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Monday, 19 October
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EconomyResults

Bajaj Finance is expected to report a 29% jump in profit today, but margins are the worry

Brokerages see the consumer lender earning about ₹6,383 crore in the September quarter on loan growth above 25%. Higher borrowing costs after the RBI's rate rise could squeeze its margin.

From the editorial desk · PunePublished
The National Stock Exchange building in Mumbai (file photo)
The National Stock Exchange building in Mumbai (file photo)Photo: zadeus / Wikimedia Commons, CC BY-SA 2.0

Key points

  1. Five brokerages on average expect net profit of about ₹6,383 crore, up 29% from ₹4,948 crore.
  2. Assets under management rose 26.5% to ₹5.85 lakh crore by 30 September, the company has said.
  3. Managing Director Rajeev Jain will take questions from analysts on an earnings call at 6 pm.

Bajaj Finance, the consumer and business lender, reports its July-September results on Monday, and the market is expecting a strong quarter. What investors will listen for, though, is what the company says about the cost of its money.

On average, five brokerages expect the Pune-based lender to post a net profit of about ₹6,383 crore, up 29% from ₹4,948 crore a year earlier. Net interest income, the gap between what it earns on loans and pays on borrowings, is forecast to rise 24% to ₹13,373 crore from ₹10,785 crore.

Much of the growth is already known. In its business update earlier this month the company said assets under management rose 26.5% from a year earlier to about ₹5.85 lakh crore at the end of September, after adding roughly ₹37,800 crore in the quarter. Its customer base grew to 12.89 crore from 11.06 crore, it booked 1.35 crore new loans, 11% more than a year ago, and its deposit book reached ₹69,750 crore.

The squeeze on margins

The concern is the other side of the balance sheet. Bond yields have risen sharply since the Reserve Bank of India raised its repo rate by 0.25 percentage point to 5.5% this month, and non-bank lenders such as Bajaj Finance borrow heavily in the bond market. They cannot always pass higher costs on to borrowers straight away.

Motilal Oswal expects assets under management to grow 25% from a year earlier and 5.6% from the previous quarter, with the net interest margin slipping about 10 basis points to roughly 9.4%. It sees credit costs, the share of loans written off or provided for, steady at about 1.55%.

Nomura also expects loan growth of about 25% and sees credit costs easing by 7 basis points from the June quarter. PL Capital puts credit costs at around 1.6% and has warned of margin pressure from the higher cost of funds.

Analysts will also watch how unsecured consumer loans and microfinance are holding up, and how fast newer lines such as gold loans are growing. Rajeev Jain, the vice chairman and managing director, and Sandeep Jain, the chief operating and financial officer, are due to speak to analysts at 6 pm.

The group’s mortgage arm set the tone last week. Bajaj Housing Finance said on Friday that its profit rose 18% to ₹757 crore.

The rest of Monday’s list

Bajaj Finance is one of about two dozen companies reporting on Monday. UltraTech Cement, the Aditya Birla group’s cement maker, and Hindustan Zinc, the Vedanta group’s zinc and silver miner, also report. Union Bank of India’s numbers will be set against Punjab National Bank’s record profit on Friday.

IREDA, Piramal Finance, L&T Technology Services, Just Dial, HFCL and Sobha are also on the calendar. With markets closed on Tuesday for Dussehra, shares of companies that report after Monday’s close will not trade on their numbers until Wednesday.