Bajaj Finance Q4 profit falls 19% to Rs 948 crore on COVID-19 provisions; NII jumps 38%

NBFC major Bajaj Finance on May 19 has announced profit after tax at Rs 948 crore for the quarter ended March 2020, registering a 19.4 percent decline compared to numbers of corresponding period last fiscal.

The profit was impacted by higher provisions, but supported by lower tax as company adopted reduced rate of 25.17 percent for computation of income tax.

Loan losses and provisions (expected credit loss) for the quarter increased significantly to Rs 1,954 crore as against Rs 409 crore in Q4FY19.

During the quarter, the company said it had taken an accelerated charge of Rs 390 crore for two identified large accounts, an additional provision of Rs 129 crore on account of recalibration of its ECL model and a contingency provision of Rs 900 crore for COVID-19.

Hence, adjusted for contingency provision of Rs 900 crore for COVID-19, profit for the quarter was up by 38 percent at Rs 1,622 crore, it added.

Net interest income, the difference between interest earned and interest expended, increased sharply by 38 percent year-on-year to Rs 4,684 crore in January-March quarter.

New loans booked during March quarter increased by 3 percent to 6.03 million, from 5.83 million in Q4FY19. "Adjusted for lower acquisition due to lockdown, new loans booked would have grown by 21 percent to approximately 7.03 million," Bajaj Finance said in its BSE filing.

crore," it explained.

Consolidated assets under management grew by 27 percent to Rs 1,47,153 crore compared to year-ago quarter.

On the asset quality front, gross NPA for the quarter remained flat at 1.61 percent on sequential basis, while net NPA declined 5 bps to 0.65 percent compared to 0.70 percent in previous quarter.

"Standard assets provisioning (ECL stage 1 and 2) including contingency provision of Rs 900 crore for COVID-19 stood at 159 bps and 97 bps excluding contingency provision under Ind AS," company said.

The provisioning coverage ratio improved to 60 percent at the end of March quarter, from 57 percent in December quarter.

The company said its liquidity position remained very strong with overall liquidity surplus of approximately Rs 15,725 crore as of March 2020 on consolidated basis and as of May 15, it was approximately Rs 20,900 crore.

For FY20, Bajaj Finance reported a 32 percent growth in consolidated profit at Rs 5,264 crore and 42 percent rise in net interest income at Rs 16,913 crore compared to previous year.

The stock fell 41 percent in past year, while it was down 53 percent year-to-date and 48 percent during March quarter.

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But brokerages feel it will be the first to recover once the lockdown ends and economy re-opens. Hence, they remained positive on the stock.

Morgan Stanley had an overweight rating on the stock, with a target price at Rs 2,740 while HSBC has a “buy” call on the stock with a target price at Rs 3,700 per share.

Morgan Stanley expects the NBFC to have above-industry return on equity (RoE) in FY21 and believes it should bounce back the fastest as conditions improve.

"Structural asset growth and RoE potential has been expanding, while valuations are also attractive at current levels," the global brokerage said.

HSBC feels the COVID-19 crisis may drive a marked change in spending patterns of consumers. "We may see 'in-house' spending being favoured against 'out-of-home' spending. Financing needs are set to rise as consumers and companies push for no-cost EMI," said the brokerage.

Growth moderation may be less in the medium term than feared by market, it added.