NBFC major Bajaj Finance on May 19 announced a profit after tax of Rs 948 crore for the quarter ended March 2020, a 19.4 percent decline compared to numbers of the corresponding period last fiscal.
The profit was impacted by higher provisions but supported by lower tax as the company adopted a reduced rate of 25.17 percent for computation of income tax.
Loan losses and provisions (expected credit loss) for the quarter increased to Rs 1,954 crore 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, the profit for the quarter was up by 38 percent at Rs 1,622 crore, it added.
The company's net interest income (NII), the difference between interest earned and interest expended, increased sharply by 38 percent year-on-year to Rs 4,684 crore in the quarter.
New loans booked in the period 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 told the BSE.
"Due to COVID-19 pandemic and the consequent lockdown, the company lost 10 productive days in Q4 FY20 resulting in lower acquisition of nearly 1.0 million loan accounts and lower AUM of approximately Rs 4,500
crore," it said.
Consolidated assets under management grew by 27 percent to Rs 1,47,153 crore compared to the year-ago period.
Gross non-performing assets (NPA) for the quarter remained flat at 1.61 percent on a sequential basis, while net NPA declined 5 bps to 0.65 percent compared to 0.70 percent in the 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," the company said.
The provisioning coverage ratio improved to 60 percent at the end of the March quarter from 57 percent in the December quarter.
The company said its liquidity position remained very strong, with overall surplus of approximately Rs 15,725 crore as of March 2020 on a consolidated basis and as of May 15, it was around Rs 20,900 crore.
For FY20, Bajaj Finance reported a 32 percent growth in consolidated profit at Rs 5,264 crore and a 42 percent rise in NII at Rs 16,913 crore compared to the previous year.
The stock has fallen 41 percent in a year, while it was down 53 percent year-to-date and 48 percent during the March quarter.
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Brokerages, however, say the stock will be the first to recover once the lockdown ends and economy reopens.
Morgan Stanley has an overweight rating on the stock, with a target price of Rs 2,740. HSBC has a “buy” call, with the target at Rs 3,700 per share.
Morgan Stanley expects the NBFC to have an above-industry return on equity (RoE) in FY21 and say it should bounce back the fastest as conditions improve.
"Structural asset growth and RoE potential have been expanding, while valuations are also attractive at current levels," the 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 the market, it added.
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