You are here: Home » Markets » News
Business Standard

Bajaj Finance declines over 5% as Q2 business update disappoints Street

New loans declined sharply to 3.6 million from 6.5 million year-on-year and 5 million quarter-on-quarter.

Bajaj Finance | Buzzing stocks | Markets

SI Reporter  |  Mumbai 

growth, profit, loss, revenue, share, value, stock, economy, returns, investment, gdp
The company acquired 1.2 million new customers in the quarter, compared with 1.9 million YoY.

Shares of slipped 5.4 per cent to Rs 3,286 on the BSE in the morning deals on Wednesday after the non-bank finance company (NBFC) reported weak July-September quarter (Q2FY21) business figures. In the past one month, the stock has underperformed the market by falling 5 per cent, as compared to 3 per cent rise in the S&P BSE Sensex.

The company's assets under management (AUM) grew 13 per cent year on year (YoY) at approximately Rs 1.37 trillion as of Q2FY21 as compared to Rs 1.36 trillion as on Q2FY20. New loans declined sharply to 3.6 million from 6.5 million YoY and 5 million quarter-on-quarter (QoQ).

Business volumes in the quarter were at 50–60 per cent of YoY levels in terms of number of loans disbursed and number of new customers acquired. The company acquired 1.2 million new customers in the quarter (compared with 1.9 million YoY), taking the overall customer base to 44.1 million.

"Growth slowdown is sharper than expected despite unlock. seems to have lost market share. Collections focus, cautious disbursements may have impacted growth. Higher credit cost guidance may keep earnings muted," ICICI Securities said in a note.

Motilal Oswal Financial Services, on the other hand, said the sharp decline in disbursement volumes has come as a bit of a disappointment (in the context of healthy trends witnessed by peers such as HDFC). Nevertheless, they believe it is a good strategy to curtail disbursements in this uncertain environment.

Hence, the brokerage firm has cut FY21 AUM growth estimate to 6 per cent from 12 per cent earlier. "Margins are likely to be stable as the drag due to excess liquidity is offset by lower cost of funds. Given the collection efficiency performance across various asset classes in the industry, we keep our credit cost estimate of ~4.5 per cent for FY21 largely unchanged," it said.

Bajaj Finance's decision to accelerate provisioning in Q2 further dented sentiment. "The Company will continue to accelerate its provisioning for Covid-19 in Q2FY21 as well to further strengthen its balance sheet... Consolidated liquidity surplus stood at approximately Rs 22,300 crore as of 30 September 2020," it said in its statement.

At 9:45 am, the stock was trading 4 per cent lower at Rs 3,342 per share, as against 0.4 per cent rise in the benchmark S&P BSE Sensex.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, October 07 2020. 09:27 IST