Bajaj Finance Q1 profit likely to jump over 40% on solid loan growth
All brokerages said asset quality is expected to remain largely stable in June quarter with stage 3 assets around 1.5 percent
July 25, 2019 / 09:42 AM IST
10| Bajaj Finance Limited : Rs 2.87 trillion
Bajaj Finance is likely to register healthy growth in the June quarter (Q1) with profit increasing more than 40 percent, backed by solid loan growth with stable asset quality.
The non-banking finance company will announce its quarterly earnings on July 25. Kotak Institutional Equities and ICICIdirect see a maximum bottomline growth of 55 percent year-on-year. Narnolia and Motilal Oswal project a minimum 43 percent growth.
Profit in year-ago period was Rs 836 crore and in the March quarter was at Rs 1,176 crore.
"Profit is expected to grow strongly at 43 percent YoY led by healthy AUM growth and stable margins. Normalisation of liquidity and easing cost pressure will further support the margins. Moderating operating expenses will also boost the profitability going ahead," Narnolia said.
Net interest income is likely to grow in the range of 30-45 percent YoY on healthy asset under management growth due to consumer finance and rural lending, according to brokerages.
"Advances growth are seen maintained at higher levels at 35 percent YoY. Growth in housing finance company is higher at 172 percent YoY (on a lower base). This quarter, they may be a beneficiary of current NBFC business slowdown but bank’s participation is gradually rising. Expect NII growth of 45 percent YoY and PAT growth of 56 percent YoY," ICICI direct said.
Management is targeting 8-10 percent market share in home loan business over the next few years. Narnolia said strong parentage support and AAA credit rating will help Bajaj Finance to take borrowings comfortability despite the liquidity issue in the market.
All brokerages said asset quality is expected to remain largely stable in June quarter with stage 3 assets around 1.5 percent.
Kotak said net interest margin will likely expand 10 bps QoQ to 9.8 percent, in line with seasonal trends. It expects company's cost-income ratio to improve to 55 percent from 57 percent QoQ due to higher contribution from the consumer business.
Key issues to watch out for would be management commentary on rural business outlook, borrowing mix trend, trend in disbursement growth, incremental cost of funds, asset quality trends (especially in LAP and 2W/3W businesses) and traction in the cross-sell franchise.