Bajaj Finance Q4 Results: Profit Falls 20% On Higher Impairment Expenses

Bajaj Finance Ltd.’s quarterly profit fell as the non-bank lender’s impairment expenses jumped more than twofold, partly on account of a contingent provisions made to deal with the coronavirus crisis.

The Pune-based company’s profit fell 20 percent year-on-year to Rs 892 crore in the quarter ended March, according to an exchange filing. Net interest income rose 38 percent to Rs 4,459 crore.

Bajaj Finance recorded an impairment expense of Rs 1,865 crore during the quarter—more than double of what it did in the previous quarter. This includes Rs 850 crore as provisions for the Covid-19 pandemic.

Gross non-performing asset ratio stood at 1.61 percent. Net NPA ratio stood at 0.65 percent. The lender has a provision coverage ratio of 60 percent.

The NBFC’s asset under management rose 27.4 percent year-on-year—the slowest pace of growth since at least the first quarter of financial year ended March 2018—to Rs 1.47 lakh crore in the three months ended March. On a sequential basis, its AUM rose 1.4 percent.

Bajaj Finance had tightened credit norms for small and medium enterprises and business-to-consumer segments as per 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.

The non-bank lender, in a conference call on April 6, had warned investors that these are exceptionally tough times. “The company, at this juncture, is focused on capital preservation, balance sheet protection and operating expenses management,” it said in the media statement today. Bajaj Finance remains confident that it will successfully deal with the challenges arising due to the Covid-19.

Loans Under Moratorium

Providing details about the loans put under a three month moratorium offered by the Reserve Bank of India, Bajaj Finance said that 27 percent of its AUM has availed of the relief.

• 14 percent of the mortgages portfolio is under moratorium
• 29 percent of the consumer B2C portfolio is under moratorium
• 30 percent of the SME portfolio is under moratorium
• 70 percent of the auto finance portfolio is under moratorium

In terms of absolute amounts, Rs 38,599 crore has availed the relief, Bajaj Finance disclosed. It further detailed the ‘bounce rate’ defined as accounts with are zero-days past due. The overall bounce rate has risen from 12 percent in the January-March period to 35.3 percent in April and 36.9 percent in May.

The lender further said that 68 percent of the loans under moratorium have no prior history of default. The provisions set aside against the loan under moratorium stand at 2.33 percent.

Liquidity Position Comfortable

Bajaj Finance said that its liquidity position is comfortable and that it will continue to hold additional liquidity.

As on 15 May 2020, company had consolidated liquidity buffer of Rs 20,900 crore and government bond investments of Rs. 3,310 crore. This represents 18.6 percent of its total borrowing.

“Given the environment, the company will continue to run high liquidity buffer, despite an impact on cost of funds in the short term,” it said. “The company has stress tested its liquidity model and is comfortably placed to meet its repayment obligations and business growth for a foreseeable period.”

Shift In Focus

In a conference call soon after the earnings, Rajeev Jain, managing director at Bajaj Finance said that the company has used the 60-day lockdown period to strengthen its collection systems. The company has added 2800 officers in the company towards this activity. This will have us ensure that we collect dues rapidly, Jain said.

The lender will also focus on its existing customers for fresh lending from here on. In addition, it will strengthen its deposit franchise by targeting more retail deposits. While the company will remain focused on growth, it is not an immediate priority, Jain said.

On Monday, Bajaj Finance shares rose 1.40 percent to Rs 1,967.25 apiece on the BSE while the benchmark Sensex gained 0.56 percent to end the day at 30,196.17 points. The company’s quarterly results were declared after market hours.