Bajaj Finance gains 4%, hits record high on strong December quarter results

The NBFC reported a strong 85 per cent YoY jump in consolidated net profit at Rs 2,125 crore, beating Street estimates.

Shares of Bajaj Finance hit a record high of Rs 8,043.50, up 4 per cent on the BSE in Wednesday’s intra-day trade in an otherwise weak market after the NBFC reported a strong 85 per cent year-on-year (YoY) jump in consolidated net profit at Rs 2,125 crore in the October-December quarter (Q3 of FY22), beating Street estimates.

The stock of non-banking finance company (NBFC) surpassed its previous high of Rs 8,020.20 touched on October 18, 2021. At 09:46 am, the stock was up 3 per cent at Rs 7,963, as compared to 0.65 per cent decline in the S&P BSE Sensex.

In Q3, Bajaj Finance’s profit was aided by a robust growth in net interest income (NII) and lower provisions. On a standalone basis, the lender reported a net profit of Rs 1,934 crore.

Consolidated NII jumped 40 per cent to Rs 6,000 crore in the reporting quarter, compared to Rs 4,296 crore in the corresponding period of last financial year. This was driven by healthy expansion in net interest margins and lower interest income reversal for the quarter. Gross non-performing assets (gross NPAs) improved by 72-basis points (bps) to 1.73 per cent at the end of the December quarter while net NPAs improved by 32 bps to 0.78 per cent.

The lender reported it’s highest ever assets under management (AUM) growth in the reporting quarter. AUM grew by Rs 14,700 crore in the third quarter, taking the total AUM to Rs 1.81 trillion, up 26 per cent YoY.

Bajaj Finance is a dominant player in the consumer finance space while it has also made a foray into various lending segments wherein housing has grown to a significant size.

Bajaj Finance’s share price has been largely steady in the past few months while it has jumped 64 per cent in the past year. Analysts at ICICI Securities believe since the fin-tech story is embedded in this business, valuations should stay at premium. 

The core business has got potential and is well on track to get transformed into an adaptable new age fin-tech, the brokerage firm said.

Q3FY22 was a strong quarter for Bajaj Finance with an all-round momentum across key business parameters. Customer acquisitions and new loans booked have reached pre-COVID levels and will soon breach historical highs in subsequent quarters, according to Motilal Oswal Financial Services.

The brokerage firm expects Bajaj Finance to be able to deliver a healthy AUM CAGR of around 25 per cent over the next two years. “We estimate Bajaj Finance to contain credit costs around 2.9 per cent in FY22E. Margin is likely to sustain on: lower cost of funds, reduced liquidity, and normalization in interest reversals, it said in result update.