The share price of the non-banking finance company Bajaj Finance fell about 4% in the early trade when the company revealed that it anticipated higher non-performing assets in the months from August to September 2021.
The reasons posited for this expectation are the pandemic COVID lockdowns.
The company provided an update on the estimated impact of the second wave of COVID on the company’s financials for the financial year 2022.
The company claimed, “Forward flows across overdue positions were higher due to constraints on collections amidst strict lockdowns across most parts of India. As a result, the company estimates its GNPA (gross non-performing asset) and NNPA (net non-performing asset) in Q1 and Q2 to be higher.”
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Incremental credit cost vs planned credit cost is estimated by the company to be Rs 1,100 crore vs Rs 1,300 crore due to the destruction caused by the second wave of the pandemic COVID.
Most hit were the businesses of B2B and auto finance due to the strict lockdowns in the majority of the Indian states.
Further, the company estimated an impact of Rs 4,000-5,000 crore to the AUM growth plan of the current financial year of which the first quarter will be the hardest hit due to lower volumes in B2B businesses.
The company also detailed various steps it has taken to reduce operating expenses and the cost of funds to partially mitigate the shrinkage in the business.
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The company reported a 42% year-on-year (YoY) rise in March quarter profit, which was Rs 1,347 crore vs Rs 948.1 in the same quarter last year.
The various brokerage houses give the following recommendation on the stock:
JPMorgan assigned the company recommendation neutral, Citi assigned recommendation Buy, CLSA did not give any rating, Morgan Stanley gave rating overweight, Motilal Oswal gave rating buy.