Bajaj Finance Q2 Results: Net Profit Rises On Strong Core Income
Bajaj Finance Ltd.'s net profit on a standalone basis rose in the second quarter as core income improved.
The non-bank lender's net profit increased 49% year-on-year to Rs 1,306 crore in the three months ended September, according to its exchange filing.
On a consolidated basis, net profit stood at Rs 1,481 crore, up 53% year-on-year. The consolidated business included results for Bajaj Housing Finance Ltd. and Bajaj Financial Securities Ltd.
Its standalone net interest income was up 26% over the preceding year to Rs 4,920 crore. Consolidated NII rose 28% to Rs 5,335 crore.
Assets under management for the lender improved to Rs 1.23 lakh crore, up 17% over a year ago. On a consolidated basis, AUM rose 22% year-on-year to Rs 1.67 lakh crore.
The lender said growth and risk in the market had improved in the second quarter, giving it confidence about the rest of the year.
A quarter of strong revival across growth, risk, debt management and financial metrics. In absence of a third wave, quite confident about second half of the year on growth, risk and financial metrics.Bajaj Finance Investor Presentation
The consolidated gross NPA ratio stood at 2.45% against 2.96% in the first quarter. Similarly, net NPA ratio improved by 36 basis points sequentially to 1.1%.
Loan losses and provisions for the quarter were at Rs 1,300 crore. Total provisions taken in the first half of the fiscal is Rs 3,051 crore, the company said.
Stage 2 assets which are overdue by 60-90 days also reduced during the quarter to Rs 5,962 crore vs Rs 7,425 crore as of June.
Non overdue one-time restructuring book as of September increased 17.5% sequentially to Rs 1,512 crore.
In Q2, the company restructured Rs 426 crore in loans. These are classified as stage-2 assets and Bajaj Finance held a 19% provision coverage ratio for this book.832
In absence of a severe third wave, the Company estimates its gross NPA ratio at 1.7-1.8% and net NPA ratio at 0.7-0.8% by March 31, 2022. Accordingly, the company estimates its overall credit cost for FY22 to be approximately Rs 4,300 croreBajaj Finance Investor Presentation
Rajeev Jain, managing director of Bajaj Finance, said the company had raised its management overlay provisions by Rs 350 crore to Rs 832 crore to protect itself against a potential third wave.
"We want to protect ourselves for another quarter before we take a review of our loan loss provisions," Jain told analysts over a conference call after announcing the results.
The company is still closely watching the portfolio quality for two-wheeler and three-wheeler loans, he said. The quality of the loans against property portfolio may only improve by next financial year, Jain said.
Among key segments, Bajaj Finance saw growth revive across some while others remained relatively weak.
Bajaj Housing Finance portfolio grew 32% year-on-year, with home loans up 29%. The consolidated mortgage portfolio grew 18%.
The consumer B2C business grew 19% year-on-year.
Sales finance and rural sales finance businesses grew 59% and 80% respectively.
The commercial lending business grew 50% over preceding year.
The auto finance business contracted by 15% year-on-year.
Business Transformation Plan
Bajaj Finance is planning a business transformation plan to move to an omnichannel distribution approach, where customers will be able to move seamlessly between the physical and online stores. Through this approach the customers will be able to make payments, transfer funds, borrow and invest across different channels.
While the company planned to go live with this business transformation by Oct. 31, the process now stands delayed, Jain told analysts. The delay was large due to the festive season where the company traditionally doesn't make any business changes. Delays in tech deliveries also affected the timeline, Jain said.
"The business transformation will now go live on Dec. 15," he said.
The company will also be launching a new merchant application by February next year, where it can fully on-board merchants and set up a payments system for them through a mobile application, Jain said.