Bajaj Finance surges 5% on record quarterly profit

Shares of Bajaj Finance surged 5 per cent to Rs 6,020 on the BSE in Monday’s intra-day trade in an otherwise volatile market after the consumer financier reported its highest-ever consolidated quarterly profit at Rs 2,973 crore in the October-December quarter (Q3) of FY23, up 40 per cent year on year (YoY). The performance was aided by a healthy rise in net interest income (NII) and drop in provisions and contingencies.

At 10:20 AM; Bajaj Finance quoted 4.5 per cent higher at Rs 6,016, as compared to 0.01 per cent decline in the S&P BSE Sensex. However, the stock has underperformed in recent past. In past three months, the stock has declined 14 per cent, as against less than 1 per cent fall in the benchmark index. Further, in past six months, it slipped 17 per cent, as compared to 3 per cent rise in the Sensex.

In Q3FY23, Bajaj Finance’s NII rose by 24 per cent YoY to Rs 7,435 crore, as it booked about 7.84 million loans, its highest-ever in a single quarter, up 5 per cent YoY. Further, it reported its highest-ever customer addition of 3.14 million in the quarter, taking its customer base to 66.05 million as of December, 2022.

Given strong momentum in the first three quarters, the company now estimates new customer addition at 11 million in FY23.

Bajaj Finance’s asset quality exhibited improvement, with gross non-performing assets (GNPAs) at the end of Q3FY23 at 1.14 per cent compared to 1.17 per cent in the previous quarter. Similarly, net NPAs were down to 0.41 per cent, compared to 0.44 per cent in the previous quarter.

The impact of rate hikes on cost of funds is more gradual than anticipated. However our multiple stands reduced, as competition intensity remains high especially in consumer finance and mortgage segment along with company’s plan to enter into risky microfinance business. However re-rating can happen if company executes long range strategy framework and increase stickiness of new franchise customers, analysts at Prabhudas Lilladher said in the result update.

Management categorically stated that it has no plans/ aspirations now to convert into a bank and that there are no discussions about any management change. However, we remain watchful of developments in Bajaj Finance’s payment offerings and its foray into new product lines like MFI, Auto, CV and Tractors, Motilal Oswal Financial Services said.

Customer acquisitions and the new loan trajectory have been strong. The momentum will only get stronger ahead, with the digital ecosystem - app, web platform and full-stack payment offerings - in place. The brokerage firm sees NIM compression in FY24 as levers on borrowing costs have largely played out and the competitive landscape will limit any significant yield expansion.

“Key factors to watch out for in FY24 evolution of its payments landscape and traction there in; velocity of the consumer app and the adoption of the web platform; build-out of new product segments like CV, Tractor, MFI that Bajaj Finance plans to launch in the next fiscal,” the brokerage firm said in its result update.