shares of Bajaj Finance Limited, The National Stock Exchange fell nearly 5% in early deals on Wednesday. The non-banking financial services company (NBFC) had announced its March quarter results (Q4FY22) after the market close on Tuesday.
While performance was largely in line with analysts’ expectations, net interest income (NII) which grew 25% year-on-year (YoY) 4,803 crore, 7% lower than analysts’ estimates at Motilal Oswal Financial Services.
Consolidated Net Profit up 80% y-o-y (YoY) 2,420 crore on the back of 29% year-on-year growth in assets under management 1.97 trillion. Asset quality also improved, as gross NPAs (non-performing assets) fell to 1.6% as of March 31, 2022, from 1.79% a year ago.
Going forward, key factors to track in FY13 include its progress digital transformation journeyPotential entry into the credit card business from its balance sheet, pressure on net interest margin (NIM) amid rising competition.
Analysts at Motilal said, “NIMs are likely to shrink in FY13 due to pressure on yields, absence of large IPO (initial public offering) financing (under new RBI guidelines) and increased borrowing costs. Driven by expectations.” Oswal said in a report on April 26.
Bajaj Finance intends to build a web platform, with Phase-I expected to go live by October 2022 and Phase-II by March 2023. This means operating expenses to NII ratio will remain high in FY23 and the management expects this measure to remain in place. In the range of 34.5-35.5% in FY23. Note that this ratio increased by 390 basis points (bps) to 34.6% in FY12. One basis point is one hundredth of a percentile.
In FY22, subscriber franchise grew 19% year-on-year to 57.6 million. Management expects to add 8-9 million customers in FY13.
It has no plans to convert into a bank and aims to build a strong payments and finance business. “This can address any overhang from a potential transition in a bank and impact on growth and profitability. We largely maintain our earnings forecast and expect 39% CAGR in profit in FY 2012-24 and FY20 23 at 22%,” analysts at Jefferies India said in a report on April 26. CAGR is the compound annual growth rate.
Analysts also commented that NBFCs are growing at a fast pace, but are well worth valuations.