Bajaj Finance up 9% in Q1, but investors better monitor key metrics

Among the major highlights was the year-on-year (YoY) jump in assets under management (AUM) aided by higher disbursements.

In addition, customer acquisition during the quarter was at a record high of 2.7 million, up 45% year-on-year. “This places the company at an annual run-rate of 10 million for FY23 compared to its guidance of new customer acquisitions of 9-10 million annually,” said analysts at Nirmal Bang Institutional Equities.

While the company’s digital strategy is progressing well, a key monitorable item over the medium term will be OPEX productivity, analysts warned. In a post earnings conference call, the company’s management said that it is on track to go completely digital across all products and services by January 2023 and to go completely digital on the web by March 2023.

In Q1, its OPEX-to-NII ratio was around 36%. The company’s management has guided for an OPEX-to-NII of 35%-36% in FY13, on account of investments in technology and hiring across all verticals. NII is short for net interest income.

Meanwhile, the company’s asset quality has improved across all sectors. Net interest margin (NIM) rose by about 40 basis points sequentially due to lower cost of borrowing. One basis point is 0.01%.

The management has said that it will continue to protect its margin profile across all verticals by passing on the increased cost of funds. The company’s focus is more on margin than growth.

According to analysts at Motilal Oswal Financial Services Ltd, even though the management has directed that it will prioritize margin over credit growth, there is a possibility of NIM compression in FY13. The domestic brokerage house, in a report on July 28, said this is because the leverage on borrowing costs has largely run out and has limited ability to pass on the high cost of funds over a large fixed rate book.

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