Bajaj Finance Q2 Results: Profit Rises 13% Led By NII And AUM Growth, Meets Estimates

Bajaj Finance's Ltd.'s profit for the second quarter rose 13% on a yearly basis to Rs 4,014 crore, led by the healthy growth in net interest income and assets under management. The profit after tax was in line with Bloomberg's estimates of Rs 4,118 crore.

Net interest income of the non-banking financier rose 23% on year to Rs 8,838 crore, and AUM clocked a growth of 29% on year to Rs 3.73 lakh crore.

However, rise in provisions and deterioration in asset quality weighed on the non-bank lender's performance. Loan losses and provisions for the reporting quarter rose sharply by 77% on year to Rs 1,909 crore. This was because of an increase in net stage 2 and 3 assets of Rs 542 crore, which was across all retail and small and medium enterprises, according to the investor presentation.

Asset quality of Bajaj Finance worsened with the gross non-performing assets ratio rising to 1.06%, against 0.86% a quarter ago and 0.91% a year ago. Net NPA also rose to 0.46% as compared to 0.38% a quarter ago and 0.31% a year ago. The provisioning coverage ratio on stage 3 assets was 57%.

In the post-earnings conference call, the management said that it is cautiously optimistic on asset quality as of now and remains confident that asset quality should improve in the coming quarters.

On a consolidated basis, AUM of car loans recorded 128% on-year growth to Rs 9,906 crore, followed by gold loans at 74% to Rs 6,363 crore.

In terms of outstanding numbers, mortgages contributed the most to the overall AUM to Rs 1.15 lakh crore, up 27% on year and urban B2C loans grew 33% on year to Rs 77,239 crore. SME lending was up 10% on year to Rs 44,382 crore and two and three-wheeler finance at 15% on year to Rs 18,960 crore. Rural B2C loans grew 10% on year to Rs 18,815 crore.

The management expects to grow its AUM by 27-28% on year for 2024-25 (Apr-Mar) even as it sees stress in rural B2C space and is planning to wind down its two-wheeler financing operations. This optimism has come as the company's new lines of businesses have started contributing 2-3% of AUM growth.

During Jul-Sep, deposits of the non-bank lender rose 21% on year to Rs 66,131 crore.

While the cost of funds rose by 3 basis points on the quarter to 7.97%, Bajaj Finance expects it to have peaked at the end of the September quarter.

The margins of the non-bank lender have stabilised at the end of the September quarter.

"We forecast that on a 12-month basis, a 25 basis point drop in repo rate should clearly lead to a 10-12 basis point improvement in NIMs. However, we would like to use the improvement in NIMs to our advantage to grow the secured segment," Managing Director Rajeev Jain said.

The non-banking finance company's total income stood at Rs 17,095 crore in the July-September period, an increase of 28% from the year-ago period, according to its stock exchange filing.

The company also reported an exceptional gain of 2,544 crore in the half-year standalone balance sheet on account of the Bajaj Housing stake sale.