Bajaj Finance does well in Q1 even as competition hots up

Bajaj Finance continues its journey of growth 

Consumer lender Bajaj Finance Ltd reports good numbers despite increasing competition in its lending business, with more and more banks chasing the aspiring individual borrower through lucrative deals. It reported a PAT of Rs. 836 crores representing a growth of 81.4% on YoY basis.

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Quarterly PAT analysis

Bajaj Finance reported a good 49% growth in fresh loans this quarter ( which is usually the strongest quarter) but slower than the previous two quarters. Given that most banks have upped their ante in acquiring retail customers and even other non-banks are aggressively chasing individual borrowers, the company perhaps found it tougher than before to grab more customers.

The company’s main consumer lending business grew 35%, loans to small business rose 42%, rural business increased at a breakneck speed of 75% and even the mortgage business, newly housed under a separate subsidiary, gained 27% in the quarter.

Key highlights

  • Asset under management (AUM) swelled 35 per cent YoY to Rs 93,314 crore
  • Net interest income (NII) increased to 2,572.9 crores from 2034.3 crores
  • Consolidated revenue jumped to Rs 3,936.45 crore during the quarter under review, from Rs 2,832.85 crore a year earlier
  • The company has acquired ~1.1mn new customers for cross sell during the quarter with overall franchise rising to 28.3mn customers
  • Cost to income ratio touched historic low of ~35.4%.

How will the stock be impacted

Bajaj Finance continues to deliver high growth quarter on quarter and has strengthened its footing as a quality player in the market. With another strong set of numbers, the stock has already rallied >5% to touch an all time high of Rs 2676. Though we expect growth to continue, investors should consider the high valuations of 6.4x 2020E P/B which has made the stock quite expensive.

Bajaj Finance (CMP: 2675, Mcap: 1,54,391 crores, FY20E P/B 6.4x)

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