Bajaj Finance declines over 5% as Q2 business update disappoints Street

 Shares of Bajaj Finance slipped 5.4 per cent to Rs 3,286 on the BSE in the morning deals on Wednesday after the non-bank finance company (NBFC) reported weak July-September quarter (Q2FY21) business figures. In the past one month, the stock has underperformed the market by falling 5 per cent, as compared to 3 per cent rise in the S&P BSE Sensex.

The company's assets under management (AUM) grew 13 per cent year on year (YoY) at approximately Rs 1.37 trillion as of Q2FY21 as compared to Rs 1.36 trillion as on Q2FY20. New loans declined sharply to 3.6 million from 6.5 million YoY and 5 million quarter-on-quarter (QoQ).

Business volumes in the quarter were at 50–60 per cent of YoY levels in terms of number of loans disbursed and number of new customers acquired. The company acquired 1.2 million new customers in the quarter (compared with 1.9 million YoY), taking the overall customer base to 44.1 million.

"Growth slowdown is sharper than expected despite unlock. Bajaj Finance seems to have lost market share. Collections focus, cautious disbursements may have impacted growth. Higher credit cost guidance may keep earnings muted," ICICI Securities said in a note.

Motilal Oswal Financial Services, on the other hand, said the sharp decline in disbursement volumes has come as a bit of a disappointment (in the context of healthy trends witnessed by peers such as HDFC). Nevertheless, they believe it is a good strategy to curtail disbursements in this uncertain environment.

Hence, the brokerage firm has cut FY21 AUM growth estimate to 6 per cent from 12 per cent earlier. "Margins are likely to be stable as the drag due to excess liquidity is offset by lower cost of funds. Given the collection efficiency performance across various asset classes in the industry, we keep our credit cost estimate of ~4.5 per cent for FY21 largely unchanged," it said.

Bajaj Finance's decision to accelerate provisioning in Q2 further dented sentiment. "The Company will continue to accelerate its provisioning for Covid-19 in Q2FY21 as well to further strengthen its balance sheet... Consolidated liquidity surplus stood at approximately Rs 22,300 crore as of 30 September 2020," it said in its statement.

At 9:45 am, the stock was trading 4 per cent lower at Rs 3,342 per share, as against 0.4 per cent rise in the benchmark S&P BSE Sensex.

Bajaj Finance launches qualified institutional placement of Rs 8,500 crore

Bajaj Finance on Monday launched its Rs 8,500-crore qualified institutional placement (QIP). The shares will be offered in the range between Rs 3,860 and Rs 3,900 apiece. The share sale will help Bajaj Finance expand its lending at a time when non-banking finance companies (NBFCs) sector is plagued by a liquidity crisis.

The shares of Bajaj Finance ended Monday's session at Rs 4,116. The offer price is at a discount of 5.2 to 6.2 per cent to the closing price on Monday.

The share price of Bajaj Finance rose 55 per cent since the beginning of 2019, while the benchmark Sensex rose 11.8 per cent during the same period. In 2019, eight companies have raised Rs 22,312 crore through QIPs, against 25 that had raised Rs 16,587 crore in the previous year.

JM Financial, Axis Capital, Kotak Mahindra Capital, Morgan Stanley, and Nomura are advising the company on the share sale. The QIP would make valuation reasonable with the rise in book value.

Bajaj Finance to seek RBI's nod to raise ECB limit to $1.4 billion

Bajaj Finance is set to approach the Reserve Bank of India (RBI) to increase its limit of borrowing through external commercial borrowing (ECB). It has already got the board's approval to increase the limit for borrowing through ECB to $1.4 billion. Now, the company has sought shareholders' approval for raising the limit which they expect to get in five-seven days. "The board of directors in its meeting held today increased the limit for borrowing funds through ECBs, by way of loans or issuance of secured/unsecured bonds, notes, debentures, etc. up to an aggregate amount of $1.4 billion, in one or more tranches, in accordance with the rules and regulation framed by the RBI," the company said in an exchange filing.