Bajaj Finance profit in Q1 falls 19% on higher provisions2 min read . Updated: 22 Jul 2020, 05:42 AM IST
- Consolidated profit dropped to ₹962.32 cr amid covid stress, lower biz acquisitions
- The management says it will allow more flexibility to customers with good credit history to switch to flexi loans, offering to service only the interest cost for a time period
MUMBAI : India’s largest non-bank lender Bajaj Finance Ltd on Tuesday reported a 19% fall in consolidated net profit at ₹962.32 crore in the June quarter on higher provisioning. It had posted a net profit of ₹1,195.25 crore in the corresponding period of 2019-20.
The NBFC said its business operations were hit during the quarter due to covid-19 and the consequent lockdown. This resulted in significantly lower new business, and constraints on recovery of over dues from customers, it added.
The management said it will allow more flexibility to customers with good credit history to switch to flexi loans, offering to service only the interest cost for a time period, and expects to convert up to ₹8,600 crore of term loans into flexi loans for a fee, said Rajiv Jain, managing director, Bajaj Finance.
Speaking to analysts on Tuesday, Jain said the product offers more flexibility to drawdown when customers need to, and prepay when they wish to. Customers can also service interests in the first 1-2 years.
When analysts asked whether this flexi loan product amounted to restructuring, it clarified that the company has been offering flexi loans to its customers for the last five years. As on 31 March, the lender has an existing book of ₹36,846 crore under the flexi scheme.
“In the first quarter, we were offering the loan product to customers with no overdue and good repayment track record. Of the ₹8,600 crore of switched loans, ₹5,000 crore were given to customers not under moratorium and ₹3,600 crore under moratorium. It’s important that customers get back to making monthly payment," Jain said.
At the end of the June quarter, the consumer durable financier saw the loan book under moratorium reduce to 15.7% of total assets under management from 27.1% on 30 April. The auto finance business saw 50.3% loans under moratorium at the end of the quarter compared to 70% in the previous quarter. The consolidated moratorium book stood at ₹21,705 crore on 30 June.
The lender also expects its credit cost for FY21 to be more than what was expected considering the extended disruptions. “It now estimates its credit costs to increase by 100-110% ( ₹6,000-6,300 crore for FY21) over pre-covid credit cost of previous year," the NBFC said.
Total consolidated income rose to ₹6,649.74 crore in the quarter from ₹5,807.76 crore in June 2019 quarter. It reported 12% growth in net interest income to ₹4,152 crore as on 30 June compared to ₹3,695 crore in the year- ago period. Fee income declined by 5% year-on-year to ₹593 crore. However, it made treasury gains of ₹260 crore. The consolidated results include those of its subsidiaries, Bajaj Housing Finance Ltd and Bajaj Financial Securities Ltd. Its shares closed 4% lower at ₹3,292 on the BSE on Tuesday.