NBFC Bajaj Finance, on January 29, is expected to report healthy growth in Q3FY20 earnings with profit rising around 50 percent compared to year-ago, driven partly by strong NII and operating income, but provisions remained elevated. Lower tax rate and capital raise during the quarter may also support profitability.
The stock gained 4.6 percent during the December quarter and shot up more than 71 percent in last one year.
Kotak Institutional Equities expects Bajaj Finance to deliver about 35 percent AUM growth (similar to Q2FY20) on the back of rapid expansion into newer geographies and strong festive demand.
"While growth has slowed down in commercial lending (mostly LAS book), strong uptick in consumer loan and rural loans will drive growth. Steady growth in disbursements, card issuance and insurance distribution will drive 60 percent YoY growth in fees," said the brokerage which expects profit to increase 47 percent YoY and net interest income 32 percent in Q3FY20.
Motilal Oswal, which also expects AUM growth of 35 percent YoY, said customer base growth during the quarter moderated on higher base.
According to brokerages, pre-provision operating profit (PPoP) growth could be more than 35 percent YoY, and net interest margin may see some sequential expansion but may see contraction on year-on-year basis.
"Net interest margin will likely expand 15 bps QoQ to 9.65 percent, in line with seasonal trends. While cost/income ratio will likely remain stable at 35 percent, we are building in higher credit costs (2.1 percent, up 30 bps QoQ) to reflect provisions in its LAS book," said Kotak which expects provisions to increase 65 percent YoY and 25 percent QoQ in quarter ended December 2019.
Motilal Oswal sees provisions and contingencies rising 13.6 percent sequentially and 50 percent YoY.
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Commentary on growth and Karvy issue would be key to watch out for.
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