Infra lending to de-grow by 8% in FY13: Bajaj Finance

Saikat Das
moneycontrol.com

Higher loan provisions tempered Pune-based  Bajaj Finance's second quarter (July-September) net profit growth. Without the provisions, the non-banking finance company's net profit would have risen 58% instead of 48%, chief executive Rajeev Jain told moneycontrol.com in an exclusive interaction.The company plans to bring down infrastructure and construction equipment lending by another 8% by the end of 2012-13. However, the consumer and SME book is likely to grow more, he said.

Also read: Bajaj Finance Q2 net up 48% to Rs 130 cr

Q. What is the key driver for Q2 numbers?

A. Both our volume (for loan disbursals) momentum and asset quality are holding very well. These are two big drivers of the business growth. The impetus is strong for both consumer business and SME business. However, we are de-growing in commercial business since the last two quarters.

In infrastructure and construction equipments, we are contracting at this point of time. The negative growth will continue to happen for the rest of the fiscal year. The de-growth would be 18-20% by March from the existing 12% y-o-y. But vendor financing, other component of commercial lending has not seen any de-growth.

Meanwhile, we are growing our loans to consumer segment and small and medium enterprises.

Q. Your net profit fell short of market expectation. Your comments...

A. That is because we have taken a one time accelerated provisioning. Otherwise, our profits would have up 58% y-o-y, which is higher than Q1 actually. It is a one time charge of 14 crore that we have taken. We want to be doubly cautious on asset quality.

Q. Can you explain your SME book?

A. There are four categories in our SME business: loan against property and shares, working capital loans, home loans for self employed people. All these come under SME segment. Working capital is unsecured that is without any collateral. Based on our past performance and credential of the clients this loan is extended. Out of our total SME book, this unsecured portion forms around 14%.

Q. Are you sensing any uptick in business sentiment post the government reform measures?

A. In businesses like SME and consumer, the impact is always cascading in next 9-12 months time. There will be no immediate impact on the ground for our business.

Next 30 days, the consumer business will determine the future course. This is however, on account of festival season. The start has been strong so far. We need to see how it picks up by the end of the month. We are also giving a lot of freebies to our customers.

Q. What about your non-performing assets?

A. Our net non-performing asset ratio increased by 10 basis points to 0.20% sequentially. However, it improved by the same quantum year-on-year basis. For NBFCs, standard asset status is 180 days repayment. However, we have been providing for 90 days. We have increased the level of this provision.

Q. What are your fund raising plans?

A. We are going to raise Rs 750 crore. We have the board’s approval for share sale either through rights issue or qualified institutional placement (QIP). The board will take a decision soon. We should go out and raise Rs 750 crore before this fiscal year (2012-13) ends.

Q. What is happening in your credit card business?

A. We are steadily growing our co-branded credit card with the Standard Chartered Bank. We are acquiring 4000-5000 cards every month. However, it is an off balance sheet item for us. We do not show it in our books while the credit card portfolio earns us fee income. The bank shows it in their balance sheet.

Q. Guidelines for the new banking license is expected soon. Will you apply?

A. We would like to apply for the new banking license even though we are a corporate house.

saikat.das@network18online.com