More rate hikes can hurt Bajaj Finserv's margins in H2FY12

Bajaj Finserv has reported a strong fourth quarter with income surging to Rs 1300 crore. This comes against the Rs 652 crore that the company clocked in the corresponding quarter last year.

Sanjiv Bajaj, managing director, talks to CNBC-TV18 on the earnings this quarter and the way ahead for the company. He hopes to hold margins steady for the next few quarters, but a further interest rate hike could play spoilsport, he says. Below is the verbatim transcript. Also watch the accompanying video Q: You have come out with good set of numbers, your PAT has almost doubled and even gross revenues have seen a good jump, if you could take us through segmental breakup of your numbers?
A: The topline remained the same but very strong jump in the bottomline. Our main segmental results would include two insurance companies.
Life insurance went through its own challenges through the year with the regulatory changes. As a result, our topline fell from Rs 11420 crore to Rs 9610 crore, but we have reported record shareholder profit. PAT went up from Rs 542 crore to Rs 1062 crore.
The general insurance company again saw topline going up by 15% to Rs 2915 crore. There was an additional exceptional provisioning required in the year because of the third party motor pool. As a result of this, our PAT fell from Rs 121 crore to Rs 43 crore which I believe will still make us the only profitable company in the private sector general insurance. If it were not for this exceptional item of Rs 199 crore, our PBT for the year was Rs 260 crore versus Rs 180 crore last year.
The last significant business is Bajaj Finance. Bajaj Finance saw record disbursals from about Rs 4500 crore to Rs 9500 crore. The result of that was that our PAT has gone up 1.5 times from Rs 89 crore to Rs 247 crore.
So, overall from a bottomline perspective, exceptionally strong numbers through the year. Q: Coming to Bajaj Finance, what have been the margins like this time around?
A: We have managed to hold margins stable through the year. We are in a number of different businesses, so the net interest margins differ variedly, whether we are talking about the consumer side of the book or the SME side or the more recent infrastructure financing side. We have taken our interest rates up by about 50 bps recently post the increase in rates from RBI. Going forward, I would expect we would be able to hold margins in the first and second quarter, but if we do see further rate hikes we will naturally have to balance growth with the spreads. We are focused towards building a stable and profitable portfolio. It could have some pressure on our NIMs in third and fourth quarter but we will have to see what happens now in the first half of the year.
Q: If you could just tell us what have been the margins and as well as the spreads?
A: Our average if you take Return On Total Assets (ROTA) would be about 3-3.5%. That has remained stable. We don