MOSL: Bajaj Finance (Neutral)- Robust AUM growth, stable asset quality
Bajaj Finance: Robust AUM growth, stable asset quality
(BAF IN, Mkt Cap USD25.7b, CMP INR3112, TP INR2900, 7% Downside, Neutral)
- PAT of INR11.6b exceeded our estimate by 11%, led by a modest NII beat and lower credit costs. The quarter was characterized by continued strong AUM growth, stable sequential margins and healthy asset quality.
- AUM increased 5% QoQ (+41% YoY) to INR1.16t, led by strong growth across segments, barring commercial lending (+10% YoY). In 2W lending, BAF financed 44% of Bajaj Auto's 2W sales, as against its run-rate average of 35%, as competitive intensity weakened.
- For FY19, fee income more than doubled YoY to INR16.8b, while PAT grew 60% YoY to INR40b. RoE for the year increased 260bp to 22.9%
- Margins (calc.) were sequentially stable at 12%, with cost of funds relatively low at 8.3%. The borrowing mix remained largely stable QoQ, with the share of bank/market borrowings at 37%/50% respectively. With operational efficiency, with opex/AUM declining 30bp YoY to 4.2%.
- Asset quality remained stable, with a GNPL ratio of 1.54% and a PCR of 59%. BAF had fully recognized IL&FS exposure of INR2.3b - adjusted for this, GNPA % declined 7bp YoY to 1.34%. The company continues to maintain 6-7% of the balance sheet in cash and liquid investments.
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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