Bajaj Finance's shares fall as company says lockdowns pulling down business

Company says growth plan for its asset under management (AUM) in FY22 will see an impact of Rs 4,000 crore at least

Shares of consumer financier Bajaj Finance were down more than 4 per cent on Monday after the lender send lockdowns in states to contain Covid-19 would affect its business.

Bajaj Finance said growth plan for its asset under management (AUM) in FY22 will see an impact of Rs 4,000 crore-Rs 5,000 crore, with most of the impact coming from the first quarter of FY22 due to lower volumes in B2B business.

The company’s B2B and auto finance businesses were most affected. These businesses delivered 70 per cent of their planned volumes in April 2021, but as states started imposing lockdowns mid-April, volumes dropped to 40 per cent in May 2021.

“Most states have indicated continued lockdown till 7th or 15th June. With the expected reopening, June should be much better”, the company said.

Its other businesses saw far lesser impact in April and reported around 85 per cent of planned disbursements. In May, the lender leveraged its digital capabilities and delivered 60 per cent of planned disbursements. However, it expects June to be much better as the economy will reopen gradually.

“The Company has taken several actions to reduce its operating expenses and cost of funds to partially mitigate the financial impact caused by lower AUM growth”, it said.

The equated monthly installment (EMI) bounce rates increased marginally in Q1FY22 compared to Q4FY21. “Average EMI bounce rates in Q1 FY22 were approximately 1.08X of Q4 FY2”, the company said.

As a result of the constraints on collections, the lender estimates its gross non-performing assets (GNPA) and net NPA in Q1 and Q2 to be higher. It ended FY21 with GNPA of 1.8 per cent and NNPA of 0.75 per cent, close to pre-Covid-19 levels. It is carrying an additional provision of Rs 840 crore for covid related disruptions on its balance sheet as of March 31, 2021.

“The Company estimates an incremental credit cost of Rs 1,100-1,300 crore versus planned credit cost in FY2022 on account of disruption caused by the second wave,” it said.