Bajaj Finance Ltd is set for another sturdy quarter as indicated by its latest business update for the three months ended December (Q3FY24).
This is in spite of the Reserve Bank of India (RBI)’s directive, asking Bajaj Finance to stop sanctioninganddisbursing loans under two lending products—eCOM (e-commerce loans) and Insta EMI Card.
In Q3, Bajaj Finance acquired around 3.85 million customers taking its customer base to 80.4 million. This is the highest addition at least in the past 10 quarters.
Tailwinds in the form of festive season played a role in customer acquisition. Further, the new loans booked in Q3 rose by 26%, while its deposit book as on the quarter end clocked growth of 35% year-on-year.
Given this, Bajaj Finance’s assets under management continued its upward trajectory and stood at about ₹3 trillion as of December end. This represents an increase of about 35% year-on-year.
Motilal Oswal Financial Services note that the growth suggests the festive period was strong for Bajaj Finance and that it successfully leveraged traditional channels (except digital/e-commerce) for newer customer acquisitions.
Against this backdrop, it’s not surprising that shares of the non-banking financial company rose by over 4% on Thursday. A key monitorable henceforth is the margin performance. Here, positive surprises can be ruled out given the headwinds.
Bajaj Finance’s net interest margin is expected to compress over the next two to three quarters by 25-30 basis points (bps) on the back of a rise in funding costs, which Bajaj Finance may not be able to pass on completely. One basis point is 0.01%. In Q2, the reported net interest margin fell by 14 bps sequentially.
To be sure, the embargo on digital loans is expected to slightly dent business and fees but the impact would reflect in Q4FY24-Q1FY25, said Shweta Daptardar, an analyst at Elara Securities (India). “Albeit not sizeable, we still have evaluated 2% impact on business growth and 3.5% impact on profit before tax for the second half of FY24,” added Daptardar.
Meanwhile, Bajaj Finance’s liquidity position is on a strong footing. As things stand, shares of the company are lower by 6% from the 52-week high of ₹8,192 apiece seen in October. Besides margin, if RBI restrictions are in place for a longer period of time, it may dampen investor sentiment.