Bajaj Finance consolidated net profit jumps 85% to Rs 2,125 crore in Q3

To infuse Rs 2.9k cr as equity in two subsidiaries

Bajaj Finance has reported an 85 per cent jump in consolidated net profit to Rs 2,125 crore in the October-December quarter (Q3 of FY22), beating Street estimates.

The profit was aided by a robust growth in net interest income (NII) and lower provisions. On a standalone basis, the lender reported a net profit of Rs 1,934 crore.  

Consolidated NII jumped 40 per cent to Rs 6,000 crore in the reporting quarter, compared to Rs 4,296 crore in the corresponding period of last financial year. This was driven by healthy expansion in net interest margins and lower interest income reversal for the quarter.

Loan loss provisions, on a consolidated basis, were down 22 per cent to Rs 1,051 crore. In Q3, the company increased management overlay provision to Rs 1,083 crore from Rs 832 crore at the end of the September quarter. This was to protect itself from probable losses arising out of the third wave.

“The company is well prepared to navigate wave 3, given the strong management overlay provisions and significantly improved stage 2 and 3 assets,” it said. However, due to repeated Covid waves, it will keep sufficient management overlay provisions. Hence, in FY22, loan loss provisions will be in the range of Rs 4,800 crore-Rs 5,000 crore.

Gross non-performing assets (gross NPAs) improved by 72-basis points (bps) to 1.73 per cent at the end of the December quarter while net NPAs improved by 32 bps to 0.78 per cent.

Both gross and net NPAs are back to pre-Covid levels for the lender. Auto finance business continues to have high NPAs although it has come down significantly. The lender reported its highest ever assets under management (AUM) growth in the reporting quarter. AUM grew by Rs 14,700 crore in the third quarter, taking the total AUM to Rs 1.81 trillion, up 26 per cent year-on-year (YoY).

“AUM composition remained steady. So far in January, there is no impact on business momentum. If the third wave does not create disruption, the company expects Q4 and full-year AUM growth to remain strong,” the lender said.

The company is undertaking Phase 1 of its business transformation exercise. In this phase, it plans to transition all its existing customers to the new digital platform from February onwards.

The second phase of the business transformation exercise will focus on new customers. It plans to deliver Phase 2 in 8-9 months, subject to no major Covid disruption.

In Q3, the lender booked 7.44 million new loans against 6.04 million in Q3 of FY21. Customer franchise stood at 55.36 million at the end of Q3, up 20 per cent YoY.

Meanwhile, Bajaj Finance will infuse Rs 2,900 crore as equity in two subsidiaries — Bajaj Housing Finance (Rs 2,500 crore) and Bajaj Financial Securities (Rs 400 crore) — for business expansion. The capital is expected to support their growth plans for the next

two years.