Bajaj Finance gains 7% post September-quarter results

The stock was up 7% to Rs 2,230 on the BSE in early morning trade on Wednesday, recovered 11% from its Tuesday's low of Rs 2,001 post September-quarter results.

Shares of Bajaj Finance were up 7% at Rs 2,230 on the BSE on Wednesday in early morning trade, after the company reported strong earnings in the September-quarter and the management remains confident of robust growth in the coming quarters. The stock has recovered 11% from its Tuesday’s low of Rs 2,001 after the announcements of results.

The non-banking finance company has reported a better than expected 55% year-on-year (YoY) growth in its consolidated net profit at Rs 9.23 billion in the September quarter (Q2FY19). The company’s net interest income (NII) grew 42% YoY at Rs 27.29 billion during the quarter. Analysts on an average had expected a profit of Rs 8.17 billion on NII of Rs 27 billion for the quarter.

Assets under Management (AUM) rose 38% to Rs 1002.17 billion from Rs 726.69 billion in the corresponding quarter last year. On a standalone basis, the company witnessed some surge in non-performing assets (NPAs) in rural and mortgage businesses; however, overall gross NPA of 1.68% (standalone) and 1.49% (consolidated) remain at comfortable levels.

“Although management remained fairly optimistic on growth sustainability for the consumer/mortgage businesses, considering the recent liquidity tightening scenario, certain business segments, such as LAP/developer finance/loan against shares, may witness selective slow down to avoid any probable risk of default,” analysts at Emkay Global Financial Services said in a result update.

“Management clarified about its Rs 2.25 billion exposure to IL&FS Group (under LAP) at a commercially operational project in the GIFT City in Gujarat which is 100% recoverable. Yet, management has prudently provided for 10% of the exposure, considering the probable IRR losses. We may also see some surge in NPAs from its LAP/developer book,” the brokerage firm said will maintain ‘buy’ rating on the stock and target price of Rs 2,690 per share.

“Our assessment of the situation is that niche asset franchises like 2W, gold loans, consumer loans, MSME loans, and microfinance are better-placed due to the attractive economics of the underlying asset, the inability of banks to compete, and the ability to pass on higher borrowing costs. Under this framework, Bajaj Finance will have minimal impact,” according to analysts at Antique Stock Broking.

“While we remain fully cognizant of volatility in near term, harping too much on it doesn't do justice to a unique business model built by BAF. Such volatile times can give great entry points. We expect 25% loan book CAGR, 32% earnings CAGR and RoAs at 3.0%,” the brokerage firm said result review. It maintains ‘hold’ rating on the stock with target price of Rs 1,970.

At 09:50 am; Bajaj Finance was trading 5% higher at Rs 2,193 on the BSE, as compared to 0.67% rise in the S&P BSE Sensex. A combined 2.25 million equity shares changed hands on the counter on the NSE and BSE so far.