Bajaj Finance Q3 Results Review - Stable Margin, Lower Cost Aid Profitability: Nirmal Bang

Nirmal Bang Report

Bajaj Finance Ltd. reported net profit growth of 40% YoY, which was in line with our estimate, led by healthy operating performance and lower provisions. Assets under management momentum slowed marginally, coming in at 5.7% QoQ (27% YoY) as the company prioritized margins over growth.

Customer acquisition was at a record high level of 3.14 million in Q3 FY23 and the company is on track to acquire more than 11 million customers for FY23. Net interest income growth came in at 25% YoY, largely in-line with our estimate, driven by AUM growth.

Net interest margin compressed on YoY basis. Moreover, adjusting for the discontinued IPO financing business last year, NIM would have been largely flat.

Core fee income remained healthy at 19% YoY, leading to net revenue growth of 24% YoY. Opex increased by 24% YoY and consequently cost/income ratio was largely flat on YoY basis at 34.7%.

Bajaj Finance's management indicated that most of the investment has been done and as operating leverage kicks in, the cost/income ratio is likely to decline going forward. Operating profit increased by 23.8% YoY, which was 3% above our estimate.

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