MOSL: BAJAJ FINANCE (Downgrade to Neutral)-Strong core business; Ind-AS transition impacts networth by ~5%
Bajaj Finance: Strong core business; Ind-AS transition impacts networth by ~5%
(BAF IN,Mkt Cap USD21.1b, CMP INR2518, TP INR2500, 1% Downside, Downgrade to Neutral)
- Bajaj Finance (BAF) reported PAT of INR8.36b under Ind-AS accounting (INR10.2b (+69% YoY) under IGAAP v/s our estimate of INR8.7b). The quarter was marked by continued new client addition (+33% YoY), improving spreads YoY and stable asset quality. AUM grew 35% YoY to INR933b in the quarter. Adjusted for short-term IPO financing in the base quarter, AUM was up 39% YoY.
- Ind-AS impact: (a) FY17 networth declined ~6%, mostly due to amortization of up-fronted income (net basis INR7.97b, pretax) and hit due to adoption of ECL (INR2.7b pretax). (b) On a comparative basis, FY18 PAT was 7% lower under Ind-AS v/s I-GAAP, again largely due to amortization of fee and subvention income. While there has been change in PAT due to fee income amortization, cash flow/economic value generated out of business remains the same.
- Since a higher share of fee income/subvention income related businesses is written in 1Q and 3Q of the year, Ind-AS impact due to amortization is likely to be higher in these quarters. In FY18, the amortization-related impact for the full year (INR1.97b) was largely equal to that in 1Q (INR1.86b), and we expect a similar trend in FY19 too. 1QFY19 PAT was INR10.2b as per I-GAAP and INR8.36b as per Ind-AS (EIR impact of INR2.2b).
Bajaj Finance Limited is a non-banking finance company (NBFC). The Company is engaged in lending and allied activities. It focuses on consumer lending, small and medium-sized enterprises (SME) lending, commercial lending, rural lending, fixed deposits and value-added services. Its consumer lending products include two-wheelers and three-wheelers finance, consumer durables finance, digital products finance, retailer finance, salaried personal loans, e-commerce consumer finance, e-commerce seller finance and home loan. Its SME lending products include loan against property and business loans. Its commercial lending products include loan against securities and financial institutions group lending business. Its rural lending products include personal loans cross-sell, salaried personal loans and gold loans. It offers retail fixed deposits and wholesale fixed deposits. It is engaged in life insurance distribution, general insurance distribution and mutual fund distribution.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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