come.
• Only dominant players within FMCG will benefit from jump in demand.
• A few companies in the insurance sector have the scope to get ahead of others on the back of new launches.

Chakri Lokpriya

• New sectors like insurance are good to invest but don’t go overboard.
• Would not invest in Bharti Airtel Ltd. since future profitability does not look rosy.