Bajaj Finance, the non banking financial company (NBFC) took a deep cut in its assets under management (AUM) – the key performance parameter – due to the ongoing lockdown in the country following the novel Coronavirus or COVID-19 breakout.
The NBFC has lost 3.5 lakh accounts and Rs 4750 crore worth of assets under management in the last 10 days of March after the nationwide lockdown was announced.
However, it expects demand to revive by July and business to normalise by October.
Bajaj Finance reported a mere 2% growth in its asset under management to Rs 1.47 trillion at the end of March as against Rs 1.45 trillion in the previous quarter.
The growth in AUM had slowed to 27% year-on-year compared to 40% during the corresponding quarter last year.
The NBFCS management has laid down three business scenarios depending on the lifting of the lockdown deadline. According to Scenario 1, if the lockdown is lifted on 14 April, the company expects to return to 60% of the normal business by May and 100% by September.
In that case, impact on growth and profitability will not be significant and credit cost or the amount of funds will only be 40-50% higher.
If the lockdown is lifted on 30 April, the NBFC expects to return to full normalcy by October. Credit cost or the amount it has to set aside for bad loans will be 50-60% higher in this scenario.
The third scenario is if the lockdown is lifted on 15 May, the company is expected to do zero business in April and May with the return to normalcy being pushed to the fourth quarter of the current fiscal year.
The impact on credit cost in this case will be 80-90% higher on a full-year basis, the management said.
Bajaj Finance is assessing the need for one-time provisioning against certain large accounts, a sign that credit cost could increase in the current fiscal year.
It has already given moratorium on loan repayment to nearly 12 lakh out of total 2 crore borrowers. Of this 9 lakh customers are under non-auto loans and 3 lakh customers under auto loans.
Bajaj Finance capital adequacy ratio remains strong at 25% and the company is carrying liquidity of Rs 15,800 crore as on 31 March.
Its deposit book stood at Rs 21,400 crore as of March 31, 2020 compared to Rs 13,193 crore as of March 31, 2019. The mix of retail and corporate book stood at 72:28.
Net net we believe that the H1 of FY21 is likely to remain challenging ahead for Bajaj Finance as asset recoveries and asset quality will be the key monitorables ahead.
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