If the RBI’s prolonged restrictions on loan sanction and disbursal under its eCOM and Insta EMI Card products persist, it has the potential to negatively impact investor sentiment.
Bajaj Finance Ltd’s performance for the three months ended December (Q3FY24) points towards another robust quarter, underscoring its resilience despite the Reserve Bank of India’s (RBI) directive to halt loans under the eCOM and Insta EMI Card products. The company’s customer base reached 80.4 million with the addition of approximately 3.85 million customers, marking the highest surge in at least a decade.
The festive season acted as a catalyst for customer acquisition, contributing to a 26% rise in new loans booked during Q3. Moreover, the deposit book witnessed a 35% year-on-year growth by the end of the quarter. These factors propelled Bajaj Finance’s assets under management to approximately ₹3 trillion as of December, reflecting a substantial 35% increase from the previous year.
According to Motilal Oswal Financial Services, this growth signifies a strong festive period for Bajaj Finance, emphasizing effective utilization of traditional channels for customer acquisition, excluding digital and e-commerce platforms. The market responded positively to these developments, with the non-banking financial company’s shares surging by over 4% on Thursday.
Moving forward, the margin performance remains a pivotal consideration. While navigating through existing challenges, any positive surprises in this area will be noteworthy, considering the overall industry landscape.
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Bajaj Finance is expected to witness a compression in net interest margin over the next two to three quarters, amounting to 25-30 basis points, primarily driven by an increase in funding costs. The Q2 results already reflected a 14 bps sequential decline in the net interest margin.
The embargo on digital loans is anticipated to have a modest impact on business and fees; however, the repercussions are likely to become evident in the Q4FY24-Q1FY25 period, according to Shweta Daptardar, an analyst at Elara Securities (India). Daptardar added, “Although not substantial, we estimate a 2% impact on business growth and a 3.5% impact on profit before tax for the second half of FY24.”
Despite these challenges, Bajaj Finance maintains a robust liquidity position. The company’s shares are currently trading 6% lower than the 52-week high of ₹8,192 per share observed in October. It’s noteworthy that if RBI restrictions persist for an extended duration, it could potentially dampen investor sentiment in addition to impacting margins.
