Bajaj Finserv — the holding company of Bajaj Finance, Bajaj Allianz General Insurance Company (BAGIC), and Bajaj Allianz Life Insurance Company (BALIC) — on Thursday reported a 40 per cent year-on-year increase in income to Rs 12,272 crore in the June quarter (Q1).
The company’s net profit at Rs 845 crore, however, increased by only 2 per cent year on year as a few one-offs provisioning expenses in BAGIC and BALIC impacted the overall numbers. Bajaj Finserv’s stock shed 3.9 per cent on Thursday to close at Rs 6,783 apiece on the BSE.
BAGIC’s underwriting result was affected by losses from cyclone Fani, which hit India’s east coast during the June quarter. The life and general insurance businesses were also hit by impairment costs on account of default by Dewan Housing Finance (DHFL) on a part of commercial paper dues.
Therefore, while BAGIC and BALIC recorded premium growth of 17 per cent and 35 per cent to Rs 2,843 crore and Rs 1,837 crore, respectively, their profits were adversely impacted by provision for impairment on their holdings of DHFL’s fixed income securities.
Consequently, BAGIC’s profit after tax fell by 38.6 per cent to Rs 210 crore as against Rs 291 crore a year ago. It recorded an impairment provision of Rs 76 crore representing 60 per cent of the outstanding amount in respect of fixed income investments in DHFL. Hit by Fani cyclone, claim ratio shot up to 72.8 per cent in Q1 versus 65.7 per cent last year. However, combined ratio rose from 90.2 per cent last year to 103.1 per cent in Q1FY20 and solvency ratio as on June 30 stood at 249 per cent, well above the minimum regulatory requirement of 150 per cent. The impact of impairment on account of DHFL’s instrument was more pronounced in BALIC. Net profit fell over 57 per cent to Rs 62 crore as against Rs 146 crore a year ago as the life insurer set aside Rs 126 crore towards DHFL’s fixed income instruments. Solvency ratio, though, remained strong at a 790 per cent as on June 30, well above the regulatory requirement of 150 per cent. BALIC’s total investments in Q1 rose by 9 per cent year on year to Rs 57,860 crore.
Comparatively, Bajaj Finance’s numbers were strong, though the near-term demand outlook didn’t seem encouraging.
Total income grew by 47 per cent year on year to Rs 5,808 crore in Q1, while net profit expanded to Rs 1,195 crore, up 43 per cent year on year. Assets under management (AUM) stood at Rs 128,898 crore in Q1, posting year-on-year growth of 41 per cent. This includes Rs 21,745 crore of its housing finance business – Bajaj Housing Finance. However, the quarter saw a huge spike in provisioning expenses, which rose by 70 per cent to Rs 551 crore compared to last year. Gross non-performing assets (NPA) ratio also increased from 1.39 per cent a year ago to 1.6 per cent in Q1. Bajaj Finance’s management has turned cautious disbursing fresh to segments such as digital product financing, small and medium enterprises (SME) loans and consumer durable loans in select regions.