Bajaj Finance consolidated Q1 pre-tax profit down 29% on Covid provisioning

Net profit down 19 per cent to Rs 962 crore from Rs 1,195 crore in Q1FY20

Bajaj Finance reported a 29 per cent decline in its consolidated pre-tax profit for Q1FY21 due to additional provisioning for covid-related uncertainties. Its pre-tax profit for Q1FY21 stood at Rs 1,310 crore compared to Rs 1,851 crore in Q1FY20. Net profit of the lender was down 19 per cent to Rs 962 crore versus Rs 1,195 crore in Q1FY20.

On a standalone basis, the pre-tax profit of the lender was down 32 per cent to Rs 1,184 crore and net profit was 23 per cent to Rs 870 crore.

The lender has reversed interest income of Rs 220 crore from the interest capitalised during the moratorium period, thereby further bringing down its profits.

It has made an additional provisioning to the tune of Rs 1,450 crore in the June quarter taking the contingent expected credit loss provision due to covid to Rs 2,350 crore at the end of June quarter. The contingency provisioning for Covid-19 is now at 10.8 per cent of the moratorium book. Total provisions, along with covid provisions of the lender has rose to Rs 2,973 crore at the end of June as opposed to Rs 1,870 crore at the end of April, thereby resulting in a provision coverage of 13.7 per cent of the moratorium book.

Moratorium book of the lender reduced to Rs 21,705 crore, which is 15.7 per cent of the assets under management (AUM) of the lender at the end of June quarter from Rs 38,599 crore (27.1  per cent of AUM) at the end of April due to reduction in bounce rate and improved collection efficiencies.

Net interest income of the lender on a consolidated basis rose 12 per cent to Rs 4,152 crore in Q1FY21 compared to Rs 3,695 crore in Q1FY20, while total income rose 14 per cent to Rs 6,650 crore compared to Rs 5,808 crore. AUM of the lender posted a seven per cent growth to Rs 1.38 trillion in Q1FY21. New loans booked by the lender on consolidated basis declined 76 per cent to 1.75 million in Q1FY21 from 7.27 million in Q1FY20.

The lender said in Q1, its focus was more on capital preservation, liquidity management, business scenario planning, opex management, collections capacity augmentation, customer propositions, business transformation framework and calibrated restart of business as the country started to reopen.

Currently, 85 per cent of the lender’s business is functioning. It estimates an AUM growth of 10-12 per cent in FY21 if the government does not enforce a second lockdown. According to its estimates, more than 75 cities that it operates in will be back to pre-covid volumes by October, a further 40-75 cities by November, another 10-40 cities by January and the top-10 cities will be back to pre-covid volumes by March.

The lender's gross non-performing assets (NPA) stood at 1.4 per cent in Q1FY21 while net NPA stood at 0.5 per cent with a provision coverage ratio of 65 per cent. Gross NPA reduced by 21 bps on a sequential basis and 20 bps year on year; NNPA reduced by 15 bps on a sequential basis and 14 bps year on year.

The lender said it has acquired 530,000 new customers, taking its total consumer base to 42.95 million at the end of Q1FY21, up 16 per cent year-on-year. Its capital adequacy ratio (CRAR) at the end of Q1FY21 stood at 26.4 per cent, with tier-1 capital at 22 per cent.

It expects credit cost for FY21 to increase by 100-110 per cent to Rs 6,000-6,300 crore, due to covid-19. However, the lender said it has have significantly augmented collection infrastructure to mitigate credit costs. It has added 2,800 collections officers and some 16,000 agency staff to manage rising bounce volumes caused by Covid-19.

The lender's deposit base grew 33 per cent year-on-year to Rs 20,061 crore in Q1FY21. It reduced rates on its deposits twice in Q1 aggregating to 65 bps.