Bajaj Finance Shares Dip 1.58% as Gross NPA Ratio Rises to 1.06% in Q2FY25.
Bajaj Finance Ltd (BFL), a major player in India’s non-banking financial sector, has announced its Q2 FY25 financial results. The company showcased notable growth, with a 13% increase in profits, but it still fell short of market expectations. Let’s take a deep dive into Bajaj Finance’s performance and what this means for its future.
Table of Contents
Financial Performance Overview
Consolidated Net Profit Growth
Bajaj Finance’s Q2 FY25 consolidated net profit rose by 13% to ₹4,013.7 crore, up from ₹3,550.8 crore in the same quarter last year. Despite this improvement, it fell short of analysts’ predictions, with CNBC-TV18 expecting ₹4,043.4 crore and Moneycontrol forecasting ₹4,464 crore, which would have marked a 33% jump.
The mismatch between actual profits and projections underscores the challenges the company faces in a competitive and dynamic financial landscape.
Net Interest Income (NII) and Total Income
Bajaj Finance’s net interest income (NII) surged 22.8%, reaching ₹8,837.7 crore compared to ₹7,196.3 crore in Q2 FY24. The company’s net total income also grew by 24% to ₹10,946 crore. This robust growth was driven by a 29% increase in assets under management (AUM), which now stands at ₹3.73 lakh crore. New business lines contributed 2%-3% to this AUM growth.
Loan Portfolio and Asset Quality
New Loans Booked
The company booked 9.69 million new loans in Q2 FY25, a 14% increase compared to 8.53 million loans in Q2 FY24. This surge demonstrates Bajaj Finance’s strong market positioning and its ability to attract new customers.
Non-Performing Assets (NPA)
Despite the increase in new loans, the company’s asset quality saw some deterioration. Gross non-performing assets (GNPA) increased to 1.06% from 0.91%, and net non-performing assets (NNPA) rose to 0.46% from 0.31%. This rise in bad loans is a concern for Bajaj Finance as it highlights the risk of defaults.
Moreover, loan losses and provisions surged by 77%, reaching ₹1,909 crore compared to ₹1,077 crore in Q2 FY24. The rural personal loan segment, in particular, has been a challenge for the company, contributing to these increased losses.
Operating Expenses and Cost of Funds
Efficiency in Operating Costs
Bajaj Finance showed improved operational efficiency, with its operating expenses to net total income ratio decreasing to 33.2% from 34% last year. This reflects the company’s efforts to streamline operations and manage costs effectively.
Cost of Funds (COF)
The cost of funds rose slightly to 7.97%, a marginal increase of 3 basis points from Q1 FY25. However, Bajaj Finance anticipates that the COF has peaked and should stabilize in the upcoming quarters. Stabilizing this metric is critical for maintaining profitability.
Performance of Subsidiaries
Bajaj Housing Finance
Bajaj Housing Finance saw a 21% rise in profit after tax, reaching ₹546 crore, up from ₹451 crore last year. The subsidiary’s AUM grew by 26% to ₹1.03 lakh crore, reflecting strong demand for housing loans.
Bajaj Financial Securities
Bajaj Financial Securities also posted impressive growth, with profit after tax rising to ₹37 crore from ₹13 crore in Q2 FY24. The margin trade financing (MTF) book grew by a whopping 163%, indicating increased customer activity in the stock market.
Future Outlook and Conclusion
Bajaj Finance’s expansion strategy is aggressive, with the company adding 3.98 million new customers in Q2 FY25. It aims to surpass the 100 million customer mark by the end of FY25. However, rising non-performing assets, especially in the rural loan sector, and an increase in loan losses present challenges that could impact profitability moving forward.
| Metric | Q2 FY25 | Q2 FY24 | YoY Growth (%) |
|---|---|---|---|
| Net Profit (₹ crore) | 4,013.7 | 3,550.8 | 13% |
| Analysts’ Expectations (₹ crore) | 4,043.4 – 4,464 | N/A | N/A |
| Net Interest Income (₹ crore) | 8,837.7 | 7,196.3 | 22.8% |
| Total Income (₹ crore) | 10,946 | N/A | 24% |
| Assets Under Management (AUM, ₹ crore) | 3.73 lakh | 2.89 lakh | 29% |
| New Loans Booked (million) | 9.69 | 8.53 | 14% |
| Gross NPA (%) | 1.06% | 0.91% | N/A |
| Net NPA (%) | 0.46% | 0.31% | N/A |
| Loan Losses and Provisions (₹ crore) | 1,909 | 1,077 | 77% |
| Operating Expenses to Net Total Income (%) | 33.2% | 34.0% | N/A |
| Cost of Funds (%) | 7.97% | N/A | N/A |
| Bajaj Housing Finance PAT (₹ crore) | 546 | 451 | 21% |
| Bajaj Financial Securities PAT (₹ crore) | 37 | 13 | 184% |
While the company is optimistic about reducing loan losses by Q4 FY25, managing asset quality will be crucial to its long-term success. Investors will be watching closely to see how Bajaj Finance navigates these risks while maintaining its growth trajectory.
In conclusion, Bajaj Finance delivered solid growth in Q2 FY25 but fell short of lofty market expectations, highlighting both the strengths and challenges of the company in a competitive financial environment.
Related Post: