Q4 earnings: Reduction in provisions, finance costs help Bajaj Finance tide over timid loan growth

Mumbai: Bajaj Finance’s quarterly earnings surged 42% helped by a fall in borrowing costs, provisions for defaults, and a rise in fee income. It is confident of delivering growth for the full year despite partial lockdowns halving loan originations in some segments in the first 10 days of the new fiscal year as it could accelerate disbursements in subsequent quarters.

The standalone net profit of the lender rose 30% to Rs. 1,160 crores, from Rs. 891 crores a year ago. The consolidated net profit for the March quarter, that includes its mortgage lending unit, rose to Rs 1 ,347 crore, from Rs 948 crore a year ago.

It retained dividend at Rs. 10 apiece. Its liquidity position was at Rs. 16,485 crore or 12.5% of its total borrowings, improving its ability to face market convulsions. .

"Barring a national lockdown, 3-4 large GDP contributing states going into simultaneous lockdown for 3-5 weeks and another moratorium on loan repayment, the company is confident of delivering its long term guidance metrics in fiscal ’22," the company told investors. "Having experienced the first wave, we believe that a disruption in first quarter could be reasonably mitigated in the balance 3 quarters."

Lenders who have just recovered from a loan moratorium last year due to Covid-19 triggered lockdown are now facing yet another stress as many states impose restrictions on movements crippling businesses. But Bajaj says its business is not showing much stress.

"Despite significant disruptions, the company remains open for business across geographies in line with local administration advisories," it said. "As a high frequency indicator, in the last 7-10 days, the company has continued to originate 50-55% of daily volumes in B2B business, 80-85% in B2C and SME businesses and 40-50% in mortgages."

Provisions on bad loans fell 37% to Rs 1231 crore in the quarter ended March 2021 from Rs 1954 crore last year while finance costs fell 14% to Rs 2196 crore from Rs 2547 crore in March 2020, results released by the company on the stock exchange showed. Cost of funds in the fourth quarter was 7.39%, down from 8.37% in the previous year.

The fall in provisions and other expenses allowed the company to report a profit even as total income fell 5% to Rs 6851 crore in March 2021 from Rs 7227 crore a year earlier.

Consolidated assets under management rose 4% to Rs 1.52 lakh crore from Rs 1.47 lakh crore a year ago. However, the total new loans booked during the quarter at 5.47 million were still lower than 6.03 million reported last year indicating the slow post pandemic recovery.

Net Interest Income (NII) dropped marginally to 4,659 crore as against Rs 4,684 crore a year ago. The company reversed interest income Rs 298 crore during the quarter compared to Rs 122 crore reversed in the quarter ended March 2020.

Gross bad loans edged up to 1.79% from 1.61% a year ago. The company has provisioning coverage ratio of 58% on stage 3 assets and 181 basis points on stage 1 and 2 assets as of 31 March 2021.