Consumer biz boosts growth, demand to pick up: Bajaj Fin

Rajeev Jain, CEO, Bajaj Finance explains on CNBC-TV18 that the company was able to post a growth of 37 percent thanks to the superlative performance by the company's consumer businesses- the consumer electronics financing and the two-wheeler financing arms. Jain adds that though there are signs of improvement in the company's credit matrix, there are no signs of recovery in demand.

Below is an edited transcript of the interview on CNBC-TV18 Q: Why has your net interest income (NII), which grew at a much more rapid pace in the first and second quarters, mellowed to 25 percent?
A: The details of the results will reveal that while the consumer business grew well the SME business grew slower and commercial business de-grew in the third quarter. This reflects in a way the course events occurring externally. The company has grown over 37 percent in a scenario where the consumer discretionary was soft, auto-sector results have been flat and consumer durables grew 6 to 8 percent. So, when the economy recovers and the discretionary improves, we will be much stronger than the broader market. Q: Do you seeing any signs of a turnaround? The auto results in December were no source of joy. Is there any improvement in sentiment or do you think that you have yet to wait for those signs?
A: While there are no signs of recovery in demand, our credit matrix has starting to reach some level of stabilisation or improvement. I think the improvement in demand will take some time. Q: What about asset quality? Are there any signs of deterioration caused by your exposure to the infrastructure segment?
A: Our commercial business, represented by construction, equipment and infrastructure has de-grown in the current quarter by 42 percent. We have been very cautious on the sector over the last 12 months now. One of our clients had gone for a corporate debt restructuring scheme (CDR) so the loan loss provision includes a small charge on account of that, but otherwise it has been stable so far. Q: What is the loan-loss provision this time?
A: It is up 42 percent on a year-on-year basis at Rs 251 crore versus Rs 36 crore which was the rock-bottom seen in the last five years on absolute basis as well as a net non-performing asset (NPA). Q: So is asset quality stabilising?
A: Yes. Q: What about margins? In the last quarter, they were about 11.6 percent. Where do they stand at the end of Q3?
A: As our product mix changes – because we are a consumer SME in a commercial business- the mix essentially determines where the margins essentially hold. Though that is difficult to put a finger on, we think our product mix will be reasonably similar and as a result, margins will remain reasonably similar. Q: Which segment is growing well?
A: Our consumer businesses- the consumer electronics financing business and the two-wheeler financing business have done exceptionally well in the previous quarter. This is despite the overall broader environment. Q: Will you be raising capital or are you well-capitalised?
A: The board has just taken a decision to raise Rs 743 crore through rights and that will give us the bandwidth to widen our book for next two-to-three years. Q: By when do you expect to close this transaction?
A: Before February 28 i.e. in the next 45 days. Q: Is this capital being raised entirely only for your NBFC business?
A: It is for Bajaj Finance.