Bajaj Finance slips 5% after Co briefs on business impact due to Covid-19

Shares of Bajaj Finance slipped 5.7 per cent to a fresh 52-week low of Rs 2,081.50 on the NSE on Tuesday in an otherwise strong market after the company's management team said that over the past 10 days, the company had lost nearly 350,000 customers, impacting its assets under management (AUM) by Rs 4,750 crore.

Overall, the company reported a 27 per cent AUM growth in the March 2020 quarter (Q4) compared to its 7-quarter average growth of 37 per cent. Had the company not lost these customers, AUM for Q4 would have grown 31.5 per cent year-on-year (YoY), the management team, led by its Managing Director Rajeev Jain said in a call with analysts on Monday.

Bajaj Finance published some key performance metrics for Q4 on Monday. The new customer addition and the new loans disbursed were the weakest since FY15 — even worse than the demonetisation-hit quarters of FY17. New customers acquired was down 22.8 per cent at 1.9 million, as compared to the December 2019 quarter's 2.46 million figure. It was also less than 1.92 million in the year-ago quarter. Likewise, new loans booked fell 22.7 per cent sequentially to 6 million; this metric was up just 3.5 per cent YoY.

Apart from loan growth, the other worrisome aspect is a possible asset quality deterioration. Besides, the company is assessing the adequacy of provisioning for identified large accounts and will consider enhancing provisions for these accounts. It is also considering one-time accelerated provisioning for Covid-19 to further strengthen its provisioning standards.

Covid-19-related asset quality pressures may also lead to one-time accelerated provisioning. According to this Business Standard report, investors should brace for an increase of 40-50 per cent in the credit cost computed on FY20’s numbers, though in the worst case credit cost could increase by 80-90 per cent.

The company's consolidated liquidity surplus stood at Rs 15,800 crore as of March 31, 2020. Commercial papers worth around Rs 2,000 crore are maturing in the next three months for Bajaj Finance. Customer franchise as on March 31, 2020, stood at 42.6 million, as compared to 34.5 million as on March 31, 2019. Deposit book stood at Rs 21,400 crore as on March 31, 2020, as against Rs 13,193 crore a year ago, with the mix of retail and corporate books at 72:28.

Bajaj Finance said it remains well-capitalised with the capital adequacy ratio of approximately 25 per cent as on March 31.

Recently, foreign brokerage Bernstein had downgraded Bajaj Finance to ‘underperform’ and had cut the target price to Rs 1,740 from Rs 4,820.

“The unsecured consumer finance business models would become challenging in the current pandemic environment. At the current early stage of Covid-19 outbreak in India, it is uncertain to project how long the physical restrictions from the government would last beyond the 21-days imposed lockdown. At this stage, it would be conservative to assume that first quarter of FY2021 would be a near complete economic freeze and a crawling recovery post that,” they wrote in their rating rationale.

At 9:40 AM, the stock was down 4.68 per cent at Rs 2104.10 as compared to 4.4 per cent gain in the Nifty50 index. Around 19.4 lakh shares have changed hands on the counter so far. In 2020 so far, the stock has declined 47.8 per cent as compared to 33.6 per cent fall in the Nifty50 index. Besides, shares of Bajaj Finserv also fell 4 per cent to Rs 4,329 on the NSE on Tuesday.