Bajaj Finance Q2 results: Consolidated net profit rises 28% to Rs 3,551 crore

BAJAJ FINANCE

Bajaj Finance on October 17 reported a consolidated net profit of Rs 3,551 crore for the July-September quarter of the current financial year, up 28 percent from the same quarter of the previous year, missing estimates.

Analysts had predicted a 30 percent year-on-year (YoY) increase in net profit, at Rs 3,626 crore, for India's leading non-banking finance company (NBFC). Bajaj Finance’s net profit rose on the back of improved net interest income (NII), new loans, and improved asset quality. The company said the number of loans booked during the quarter rose 26 percent, to 8.53 million, from 6.76 million in the corresponding period of the previous year.

Net interest income

In the reporting quarter, the NBFC’s consolidated NII rose 26 percent on-year to Rs 8,845 crore. In the similar period last year, the consolidated NII stood at Rs 7,002 crore.

On a standalone basis too, the NII increased 26 percent to Rs 8,059 crore, from Rs 6,397 crore in a year-ago period.

NII refers to the difference between the interest earned by the company, and the interest expended.

On a consolidated basis, the interest income of Bajaj Finance rose 38 percent to Rs 11,734 crore, up from Rs 8,509 crore in the year ago period. Interest expenses rose 53 percent on-quarter, to Rs 4,537 crore in July-September, according to the company’s press release.

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NIM and cost of funds

As per the investor presentation of the company, its net interest margin (NIM) shrank 14 basis points (bps) sequentially. One basis point is a 100th of a percentage point. This could be attributed to the increase in the cost of funds for the company in the reporting quarter.

In Q2, the cost of funds for Bajaj Finance was 7.67 percent, an increase of 6 bps over Q1FY23-24. Bajaj Housing Finance saw a 3-bps sequential increase in its cost of funds in July-September, 2023.

The liquidity buffer of the NBFC stood at Rs 11,373 crore as of 30 September 2023, per the investor presentation.

Asset quality 

Bajaj Finance's asset quality improved in the second quarter of the current financial year. Its gross non-performing assets (NPA) stood at 0.91 percent, and net NPA stood at 0.31  percent, against 1.17 and 0.44 percent, respectively, in the year-ago period.

Stage 3 assets stood at Rs 2,645 crore as of September 30, 2023, as against Rs 2,530 crore as of September 30, 2022.

The company had a provisioning coverage ratio of 66 percent for stage 3 assets, as of September 30, 2023.

Despite the improvement in asset quality, Bajaj Finance's loan losses / provisions for the second quarter of the current financial year rose to Rs 1,077 crore, as against Rs 734 crore for the same period last year, because of the overall expansion of the topline.

"The company holds a management and macro-economic overlay of Rs 740 crore as of September 30, 2023," the company said in a release. An overlay works like additional provisioning.

On a standalone basis, loan losses / provisions for Q2FY23-24 was Rs 1,059 crore, as against Rs 705 crore in Q2FY22-23, release added.

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Deposits and AUM

On a consolidated basis, Bajaj Finance’s deposits grew 39 percent to Rs 54,800 crore, from Rs 39,422 crore in the year-ago period.

In Q2, its net deposit growth  was Rs 4,877 crore. Deposits contributed to 21 percent of the consolidated borrowings as of September 30, 2023.

The company’s assets under management (AUM) grew 33 percent to Rs 2.9 lakh crore in Q2, from Rs 2.1 lakh crore in the year-ago period.

Under consolidated AUM, two and three-wheeler finance registered the highest growth of 63 percent on-year, which was followed by 46 percent on-year growth in commercial lending, and 39 percent on-year growth in urban sales finance.

On a standalone basis, the AUM of Bajaj Finance grew by 35 percent to Rs 2.15 lakh crore as of September 30, 2023, the company’s press release said.

Subsidiaries

In the July-September quarter, Bajaj Housing Finance reported a 47 percent on-year growth in its net profit, at Rs 451 crore. This was on the back of growth in NII.

Bajaj Housing Finance's NII for Q2FY23-24 increased 29 percent to Rs 761 crore, from Rs 590 crore in Q2FY22-23.

Its gross and net NPA, as of September 30, 2023, stood at 0.24 and 0.09 percent, respectively, as against 0.24 percent and 0.11 percent as of September 30, 2022. Bajaj Housing Finance had a provisioning coverage ratio of 61 percent for stage 3 assets, as of September 30, 2023.

Bajaj Financial Securities' net profit in the July-September quarter rose to Rs 13 crore, from just 1 crore in the same period last year.

Its total Income for Q2FY23-24 was Rs 108 crore, as against Rs 49 crore for Q2FY22-23, the release said.

The company’s margin trade financing (MTF) book stood at Rs 2,056 crore as of  September 30, 2023, as against Rs 692 crore as of September 30, 2022.