Bajaj Finance: Good Financials Need Better Provisioning
Priyanka Kumari / 17 Jan 2014
Bajaj Finance Ltds December quarter performance is seemingly good as far as the top and bottomline are concerned. The worry however is the asset quality which seems to be stressed as of now.
Bajaj Finance (BFL), posted a good set of results for the third quarter of FY14. It has shown an improvement both on the topline as well as on the bottom line front on a YoY basis. The total interest and fee income jumped by 31% to Rs 1082 crore against Rs 828 crore in Q3FY13. Its other income also grew to Rs 12 crore against the Rs 4 crore that it had earned during the same quarter in FY13.
On the expenses front, the company’s operating expenses stood at Rs 292 crore for Q3FY14 up by 36% on a yearly basis. The increase was primarily due to the higher employee expenses incurred during the quarter. Employee cost stood at 7.4% of revenues against 6% in Q3FY13. Another major expense is the loan losses and provisioning, which stood increased by 55% to Rs 21 crore. Interest cost stood at Rs 410 crore against Rs 321 crore in Q3FY13, up by 28%.
BFL's net Interest Income (NII) for the quarter stood at Rs 672 crore rising by 32.5% against the Rs 507 crore it earned during the same quarter last year.
The net result was its profit saw a rise of 21% to Rs 194 crore against Rs 160 crore during the same period last year. Profitability was impacted to some extent due to the accelerated provisioning of Rs 21 crore during the quarter, which the company said is kept for strengthening the overall provisioning framework.
BFL’s asset quality has deteriorated in the December quarter because of the increase in loan losses. The net non performing assets (NPA) are down at 0.23% for Q3FY14 as compared to 0.26% in Q2FY14, but that is only because of the increase in provisioning. The gross NPAs stood at 1.15% over 1.14% on a sequential quarter basis.
However, the performance of the company for Q3FY14 has not impacted its stock price in a major way. BFL's stock closed at Rs 1548 (15 Jan 2013) with a negligible gain of 0.05%.
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