Bajaj Finance on January 30 beat analyst estimates with profit rising 52.2 percent year-on-year to Rs 1,614 crore and net interest income increasing 41.4 percent YoY to Rs 4,537 crore.
The fund raising of Rs 8,500 crore during the quarter aided topline, but provisions increased sharply by 83 percent YoY and 40 percent QoQ to Rs 831 crore for quarter ended December 2019.
Slippages, too, were higher at Rs 936 crore for the quarter against Rs 779 crore in previous quarter.
Here are highlights from Bajaj Finance's conference call as compiled by Narnolia Financial Advisors:
Management Participants: Rajeev Jain - MD, Sandeep Jain - CFO, Atul Jain - CEO (BHFL)
Consumer B2B sales finance had a slow quarter as the company witnessed significant slowdown in consumption categories. This was in addition to cautious stance in digital products financing.
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Securities lending reported low growth of 5 percent in Q3FY20, the reason being exposure to Karvy broking. Securities lending business has a delinquent broker account with principal outstanding of Rs 303 crore on which company has taken an accelerated provision of Rs 85 crore.
LAP portfolio has 2 major NPA accounts: IL&FS with principal outstanding of Rs 234 crore and a coffee conglomerate account with principal outstanding of Rs 91 Cr. Coffee account is expected to be resolved in next 30 days. Provisioning of Rs 60 crore is already done on IL&FS accounts.
The management said credit cost is at the peak level now and is not expected to increase from this level further.
Existing customers contributed to 68 percent of new loans booked during Q3FY20.
The company added 182 new locations in Q3FY20 taking total geographic presence to 2,179 locations in India as of 31 December 2019. Given corporate tax rate cut and capital raise, company has accelerated its geo expansion strategy and is opening over 200 new locations in Q4 as well.
During the quarter, the company raised $575 million (equivalent to Rs 4,083 crore) under the ECB facility agreement with various banks. The company has received approval to raise additional $650 million ECBs.
Loan losses and provisions grew by 84 percent YoY in Q3 FY20 to Rs 831 crore. During the quarter, the company has made an accelerated provision of Rs 85 crore in one of its loans against securities account and Rs 15 crore of provisions on Coffee conglomerate account. Adjusted for this, loan losses and provisions grew by 65 percent YoY in Q3 FY20 to Rs 746 crore.
The only portfolio that turned red in Q3 from earlier disclosures is auto finance portfolio.
The company successfully completed Rs 8,500 crore of capital raise through Qualified Institutions Placement in November 2019.
The company looks to add 7-8 million customers to the franchise per year.
ROE for BHFL is expected to be in the range of 13-15 percent in FY21.Two wheeler business is 5.5 percent, three wheeler is 3.5 percent and commercial vehicle is 0.2 percent of the total portfolio and average yield here is 23-24 percent.