Bajaj Fin targets 25% balancesheet growth in medium-to-long term

Bajaj Finance beat analysts' expectations on Tuesday by reporting highest ever quarterly profit at Rs 424 crore in April-June quarter, a solid growth of 54 percent year-on-year on strong net interest income despite higher provisions and tax cost. The stock hit record high of Rs 9,657.30, up 7.5 percent intraday.Total income from operations grew by 39 percent to Rs 2,286.4 crore and net interest income jumped 45 percent to Rs 1,418 crore compared with corresponding period of last fiscal.Asserting that the Q1 performance was strong, Rajeev Jain, Managing Director of Bajaj Finance told CNBC-TV18 that the company expects a 25 percent growth in its balancesheet and 20 percent net income growth from a medium-to-long-term point of view.Below is the verbatim transcript of Rajeev Jain's interview to Reema Tendulkar and Mangalam Maloo on CNBC-TV18.Mangalam: Going through the internals, the assets under management (AUM) growth has come in at 40 percent as well as disbursements have grown at 48 percent, is that a number you think can sustain going forward?A: Our outlook remains a 25 percent balance sheet growth and a 20 percent net income growth for us as a company from a medium-term to long-term standpoint. Clearly, the last quarter was a strong quarter for us as a company, so that is how I would articulate our stance as a company on that.Reema: Your loan losses and provisions have gone up by nearly 75 percent on a year-on-year (Y-o-Y) basis. Last quarter you have done some accelerated provisioning on an infrastructure account, anything similar in this quarter?A: We have taken an accelerated provisioning to the tune of Rs 19.2 crore in the quarter gone by in some of our mortgage accounts based on the management prudence, adjusted for that the growth in loan losses and provisions would have been in line with the overall net interest income (NII) and in profit growth. The number would have come in at 55 percent. So it is one time acceleration based on our management prudence that we decided to accelerate at Rs 19 crore.Mangalam: Talking about your operations, your cost to income declined by about 500 bps coming in at 41.3 percent, in fact much lower than all of FY16 and FY15 too. Is this a number which is sustainable going forward?A: Two years ago, our opex to NIM used to be at 45 percent. We came down last year to 43 percent. Our view remains that as the operating leverage comes through, we would like a corridor between 38 percent and 40 percent as the likely corridor that we want to get to. Last quarter we have got into 41 percent.So you will clearly see operating leverage come through as we automate more and more, as we build the balance sheet into larger and larger. So I thought 38 percent to 40 percent corridor -- in the short-term to medium-term horizon -- you would see us as a company.Reema: What has been the net interest margins (NIMs) for the company in this quarter and your outlook?A: There is a seasonality in our NIMs because of the consumer financing business that we are in. So, as a result, we don’t quote NIMs, while they could be calculated very easily. Clearly, the consumer business outperformed in Q1 and as a result, the NII would look significantly higher. But, we think the current NIM is not out of line with what it has been in Q1 over the last three-four years.Mangalam: I was looking through your capital adequacy ratio and at 17.82, it is at nearly six quarter low. Is that a cause of concern or do you think that is par for the course?A: There is an additional Rs 300 crore that we have done -- we have raised capital last June of Rs 1,800 crore. Rs 300 crore of that is due to come in December this year. So that would augment capital.Secondly, post Q1 -- it is in public domain -- we have raised Rs 970 crore of tier II capital and also the profit pool that we will generate, you would see us go back to 19.5-20 percent in Q2 as a company, which gives us sufficient capital adequacy till March 2018 for us as a company.Reema: What is your outlook on the asset quality going ahead because part of your retail book is unsecured? You have managed to contain your gross as well as your net non-performing assets (NPAs) very nicely for the last many quarters but from the current 1.47 on the GNPA and 0.41 on the net NPA your guidance? Can you bring it down?A: We remain in the corridor of -- this is on 120 days past due. If you do 150 days past due to 150 days past due -- on a Y-o-Y basis, the gross NPA and the net NPA came down. Going forward for these 120 days this year and next year, we would transition to 90 days past due. If you look at 90-days past due number which we have not reported, that number would be something like 1.6 percent GNPA and around 50-53 bps net NPA is what our view is.We would like to remain in a corridor of 1.5 to 1.75 percent 90 days GNPA and a 50-60 bps net NPA -- on 90 days, I must qualify net NPA. We want to continue to remain a risk-based business and balance sheet growth is secondary to maintain credit quality for us as a company.