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Bajaj Finance, the non-bank lender, is poised to announce a 30 percent YoY increase in net profit to Rs 3,626 crore for the July-September quarter. Analysts estimate that stable asset quality and increased loan growth are the driving factors behind this positive performance. The company is scheduled to release its Q2 results on October 17.
Analysts also anticipate that the consumer financier’s net interest income (NII) will see a 34 percent rise to Rs 7,420 crore, up from Rs 5,537 crore in the previous year. Among the analysts, Anand Rathi Institutional Equities provided the highest NII estimate for Bajaj Finance at Rs 8,398 crore for Q2. However, it’s worth noting that higher write-offs may lead to a 165 basis points YoY increase and a 12 basis points quarter-on-quarter (QoQ) increase in credit costs. In the preceding quarter, credit costs rose by 170 basis points, compared to 155 basis points in Q4 of FY23. The company’s management has guided that credit costs will remain in the range of 155-165 basis points for the rest of the financial year.
During the July-September period, Bajaj Finance’s shares surged by 9 percent, outperforming the benchmark Sensex, which saw a 2 percent increase.
In a Q2 business update, Bajaj Finance reported a 26 percent increase in the number of loans booked, reaching 8.53 million compared to 6.76 million in the corresponding period the previous year. Deposits also witnessed substantial growth, rising by 39 percent to Rs 54,800 crore from Rs 39,422 crore in the year-ago period. The company emphasized its strong liquidity position, with a consolidated net liquidity surplus of Rs 11,400 crore at the end of September. Additionally, assets under management (AUM) grew by 33 percent to reach Rs 2.9 lakh crore in Q2, up from Rs 2.1 lakh crore in the year-ago period.
Financial analysts at Jefferies singled out Bajaj Finance as one of their top picks among non-banking financial companies (NBFCs), citing the AUM growth reported in the business update, which exceeded their annual estimate of 29 percent. Meanwhile, Morgan Stanley expressed an “overweight” outlook on the company, raising the target price per share to Rs 10,300, up from Rs 9,500.
On the other hand, Citi maintained a “neutral” stance on Bajaj Finance due to observed stress in the B2C rural segment, which is expected to result in a 10-15 basis points QoQ increase in the lender’s gross non-performing assets. Analysts also noted that cost ratios have likely peaked and are expected to moderate from this point forward.
