Bajaj Finance slips 5% despite strong Q4FY22 results

Brokerage firm Motilal Oswal Financial Services expects net interest margins (NIMs) to compress in FY23 due to yield pressure and higher borrowing cost.

Shares of Bajaj Finance dipped 5 per cent to Rs 6,855 on the BSE in Wednesday’s intra-day trade despite registering strong growth in net profit by 80 per cent year on year (YoY) at Rs 2,420 crore for the fourth quarter that ended in March 2022 (Q4FY22).

The company's provisions declined 33 per cent quarter on quarter (QoQ) and 44 per cent YoY to Rs 702 crore in Q4FY22 due to improvement in asset quality. The asset quality remained healthy as gross non-performing assets and net non-performing assets declined by 13 basis points (bps) and 10 bps QoQ to 1.6 per cent and 0.68 per cent, respectively. These key ratios are now back to pre-COVID levels.

Meanwhile, net interest income (NII) for Q4FY22 was up 30 per cent to Rs 6,068 crore from Rs 4,659 crore in Q4FY21. The lender saw growth in consolidated assets under management (AUM) by 9 per cent QoQ and 29 per cent YoY to Rs 197,452 crore, which was primarily driven by 27 per cent YoY growth in the consumer segment.

ICICI Securities believes that the strong results symbolize balance sheet strength and company’s ability to bounce back with growth. "Since the fin-tech story is embedded in this business, valuations should stay at premium. The digital web platform, similar to the application is the new strategy in FY23," the brokerage firm said in a note.

That apart, Motilal Oswal Financial Services expects net interest margins (NIMs) to compress in FY23 due to yield pressure and higher borrowing cost. “Part of the NIM compression in Q4FY22 was mitigated by a decline in surplus liquidity on its balance sheet,” Motilal Oswal Financial Services said.

However, investors will continue to watch out the lender's traction in the payments landscape, foray into the credit card business, new web platform, the two-wheeler marketplace, and margin trajectory due to aggressive competititon in FY23.