Bajaj Finance records ₹4750 crore loss in AUM due to lockdown3 min read . Updated: 07 Apr 2020, 10:57 AM IST
- The NBFC saw only a 2% growth in its asset under management to ₹1.47 trillion at the end of March
- Bajaj Finance said its capital adequacy ratio remained strong at 25%
MUMBAI: Bajaj Finance lost 3.5 lakh accounts and ₹4750 crore worth of assets under management in the last 10 days of March after the nationwide lockdown was announced.
Addressing an analysts call post its March quarter results on Monday, the top management of the non-banking finance company said it expects demand to revive by July and business to normalise by October.
The NBFC reported a mere 2% growth in its asset under management to ₹1.47 trillion at the end of March as against ₹1.45 trillion in the previous quarter. The growth in AUM had slowed to 27% year-on-year compared to 40% during the corresponding quarter last year.
In an analysts’ call, the management laid down three business scenarios depending on the lifting of the lockdown deadline. According to Scenario 1, if the lockdown is lifted on 14 April, the company expects to return to 60% of the normal business by May and 100% by September. In that case, impact on growth and profitability will not be significant and credit cost or the amount of funds will only be 40-50% higher.
If the lockdown is lifted on 30 April, the NBFC expects to return to full normalcy by October. Credit cost or the amount it has to set aside for bad loans will be 50-60% higher in this scenario.
The third scenario is if the lockdown is lifted on 15 May, the company is expected to do zero business in April and May with the return to normalcy being pushed to the fourth quarter of the current fiscal year. The impact on credit cost in this case will be 80-90% higher on a full-year basis, the management said.
In its quarterly update released to the stock exchange, Bajaj Finance had clarified that it is assessing the need for one-time provisioning against certain large accounts, a sign that credit cost could increase in the current fiscal year.
“We have a plan to cut 7-8% of opex as lockdown lifts and put all fixed costs on hold till October. There will be no branch expansion, no new hiring and 80% cut in travel expenses," said the management in the call. “We will spend a lot of money on improving collection infrastructure. We are giving an elevated view of credit cost because capacity for such large scale collection is not in place," it added
The company has already given moratorium on loan repayment to nearly 12 lakh out of total 2 crore borrowers. Of this 9 lakh customers are under non-auto loans and 3 lakh customers under auto loans.
If the lockdown extends, the management believes that RBI should allow freezing of Days Past Due (DPD) for customers till the end of moratorium period so that these customers are not treated as defaulters. DPD indicated how many days a payment on a respective account has been delayed.
Among its recommendations to the RBI, the management also said the regulator should provide a direct low cost window for all customers as all NBFCs area unlikely to get liquidity support under the Targeted long term Repo operation (TLTRO) window. It has also sought a one-time restructuring facility for all micro, small and medium enterprise (MSME) without any impact on rating.
In its quarterly report, Bajaj Finance also reported a 22% sequential fall in new loans booked during the fourth quarter of fiscal year 2019-2020 to 60 lakh owing to the national lockdown. The company had booked new loans at 77 lakh in the previous quarter. Even on a year on year basis, the growth under new loans booked slowed down to 3% compared to 53% during the corresponding quarter last year.
While growth under customer franchise stood at 24% year on year similar to the third quarter, new customer acquisition remained stable at 19 lakh during the quarter.
Bajaj Finance said its capital adequacy ratio remains strong at 25% and the company is carrying liquidity of ₹15,800 crore as on 31 March.
Bajaj Finance’s deposit book stood at ₹21,400 crore as of March 31, 2020 compared to ₹ 13,193 crore as of March 31, 2019. The mix of retail and corporate book stood at 72:28. 7, the company said
Shares of Bajaj Finance closed 0.57% down at ₹2207 at the end of Friday’s session.