United States

Analyst Research Report Snapshot


Bajaj Finance - Q3FY14 Result Update




Kisan Ratilal Choksey Shares and Securities Private Limited


16 Jan 2014





Companies referenced:


Available for Immediate Download

Bajaj Finance - Q3FY14 Result Update CMP: Rs 1,548 Target Price: Rs 1,675 Recommendation: ACCUMULATE “Strong business growth with profitability intact” Bajaj Finance posted good set of numbers with PAT of Rs194 crore growing 21.3% Y-o-Y in line with our estimate. NII grew strongly 31.2% Y-o-Y to Rs618 crore aided by AUM growth 33% y-o-y. Incremental spreads went up 161bps Q-o-Q to 11.7% due to loan book mix in favour of consumer electronic loan book and stable cost of funds. Other operating income continued to grow at healthy pace 30% Y-o-Y supported by penal interest, distribution fees and commission on general insurance. Cost to income ratio decreased 268bps Q-o-Q to 45.1%. Provisions for loan losses rose 51.9% sequentially from Rs52.3 crore in Q2FY14 to Rs79.5crore in Q3FY14 mainly on account accelerating provisioning (Rs 21 crs) to reach 90 days NPA norms. The company has assigned loans amounting to Rs189 crore on bilateral bases during the quarter. AUM grew strongly 33% Y-o-Y & 13% Q-o-Q supported by strong growth in consumer finance book (up 10% q/q) and LAP & business loans (up 17.4% q/q). Off balance sheet book stood at Rs935 crore (4.2% of total AUM). Net NPA stood at 0.23% vs. 0.26% in Q2FY14 with 80% PCR. Robust AUM growth and rising spreads led to impressive NII growth: Net interest income showed strong growth of 31.2% y-o-y supported by AUM growth 33% y-o-y and stable spreads Y-o-Y. Asset yields increased 153bps Q-o-Q primarily attributable higher incremental mix from consumer electronic finance (Relatively higher yield compared to blended yield on loan book). Falling money market rates, stable banks’ lending rate and resumption of borrowings from banks to market have resulted into stable cost of funds and improving spreads. The management also highlighted that Stable pricing, 15% unit growth and increasing average size tick helped to show strong consumer electronic finance loan book growth. The company expects AUM to reach Rs24,000 crs by March 2014 showing 37% Y-o-Y growth. AUM growth continued to strong- Assets under management grew 33% y-o-y driven by consumer finance (29% y-o-y) and SME finance (51% y-o-y). Stable market share in two / three wheelers finance and increase penetration in consumer electronic finance helped to show strong growth in consumer finance loan during the quarter. SME finance book growth is driven largely by strong growth in LAP (up 56% Y-o-Y stands at 41% of loan book) and rise in small business loans (up 41% Y-o-Y stands at 8% of loan book). The management believes expanding network in tier II and tier III cities coupled with improved cross selling capabilities would support business growth in coming years. We expect loan book to grow 27.5% CAGR from FY13-FY15 supported by higher market share in consumer finance business and healthy growth in small business finance segment. Credit quality across product lines remain stable: Net NPAs decreased marginally 3bps to 0.23% in Q3FY14 reflecting overall stable asset quality cross product categories except constriction equipment. Collection efficiency in two wheelers has slipped marginally Q-o-Q basis. The company has provided Rs79.5 crore for loan loss provision resulting into strong coverage ratio. Valuation & Recommendation: Bajaj finance has been delivering strong operating performance in last two years. We believe Bajaj Finance is well placed within the NBFCs space on the back of strong business mix of consumer and business finance, dec...

Why buy analyst research?

  • Institutional quality research
  • Available for Immediate Download
  • Detailed company or industry insight
  • Print or save
  • 24 hour customer support
Return to previous page without adding this item to your cart.
Email Customer Support.

About Analyst Research

Analyst research reports are available for immediate download after purchase. You will have unlimited access to the report for 24 hours after purchase, to download, print or save it as many times as you wish. Analyst Research provided by Reuters does not constitute investment advice, and is not endorsed by Reuters Research. This information is protected by copyright and intellectual property laws. More information on Analyst Research.