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Bajaj Finance's December quarter performance clearly stood out. On the back of festive demand and strong growth in small and medium-sized enterprises (SME) financing, overall assets under management (AUM) grew 37.2 per cent to Rs 30,822 crore. Consumer finance (38 per cent of AUMs) grew 32 per cent over a year, while SME lending (55 per cent of AUM) was up 46 per cent. The strong momentum in these segments eclipsed the weakness in the relatively smaller commercial lending segment, which contracted seven per cent. Key segments such as consumer durables, personal loans, business loans and home loans posted buoyant growth of 49 per cent to 74 per cent, due to strong festive demand in October.
Asset quality continued to be healthy, with the gross non-performing assets (NPA) ratio at 1.5 per cent. The management remains confident of maintaining quality.
Among segments that held back growth are two- and three-wheelers. Loan against property (LAP), 25 per cent of AUM, although good, grew at a relatively lower rate of 28 per cent. The company plans to bring differentiation in this segment and expects pick-up only in the September quarter.
Net profit at Rs 258 crore, up 32.9 per cent over a year, was 10.4 per cent ahead of the Bloomberg consensus expectation of Rs 234 crore.
The scrip hit an all-time intra-day high of Rs 4,130.95 on Wednesday, before closing at Rs 3,766, a gain of 8.2 per cent. It now trades at 3.3 times the FY16 estimated book value, double its historical average one-year forward price/book of about 1.5 times. Current valuation levels, however, will be difficult to sustain if business growth moderates, a possibility.
While October saw strong business, the other two months of the quarter saw a weakness in demand. The management, too, sounds cautious.
Rajeev Jain, chief executive of Bajaj Finance, says, “While December was our strongest quarter this financial year, I don’t think demand momentum has gained a foothold at the discretionary level. It is very difficult to predict the outlook for FY16. If we have a growth-oriented Union Budget and meaningful rate cuts, we will deliver a strong FY16.” For FY15, though, he expects earnings growth to be between 21 and 24 per cent and a balance sheet growth of 35-37 per cent.
The company is carving out strategy for online and e-commerce. Rural lending and mortgages are other focus areas, all of which could help sustain growth rates in the long run.
