Bajaj Finance Clocks Slowest AUM Growth In Five Quarters, Shares Slump

Bajaj Finance Ltd.’s assets under management in the October-December period grew at its slowest pace in five quarters after the non-bank lender tightened its lending norms earlier this fiscal.

Shares of the NBFC fell as much as 5 percent on Monday, before paring some of the losses to end the day 4.63 percent lower at Rs 3,998.20 apiece.

The company’s AUM grew 35.1 percent year-on-year to Rs 1.42 lakh crore in the third quarter, according to its stock exchange filing. On a sequential basis, its AUM rose 7 percent.

The non-bank lender had tightened credit norms for small and medium enterprises and business-to-consumer segments in its first-quarter investor presentation. It had also tightened credit standards for auto loans and revised underwriting standards in digital product financing in urban and rural business.

Bajaj Finance said it acquired 2.5 million customers in the third quarter as against 1.9 million customers in the previous quarter. Its customer base at the end of December quarter stood at around 40.4 million compared with 32.6 million in the year-ago period.

New loans booked during the quarter stood at 7.7 million compared with 6.8 million in the year-ago period and 6.6 million in the previous quarter, the filing showed.

The AUM growth of 35 percent remains healthy given the slowdown in the overall environment, IIFL Securities said in a note. However, the overall run rate of new customer additions and new loans booked in the quarter is slowing quite considerably, the brokerage said, adding that this could lead to a 2-10 percent cut in profit estimates and further reduction in growth estimates.

According to Emkay Global, the 35 percent AUM growth stood in line with their estimates. The brokerage said it remains confident of the non-bank lender’s overall asset-quality profile but provisions worth Rs 310 crore for Karvy Stock Broking Ltd. may keep credit costs elevated.

Credit engine slowing down in a “secular slowdown” is not surprising, Shubhranshu Mishra, assistant vice president of research (diversified financials), BOB Capital Markets Ltd., said in a note. “What is of concern is the new customer acquisition, which should be carefully watched for the next two-three quarters as that determined the cross-sell ability and thereby sustenance of high RoAs,” he said.