Bajaj Finserv: Holding Out A Good Promise
DSIJ Intelligence / 16 Jan 2014
The holding company of the Sanjiv Bajaj Group’s financial services business has done quite well in the December quarter of 2013. Its subsidiaries are creating some strain on its overall asset quality, but that is a passing phase. The future looks bright.
Financial services major, Bajaj Finserv (BFL) declared a good set of numbers for the third quarter of the current financial year. despite its good performance, the market wasn’t really excited about this company primarily on account of the increase in its Loan losses and provisions. The stock closed at Rs 724.50, up by just about 1.40 per cent yesterday.
BFL is a holding company for the Bajaj group's interest in the financial service space through its subsidiaries and holds a 74 per cent stake in Bajaj Allianz Life Insurance Company, 74 per cent stake in Bajaj Allianz General Insurance Company and a 61.99 per cent stake in Bajaj Finance. Despite the economic environment having remained challenging and struggling, marred by high inflation and high interest rates, the company has performed well during the December quarter.
The consolidated gross revenue for BFL, which includes gross written premium, stood at Rs 4091 crore in Q3FY14 against Rs 3724 crore in Q3FY13, up 10%. The company's consolidated income from operations for the quarter under review stood at Rs 1393 crore against Rs 1120 crore in during the corresponding period last year, up 24%.
However, the consolidated net profit increased just 13% to Rs 281 crore in Q3FY14 against Rs 249 crore in Q3FY13, mainly due to a 35.87% increase in its operating expenses. What is troubling about this company is its loan losses and provisions which increased by 51.85 and 54.81 per cent on sequential and yearly basis respectively. This very fact shows that its asset quality is deteriorating specifically in case of its subsidiary, Bajaj Finance.
Among its subsidiaries, Bajaj Finance and its Life Insurance subsidiary performed well showing 21 and 15% growth in their net profit respectively. The General Insurance part showed an average performance with a 4% growth in its net profit. However, for the nine month period ending December 2013 Bajaj Finance, its General Insurance subsidiary and the Life Insurance subsidiary showed a handsome performance with a 25, 32 and 28% growth in net profit on a yearly basis.
BFL is expected to continue showing good performance in coming quarters too. Further, the asset quality of Bajaj Finance is also expected to not deteriorate further in the coming few quarters. We recommend our reader to continue to hold their positions in this stock.
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