Bajaj Finance Q1 Results, Net Profit Surges 14% on YoY Basis

India’s non-bank lender, Bajaj Finance, reported a smaller-than-expected Q1 FY25 profit on Tuesday, weighed down by higher provisions for bad loans. The company disclosed a consolidated net profit after tax of Rs 3,912 crore, marking a 14% year-on-year increase for the quarter ended June 30, 2024. This figure fell short of many analysts’ estimates of Rs 4,029 crore. According to LSEG (London Stock Exchange Group plc), a global provider of financial markets data and infrastructure, the results align with their predictions for Bajaj Finance.  Bajaj Finance Q1 FY25 results include the businesses of the non-banking financial company’s subsidiaries, Bajaj Housing Finance and Bajaj Financial Securities.  The funds reserved for covering potential defaults, known as loan losses and provisions, at Bajaj Finance increased by almost 70% to Rs 1,685 crore, eclipsing many analysts’ expectations of Rs 1,466 crore. The number of default cases rising is a concern for the company, and they need to address it. Consequently, the stock has declined by 8% so far in 2024.

Highlights of the Bajaj Finance Q1 FY25 results:

Net Interest Income (NII), or the core income of the non-bank lender, stood at Rs.8,365 crore, which is an increase of 24.5%. Bajaj Finance’s net profit increased by 13.8%, which is almost 14% on a year-on-year basis. Bajaj Finance’s asset quality remained stable, with gross A non-performing asset (NPA) at 0.86% from 0.85% last quarter, while net NPA stood at 0.38% from 0.37% in the March quarter. The provision coverage ratio for the quarter stood at 56%, up from 57% in March.

According to Bajaj Finance, there was a 10.4% increase in the number of new loans booked, reaching 109.7 lakh from 99.4 lakh in the same period last year. The number increased by 39% on a sequential basis. Bajaj Finance experienced a 20.7% year-on-year increase in its customer base, which now totals Rs. 8.8 crore. The company’s assets under management (AUM) rose by 31.1% from last year to Rs. 3.54 lakh crore, while deposits rose by 25.6% from last year to Rs. 62,750 crore.

At the end of the quarter, Bajaj Finance had liquidity of Rs. 16,200 crore, which represented a 27.6% increase from the previous year and accounted for 4.57% of the total assets under management (AUM).

Bajaj Finance vs. RBI requirements:

As per the Reserve Bank of India (RBI), personal loan and credit card holders required higher capital requirements. Indian financial companies are struggling with higher borrowing expenses, resulting in a 38.5% increase in finance costs, amounting to Rs 5,684 crore. This is because the RBI has raised its key interest rate by 250 basis points since May 2022.

Bajaj Finance Stock:

Today, the stock of Bajaj Finance is down by 3% in intraday trading at Rs. 6,557.65 per share. The low traded price is Rs. 6,541.05 due to yesterday’s Q1 FY25 consolidated results.

Conclusion: Recovering bad loans is a top priority for Bajaj Finance in the long run. Failing to do so could make it challenging for the company to achieve a strong profit in the upcoming quarters.

Disclaimer: This blog has been written exclusively for educational purposes. The securities  mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.