Q2 Results: Bajaj Finserv’s Profit Growth Slows As IL&FS Crisis Hurts

Bajaj Finserv Ltd.’s net profit rose at its slowest pace in at least six quarters as non-bank lenders battled a liquidity crunch stemming from defaults by IL&FS group entities.

Net profit of the Pune-based non-bank financial company rose nearly 1 percent year-on-year to Rs 704 crore in the July-September quarter, according to its exchange filing. Net interest income, or the core income, increased 32 percent on a yearly basis to Rs 4,465.6 crore in the period.

The company’s revenue rose 17.3 percent year-on-year to Rs 9,698 crore. Revenue from the general insurance business increased 3.3 percent to Rs 2,082.53 crore, while that from the life insurance business fell 4.8 percent to Rs 2,718.36 crore.

“Rising interest rates and default by a large financial institution in September resulted in difficult situations for NBFCs,” Bajaj Finserv said in a statement to the exchanges, without naming the institution.

Non-bank lenders faced liquidity concerns after defaults by IL&FS and its subsidiaries threatened a contagion in financial markets. That pushed up yields, increasing short-term borrowing costs.

Bajaj Finserv is the parent of listed Bajaj Finance Ltd. and unlisted Bajaj Allianz General Insurance Company and Bajaj Allianz Life Insurance Company.

Bajaj Finance’s net profit rose 54 percent year-on-year to Rs 923 crore during the three months ended September. The general insurance arm, Bajaj Allianz General Insurance, reported a 31 percent rise in gross written premium, excluding crop insurance, to Rs 2,243 crore during the period. The overall gross written premium from the insurance business, however, declined 5 percent to Rs 2,718 crore, impacted by the crop insurance due to unfavourable pricing in the kharif season, the company said in the statement.

“Bajaj Allianz would continue to remain our sole partner for the insurance business,” S Sreenivasan, chief financial officer at Bajaj Finserv, told BloombergQuint in an interaction. He said that the company has no plans to list its insurance business in the foreseeable future.

Shares of Bajaj Finserv ended 1.66 percent lower at Rs 5,163.05 apiece ahead of the results announcement.