Bajaj Finance gains 10% as AUMs under moratorium decline in June

The NBFC's assets under management (AUM) under moratorium declined from 27 per cent, at the end of April 2020, to about 15.5 per cent at the end of June 2020.

Shares of Bajaj Finance zoomed up to 10 per cent to Rs 3,419.95 in the intra-day deals on the BSE on Tuesday after the non-bank finance company's (NBFC's) assets under management (AUM) under moratorium declined from 27 per cent, at the end of April 2020, to about 15.5 per cent at the end of June 2020. 

At 3:00 pm, the stock was quoting at Rs 3,372.4 apiece, up 8.5 per cent, on the BSE. In comparison, the S&P BSE Sensex was up 125 points, or 0.34 per cent, at 36,612.56 level. A combined 22.48 million shares had changed hands on the BSE and NSE till the time of writing of this report. It's peer firm, Bajaj Finserv, too, was trading 5 per cent higher at Rs 6,626.25 apiece after hitting an intra-day high of Rs 6,630.

"The biggest surprise was reflected in the moratorium book. AUM share under moratorium declined to 15.5 per cent in June from 27 per cent in April. On an absolute basis, the moratorium book declined 40–45 per cent to Rs 21,000 crore. The development is a welcome surprise, owing to which we now factor lower stress addition. Accordingly, we cut our FY21/FY22 credit cost by 50bp/25bp to 3.9 per cent/3.1 per cent," said analysts at Motilal Oswal Financial Services.

In a business update to the exchanges post market hours, the NBFC said its customer franchise improved to 43 milllion at the end of June quarter of FY21 as compared to 36.9 million as of 30 June, 2019. 

"AUMs stood at approximately Rs 138,000 crore at the end of Q1FY21 as compared to Rs 128,898 crore in the year-ago quarter. That apart, deposit book stood at approximately Rs 20,000 crore as of 30 June, 2020 compared to Rs 15,084 crore as of 30 June, 2019," it said in a statement.

New loans, however, grew at a slower pace due to Covid-19 led lockdown and business disruption. New loans booked during Q1FY21 were 1.7 million as compared to 7.3 million in Q1FY20. 

"Better performance in asset quality would result in big delta to earnings via lower credit cost / margin compression. While QoQ decline in AUM is in line with our expectation, a pickup in economic activities should lead to better AUM growth going forward. On the other hand, Bajaj Finance is likely to benefit from lower cost of funds from bank loans as well as market borrowings," the brokerage noted. 

ICICI Securities, meanwhile, notes that retail deposit base is almost doubling every year (Rs 13,100 crore in FY20 from Rs3400 crore in FY18) and now constitutes over 60 per cent of the overall deposits. 70-75 per cent of deposits are of more than 1-year tenure and granularity is reflected in top-20 retail depositors constituting 7.3 per cent of retail deposits.

"The Company may consider additional acce lerated provisioning for Covid-19 in Q1FY21 as well to further strengthen its balance sheet," it said. The consumer goods financier had provided Rs 900 crore as contingency provision in the quarter ended March towards Covid-19.

The company said it continues to remain well capitalized with capital adequacy ratio (CRAR) of approximately 26.4 per cent as of June 30. Its consolidated liquidity surplus was around Rs 17,600 crore as of June 30.