JM Financial net profit drops 26.5% to Rs 93 cr on additional provisioning

JM Financial Group on Thursday reported a 26.5 per cent decline in its consolidated net profit to Rs 93.61 crore for the June 2020 quarter, impacted by coronavirus-driven disruptions in its businesses as well as higher additional provisions.

The company had posted a net profit of Rs 127.29 crore in the corresponding quarter of the previous financial year, according to a regulatory filing.

The nationwide lockdown has adversely impacted its revenue, which declined 19.32 per cent to Rs 691.11 crore in the reporting quarter, which, for most businesses, was a washout.

The profit was hit as the company has made an enhanced provision of Rs 66 crore towards the pandemic in the quarter.

The lockdown resulted in loan book coming down by almost a third to Rs 10,833 crore in June 2020 from Rs 13,926 crore in June 2019, the company said.

While gross non-performing assets (NPAs) doubled to 1.80 per cent from 0.90 per cent, net NPAs increased from 0.80 per cent to 1.22 per cent in the reporting quarter. However, the special mention account-2 (SMA2) numbers improved to 1.82 per cent of the portfolio from 2.10 per cent. But, it did not disclose the percentage of its borrowers who have opted for the moratorium.

"We have made additional gross provisions of Rs 66 crore on account of the uncertainties around the pandemic for the quarter, taking the total provisions to Rs 241 crore on account of the pandemic," said Vishal Kampani, managing director of JM Financial Group.

Many companies, especially those in the financial services space, have been making higher provisions to buffer themselves against the pandemic because such accounting gives them higher tax benefits. After all, additional provisioning is not a cash loss but a buffer which, on write-back, will boost the bottomline.

Kampani said that despite the pandemic headwinds, the company is maintaining higher liquidity buffers and healthy leverage ratios. Cash and cash equivalent stood at Rs 3,394 crore with a net debt-equity ratio of 0.79 as of the June quarter.

Its wealth management business assets rose to Rs 47,579 crore from Rs 43,038 crore in June 2019 and Rs 44,883 crore in March 2020.

Its asset reconstruction business acquired outstanding dues of Rs 60,363 crore at a gross consideration of Rs 17,069 crore, he said, without disclosing how much was the net addition in the quarter.

While security receipts worth Rs 48 crore were redeemed in the quarter, outstanding security receipts marginally declined to Rs 11,441 crore from Rs 11,489 crore in March 2020.

Wholesale mortgage lending book, comprising loans of JM Financial Credit Solutions and JM Financial Home Loans, stood at Rs 7,428 crore.

Consolidated loan book stood at Rs 10,830 crore, the distressed credit business assets at Rs 11,440 crore, wealth management assets at Rs 47,580 crore and mutual fund assets at Rs 4,050 crore.

Meanwhile, Kampani also announced the appointment of P S Jayakumar, the first private sector banker to become the managing director and chief executive of state-run Bank of Baroda, as the company's independent director.

JM Financial's shares shed 2.5 per cent at Rs 77.20 on the BSE, while the Sensex lost 0.88 per cent.