Bajaj Finance has reported a 13% increase in consolidated net profit, reaching Rs 4,000 crore for the quarter ending September 30, 2024. This growth is up from Rs 3,551 crore in the same period last year, showcasing the company’s resilience in a challenging economic environment.
Key Financial Metrics
The consolidated results include figures from Bajaj Finance’s subsidiaries, such as Bajaj Housing Finance and Bajaj Financial Securities. The company’s consolidated assets under management (AUM) grew by an impressive 29%, amounting to Rs 3.73 lakh crore, compared to Rs 2.9 lakh crore a year earlier. This increase in AUM reflects Bajaj Finance’s strong market position and customer demand.
Revenue Growth
Bajaj Finance’s net interest income surged by 23%, reaching Rs 8,838 crore, up from Rs 7,196 crore in Q2FY24. Additionally, total income climbed by 24% to Rs 10,946 crore, compared to Rs 8,847 crore in the previous year. The company’s customer base expanded significantly, with the franchise growing to 92.09 million, a 20% increase from 76.56 million last year.
Asset Quality Concerns
Despite the positive profit and revenue growth, Bajaj Finance faced challenges regarding asset quality. The gross non-performing asset (NPA) ratio deteriorated to 1.06% from 0.91% a year earlier, while the net NPA ratio rose to 0.46% from 0.31%. This decline indicates increased loan defaults and highlights the need for vigilant credit risk management.
Loan Performance
The number of new loans booked increased by 14%, totaling 9.69 million compared to 8.53 million in Q2FY24. However, loan losses and provisions rose significantly to Rs 1,909 crore, up from Rs 1,077 crore, marking a substantial increase of 77%.
Market Reaction
Following the announcement of its quarterly results, Bajaj Finance shares fell by 2%, closing at Rs 6,645.75 apiece on the National Stock Exchange (NSE). This dip may reflect investor concerns about rising NPAs and loan loss provisions despite the overall profit growth.
Should You Buy Bajaj Finance Shares?
Investors contemplating whether to buy Bajaj Finance shares should consider several factors:
- Strong Financial Performance: With a net profit increase and robust revenue growth, Bajaj Finance continues to demonstrate its financial strength.
- Market Positioning: The company remains a leader in the non-banking financial sector with a significant customer base and increasing AUM.
- Asset Quality Challenges: The rise in NPAs and provisions is concerning and could impact future profitability.
Expert Recommendations
Despite recent fluctuations in stock price and concerns over asset quality, experts have mixed views on Bajaj Finance:
- Analysts have issued a ‘Buy’ call for Bajaj Finance due to its strong market presence and potential for recovery despite recent stock dips.
- Conversely, some analysts suggest caution due to rising NPAs and increased provisions for loan losses, indicating potential risks within the broader group.
Conclusion
Bajaj Finance’s Q2 results demonstrate solid profit and revenue growth amid challenges in asset quality. While the company continues to expand its customer base and AUM, investors should remain cautious regarding the implications of increasing NPAs and provisions on future profitability.
Final Thoughts
As Bajaj Finance navigates these challenges, potential investors should weigh the strong financial performance against asset quality concerns when considering investments in this leading non-banking financial company (NBFC).
