Consumer durable lender Bajaj Finance on Wednesday reported a 52% year-on-year (y-o-y) rise in consolidated net profit of ₹1,614.11 crore, its highest-ever quarterly profit, on the back of healthy interest income.
Bajaj Finance’s interest income surged 39% y-o-y to ₹6,104.84 crore in the December quarter of FY20. The other large component of its revenues was in the form of fees and commission income of ₹687.36 crore, up 47% from the same period last year.
The non-banking financial company (NBFC) said Q3 has been a good quarter for the lender, despite slowing demand environment, an episodic provision on a broker account and higher credit costs.
Bajaj Finance is among the group of lenders with the largest exposure to Karvy Stock Broking, which raised money from the lenders by pledging shares belonging to its clients. Without naming Karvy, the lender said in its investor presentation that its securities lending business has a delinquent broker account with principal outstanding of ₹303 crore on which it has taken an accelerated provision of ₹85 crore.
“On the residual outstanding of this account, based on the progress in Q4 we will take a final call on provision," the non-banking financier said.
Bajaj Finance’s loan losses and provisions grew 84% y-o-y in Q3 FY20 to ₹831 crore.
Its assets under management (AUM) grew 35% y-o-y to ₹1.45 trillion as of 31 December, 2019 and new loans booked grew by 13% y-o-y to 7.67 million. Among the fastest-growing segments in this quarter were consumer (business-to-consumer) at 43%, rural B2C at 58%, mortgages at 44%, and auto finance at 51%.
“Consumer business-to-business (B2B) sales finance had a slow quarter as the company witnessed significant slowdown in consumption categories. This was in addition to our cautious stance in digital products financing," it said.
While 38% of Bajaj Finance’s total borrowing of ₹1.22 trillion at the end of Q3 FY20 came from banking sources, 42% from money markets, 17% from deposits and 3% from external commercial borrowings. Its cost of funds at consolidated level has sequentially improved 9 basis points (bps) to 8.29% in the December quarter of FY20 from 8.38% in Q2.
“Reduction in cost of funds is mainly due to robust asset liability management (ALM), strong liquidity position and incremental borrowings coming in at much lower cost. Due to large capital raise, the company saw its commercial paper (CP) borrowing go down dramatically from 8% to 2% sequentially," it said.
On 7 November, 2019, the company, through qualified institutions placement (QIP) allotted 21,794,871 equity shares to the eligible buyers and raised about ₹8,500 crore.
The lender’s existing customers contributed to 68% of new loans booked during Q3 FY20. It expanded to 182 new locations in Q3, taking its total geographic presence to 2,179 locations in India as of 31 December, 2019.
“Given corporate tax rate cut and capital raise, the company has accelerated its geo expansion strategy and is opening over 200 new locations in Q4 as well," the lender said.