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    Bajaj Finance Q1 takeaways: Moratorium drop comforts experts, management; provision provides further cushion

    Synopsis

    Moratorium levels coming down, however, does not mean there will not be a spike in bad loans once the moratorium period is over.

    The company in its June quarter earnings presentation said only 15.7 per cent of its assets are under moratorium as of June 30, compared to 27 per cent at the end of April.

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    NEW DELHI: In a quarter that was disrupted by nationwide lockdown and moratorium on loans, Bajaj Finance seems to be recovering quite well, thus proving stock market punters right who rallied behind the counter in recent weeks.

    Shares of Bajaj Finance have spiked about 52 per cent from March lows. However, the stock is still down 21 per cent year-to-date.

    The company in its June quarter earnings presentation said only 15.7 per cent of its assets are under moratorium as of June 30, compared to 27 per cent at the end of April. At the same time, most of its offices are up and running across the country.

    The company, which focussed on capital preservation, liquidity management, business scenario planning, opex management and collections capacity augmentation during the quarter said it was seeing reduction in bounce rate coupled with better collection efficiency.

    “If you hear the interviews of top banks and NBFC management they look quite confident and quite sure that moratorium is not going to impact the performance. If these are the numbers that we are having for the moratorium period, I think the numbers should even look much better from the second-third quarter onwards. So it was only a scare or a fear in the form of moratorium that a lot of people were shying away from banks and NBFCs,” said Gaurang Shah of Geojit Financials.

    Moratorium levels coming down, however, does not mean there will not be a spike in bad loans once the moratorium period is over. Consequently, in order to soften those jolts, the company increased its provisions by Rs 1,450 crore, taking the overall contingency provision for Covid-19 to Rs 2,350 crore.

    “The contingency provision for Covid-19 is now at 10.8 per cent of consolidated moratorium book. This contingency provision together with existing expected credit loss provision of Rs 623 crore provides an overall provisioning coverage of 13.7 per cent on the consolidated moratorium book. Additionally, as a matter of prudence, the company has also reversed Rs 220 crore of interest income from the interest capitalised during the moratorium period,” Bajaj Finance said in a statement.

    The bottomline of the company at Rs 962.32 crore for the quarter was in-line with analysts' estimates. On the other hand, topline beat the projections of Gaurang Shah.

    “Consolidated revenue is a little bit better than our estimates. Our estimates were somewhere close to about Rs 5,500 to Rs 6,000 crore and that has come relatively higher, somewhere close to plus Rs 6,600 crore,” said Shah.

    The company continues to have a robust capital position. It said the Capital Adequacy Ratio (CRAR) stood at 26.40 per cent as at June 30.

    “It remains one of the best capitalised large NBFCs in India. The company's liquidity position remains very strong with an overall liquidity surplus of approximately Rs 17,700 crore on consolidated basis. The company's liquidity surplus as of July 20 was approximately Rs 20,590 crore,” it said.

    Lockdown, however, put pressure on the asset under management of the company (AUM). AUM growth moderated to 7 per cent YoY to Rs 1,38,055 crore in Q1FY21.

    The company added that if the bounce rate and collection efficiency remains as it was during the June quarter, it will be comfortable taking a stronger growth stance for the second quarter.

    “Bajaj finance reported a mixed set of numbers considering lockdown-led lower retail and business activity. AUM grew 7% YoY, however declined 6% QoQ. Spike in provision of almost 2x of Q1FY20 impacted profitability. On the asset quality front, lower slippages and write-off led to a decline in GNPA from 1.6% in Q1FY20 to 1.4% in Q1FY21,” said Jaikishan Parmar, Sr. Equity Research Analyst, Angel Broking.
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    1 Comment on this Story

    Sharad Tripathi118 days ago
    How u can justify the stock price, as bajaj finance not funded any loan in any electronic gadgets
    The Economic Times