InvestorQ : What were the key highlights of the Bajaj Finance results announced for the December 2019 quarter?
Dawn Cherian made post

What were the key highlights of the Bajaj Finance results announced for the December 2019 quarter?

Dilmini Mercia answered.
1 year ago

Bajaj Finance, which has emerged as one of India’s most valuable and formidable lenders in the non-banking space, reported 52% growth in net profit at Rs.1,614.11 crore. This was largely helped by robust growth in interest income by 39% Rs.6,105 crore for the December 2019 quarter. Even the non-fund based component of revenues; fees and commissions was up by 47% at Rs.687 crore. The reasons could have been much better if it did not have to make a provision of Rs.85 crore for a huge fraud committed by Karvy. The Hyderabad based Karvy Stock Broking had illegally pledged shares belonging to customers to a large number of banks and financers including Bajaj Finance. When SEBI ordered the ownership of shares to be restored to the original owners, the banks and other financers like Bajaj Finance were left holding unsecured loans.

In its investor presentation, Bajaj Finance underlined that it had a total exposure of Rs.303 crore to Karvy on which it had already taken an accelerated provision of Rs.85 crore in the current quarter. The balance of Rs.218 crore will remain an open contingent liability for Bajaj Finance and they may have to take a final view in the fourth quarter ending March 2020. Even otherwise, the retail stress was a little sharper this quarter with loan losses and provisions up by 84% at Rs.831 crore. On the positive side, AUM of Bajaj Finance grew by 35% Rs.145,000 crore. Bajaj Finance remains among the fastest-growing consumer finance companies in India with focus on consumer funding and mortgage financing.

In a tough year, what really helped Bajaj Finance, apart from its focus on asset quality is the renewed focus on reduction in cost of funds. Bajaj Finance continues to maintain strong liquidity position even as BFL has been consistently cutting down on its CP dependence.

If you leave out the numbers, there are three things that Bajaj Finance did which other NBFCs did not. Firstly, it was transparent and aggressive in making provisions. It had tempered growth expectations much better. Secondly, it has gotten out of high risk liability classes like CPs and that is good news for the future of BFL. Lastly, they are adopting a counter-intuitive strategy to expand aggressively to over 200 locations when the situation is tight. Stock may not be a mega outperformer but surely looks good to beat the index consistently.