Motilal Oswal's research report on Bajaj Finance
Bajaj Finance (BAF)’s 1QFY22 PAT was up 4% YoY / down 26% QoQ to ~INR10b (27% miss). While NII at INR37b (5% miss) was up 12% YoY, opex was largely in-line. Provisions came in at INR17.5b v/s our estimate of INR15b. The company aggressively wrote off ~INR9.2b worth of loans and kept COVID overlay provisions at INR4.8b, leading to high provisions. The GNPL ratio increased from 1.8% to 2.96% QoQ. BAF wrote off ~INR9.2b (60bp of AUM). PCR declined to 51% (down ~710bp QoQ) on GS3 and 174bps on GS1&2. BAF utilized COVID-related overlay of INR3.6b in 1QFY22, with the COVID management overlay declining to INR4.8b. Net slippage was high at ~INR30b (2% of AUM) as the company did not restructure a large number of loans in one-time restructuring (OTR) 2.0.
Outlook
Given the strong recovery in Jul’21 and the healthy progress made in the digital transformation program (including wallets/payments), we reiterate Buy, with Target Price of INR6,750 (7x 1HFY24 BV).
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