Bajaj Finance slumps after business update

Bajaj Finance tumbled 4.28% to Rs 5737 after the company estimates that its gross and net non-performing assets could be higher in Q1 and Q2 of FY22.

The company said that it had a good Q4 with most financial indicators normalising to pre-COVID levels. The company ended FY2021 with GNPA of 1.8% and NNPA of 0.75%, close to pre-COVID levels. The company remained prudent on provisioning and carried an additional provision of Rs 840 crore as of 31 March 2021.

However, given the severity of the second wave and the consequent lockdown across most of India for last 35 days, the NBFC offered an update of its estimated impact on the company's financials in FY2022.

The company said it remains open for business across all categories aided by stable EMI bounce rates in Q1 FY22.

With respect to business operations, Bajaj Finance said that B2B and auto finance businesses were most affected due to strict lockdowns in majority of states. These businesses delivered 70% of their planned volumes in April 2021 as multiple states started imposing lockdowns from mid-April. Their volumes dropped to 40% in May 2021. Other lines of businesses were less impacted in April and delivered 85% of planned disbursements.

The company estimates an impact of Rs 4,000-5,000 crore to its AUM growth plan for FY2022 on account of the disruption caused by the second wave. However, Q1 FY2022 will see higher impact on AUM due to lower volumes in B2B businesses.

With respect to its portfolio, the company said that the second wave has caused a marginal increase in EMI bounce rates in Q1 FY22 over Q4 FY21. Average EMI bounce rates in Q1 FY22 were approximately 1.08X of Q4 FY21.

Forward flows across overdue positions were higher due to constraints on collections amidst strict lockdowns across most parts of India. As a result, the Company estimates its GNPA and NNPA in Q1 and Q2 to be higher.

The company estimates an incremental credit cost of Rs 1,100-1,300 crore versus planned credit cost in FY2022 on account of disruption caused by the second wave.

The company follows ECL methodology of provisioning and accordingly majority of incremental credit cost will get accounted in Q1 FY22.

"Most states have indicated continued lockdown till 7th or 15th June. With expected reopening, June should be much better," the company said in a statement.

Bajaj Finance is engaged in lending and allied activities. It focuses on consumer lending, small and medium-sized enterprises (SME) lending, commercial lending, rural lending, fixed deposits and value-added services.

The NBFC's consolidated net profit jumped 42% to Rs 1,347 crore on 5% decline in total income to Rs 6,855 crore in Q4 FY21 over Q4 FY20.

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