Consumer lending major Bajaj Finance is expected to post a 32 percent jump in net profit for the quarter ended March 2023 on the back of robust disbursements and continued focus on its omni-channel strategy, analysts said.
The average estimate of a poll of three brokerages puts the lender’s consolidated net profit at Rs 3,206 crore for the three months to March. Net interest income is likely to come in at Rs 6,316 crore.
The non-banking finance company (NBFC) will announce its fourth-quarter results on April 26.
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“We expect Q4FY23 to be strong for NBFCs across board, given a strong AUM growth of 4.8 percent QoQ. Although rate hikes at a faster pace and another wave of Covid can play spoilsport and affect credit demand, NBFCs aggregate earnings are expected to inch higher on an on-quarter basis as disbursements across board have been very strong,” brokerage Prabhudas Lilladher said in a note.
Bajaj Finance, it said, recorded the highest-ever increase in its customer franchise of 11.5 million in FY23, surpassing its target of 11 million. Deposit momentum was sustained with 45 percent YoY growth, at a time when there is still intense competition for deposits between Banks and NBFCs.
“The omni-channel platform will provide a fully integrated, seamless experience for customers to navigate between online and offline channels in a smooth manner and enable Bajaj Finance to be preferred interface for users. Full roll-out of omni channel platform will provide a fully integrated, seamless experience for customers,” it pointed out.
Operational metrics
In its Q4 business updates earlier this month, Bajaj Finance said new loan bookings for the quarter increased 20 percent to 7.6 million as against 6.3 million a year back.
The company's customer franchise as of March 31 stood at 69.1 million.
Core assets under management (AUM) grew by 29 percent to approximately Rs 247,350 crore as against Rs 192,087 crore (AUM excluding short term IPO financing receivable of Rs 5,365 crore) in the year-ago period. AUM in Q4 FY23 grew by approximately Rs 16,500 crore.
Axis Securities emphasised that the AUM growth and other operational parameters are progressing well, which is likely to reflect in its Q4 earnings.
Bajaj Finance had also said its liquidity position remains strong, with capital adequacy ratio (CRAR) of approximately 24.9 percent as of March 31, 2023.
Headwinds
Margin pressures are likely to be seen in Bajaj Finance’s Q4 numbers owing to an inch-up in cost of funds, according to Axis Securities.
Analysts at Systematix Institutional Equities said this will be a concern for NBFCs as a whole. “The NIMs (net interest margins) of some of our coverage NBFC companies could contract by marginal 5-15 bps QoQ on higher cost of funds. While incremental cost of funds has risen by 50-120 bps, it would take another 1-2 quarters to see the full impact of rising cost of borrowings on NIMs, as we expect the reset to happen with lag,” it noted.
However, Prabhudas Lilladher expects Bajaj Finance to report stable margins as the marginal increase in cost of funds will be passed on to customers. This, coupled with strong NII growth, is expected to boost the company’s bottomline.
Analysts will also be tracking the management commentary on margin-growth trade-off and progress on the execution of its Long Range Strategy (LRS).
The company’s five-year LRS framework, spread over 2023-27, includes various parameters like customer franchise, payments gross merchandise value (GMV), app installs, and web visitors, among others.
Bajaj Finance, known for its fast-growing asset book, has been a top-performing stock for investors due to its consistent growth in AUM and superior asset quality.
It has underperformed the benchmarks of late. The counter is down around 7 percent this year so far, while it has shed 13 percent on a one-year basis.
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