Bajaj Finance could report double-digit growth in Q4 earnings

Bajaj Finance on May 19 is expected to report double-digit growth across all earnings parameters for the quarter ended March 2020. There could be an increase in provisions too.

Profit growth is likely to be in the range of 12-45 percent while the net interest income as well as pre-provision operating profit (PPoP) could grow more than 35 percent each, with healthy AUM growth YoY.

"NII growth is expected to be at 38 percent YoY to be driven by high AUM growth. AUM growth is expected to be at 27 percent," said Narnolia Financial Services which expects profit and PPoP growth at 30 percent and 37 percent respectively.

Kotak Institutional Equities also expects strong consumer demand to drive 35 percent YoY AUM growth, similar to Q3FY20. "Profit, NII and PPoP could increase 45 percent, 37 percent and 40 percent YoY respectively for the quarter."

Bajaj Finance's consolidated liquidity surplus stood at Rs 15,800 crore as of March 2020. Its liquidity position remains very strong. CP borrowing stood at less the Rs 2,000 crore with maturity over next 3 months. The undrawn line of credit stands at Rs 2,500 crore," the brokerage added.

The NBFC could see margin contraction on sequential basis.

"There might be a slight drag on margins (down 30 bps) QoQ, since it has borrowed more than required to support high growth because funds were available at an attractive cost," said Narnolia.

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Kotak feels NIM will likely contract 30 bps QoQ due to lower share of high-yield consumer loans.

"While cost-to-income ratio will likely remain stable at 34 percent YoY, we are building in higher credit costs (2.1 percent, up 60 bps YoY) to reflect provisions in its loan against securities (LAS) book," the brokerage said.