"NoN-BanK with Strategy & Structure of a Bank."- Bajaj Finance Quarterly Results
Q1 was a pandemic quarter. The emphasis was on employee well-being, capital safeguarding, liquidity management, business scenario planning, opex management, collections capacity augmentation, customer propositions, business transformation framework, and, lastly, a calibrated restart of business as the country started to reopen.
The company is holding it steady!
There was a noticeable accident in the 2008 Mexico City Learjet crash caused due to wake turbulence. Bajaj Finance is holding steady even in turbulence times.
Asset Quality:
Quarterly Update of the business:
- NII, Net Profit, and Asset Quality are stable.
- 15.7% of AUM under moratorium. The moratorium is in line with competitors.
- Consolidated assets under management are at 138,055 cr's V/s 128,898 cr's. Growth of 7%
- Consolidated profit after tax is at 962 cr's V/s 1,195 cr's. Which as seen degrowth of 19%
- Contingency provision off 1,450 crores for COVID·19, which is 10.8% of consolidated moratorium book. This contingency provision, together with existing expected credit loss provision off 623 crores, provides an overall provisioning coverage
of 13.7% on the consolidated moratorium book.
- Paycut at all levels: 5% for the junior level to 17.5% for the senior-most level.
- Capital to Risk-Weighted Assets Ratio (CRAR) remains very well capitalized with CRAR of 26.40% as of 30th June 2020. It remains one of the best capitalized large NBFCs in India.
- Gross NPA and Net NPA as of 30th June 2020 stood at 1.40% and 0.50%, respectively, as against 1.60% and 0.64% as of30 June 2019.
- Customer Base: 4.3 Crores, with new loans booked during Q1 FY21, declined by 76%.
- Long Term guidance is unharmed with 10-12% AUM growth in FY21. Companies operation were primarily impacted due to COVID- 19 and consequent lockdowns, which remained for most of Q1FY21. That has resulted in lower business and recovery of dues from its customers.
Products Offered by Bajaj Finance
- Business Operations were closed till 10th May 2020 due to full nation lockdown. Currently, bajaj finance is operating at 85%, i.e., 2,322 locations are open to business, and the rest 86 places are in closed containment zones, representing 15% of the company. Starting from the 10th may stringent loan to value (LTV) norms and focus on existing customers. Semi-urban and rural market volume recovery is much stronger than anticipated.
Presence of Bajaj Finance operations
- Given the lockdown, the company increased focus on its 42.95 mm customer franchise to increase penetration of fee products like health card, health insurance, etc. The company sold a 5.33 lac health card to its existing EMI card customers in Q1 FY21. This product comes with a higher limit, EMI financing tie-ups at multi-specialty hospitals, and various other wellness benefits.
- Existing customers contributed to 70% of new loans booked during Q1 FY21.
-The company has taken several actions, including fixed pay cut (5% at the junior level to 17.5% at senior-most level), no incentives for Q1, call center optimization, freeze on travel, advertising & promotion, and deferred physical training, etc. to reduce its cost base. The company has paused replacement and new hiring, branch expansion, and deferred other discretionary costs till Sep' 20.
- As per Reserve Bank of India, given the extension of lockdown and continuing disruption on account of COVID-19, extended the moratorium by another three months till 31st August 2020.Consolidated moratorium book reduced to ₹ 21,705 crores (15.7% of AUM) as of 30th June 2020 from ₹ 38,599 crores (27.1% of AUM) 30th April 2020 owing to the reduction in bounce rate coupled with improved collection efficiencies.
Business Transformation- 'Never let a crisis go waste.'
"Zero Based Budgeting"
The company is utilizing this pandemic time to completely transform itself by deploying this methodology to reimagine all its businesses and functions. As a result, all activities and services are getting into micro detail of every process, customer moment of truth and cost lines, and completely reimagining them with enhanced customer experience, stronger digital orientation, and a cost structure. As demand comes back entirely, they will be ready to leverage this transformation to grow the business rapidly. Existing customers would be able to access financial services across lending, insurance, investments, and payments in a maximum of three clicks.
Future guidance from Bajaj Finance
Over the last few years, the company has been testing its Munich strategy of 'Online to offline' and offline to online' by integrating customers and retailer ecosystem. It's now working on integrating its 'O2O' model to deliver higher velocity
to its merchant ecosystem and reduced friction for its customers. This transformation will help them sell more financial services at the point of sale and subsequently.
Read Disclaimer, Data Source: https://bit.ly/39efv0A
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