Bajaj Finance – 5 Point Analysis | Yadnya Investment Academy

Introduction:

This blog will consist of 5 point analysis of Bajaj Finance that are Customer Franchise, Assets Under Management (AUM), Consolidated Liquidity Surplus, Capital Adequacy Ratio, and Deposits Book. Read now how the company performed on the following parameters

i) Customer Franchise:

• Being an NBFC, Bajaj Finance has posted a strong Customer Franchise Number in Q4FY21. Bajaj Finance is having a customer base of 4.86 Cr (48.60 mn).
• This figure is consistently increasing. Bajaj Finance was having a total customer base of 4.26 Cr (42.60mn). in Q4FY20. Now which has increased to 4.86 Cr(48.60 mn).
• In the current quarter, the company has added 23 lakh (2.30 mn) new customers have been added.
• Whereas 24.6 lakh (2.46 mn) customers have been added in Q3FY20. Post that the Customer Acquisition number went down quarter on quarter even to the lower levels of 5.30 lakh (0.53 mn) customers in Q1FY21 due to lockdown across the nation.
• Total Customer Franchise is growing with accelerated momentum gain in New Customers acquisition.
• Hence, the rising customer acquisition figure in Q4FY21 presents that customer acquisition number is approaching towards pre-covid level, which is a positive sign for the company.
• Strong V-shaped recovery is seen in New Customers Acquired by the company.
• In the context of loans booked, 5.5 million new loans are booked in Q4FY21 on account of efficient cross-selling of Bajaj Finance.

Bajaj Finance: Customer Franchise (Q4FY21)

ii) Asset Under Management (AUM):

• The AUM of the company has reached its All-Time High-Level.
• In Q4FY20, the AUM of the company was 1.47 Lakh Cr. which got decreased in the next quarters but in Q4FY21, the AUM of the company touched new high levels of Rs. 1.53 lakh crore.
• Bajaj Finance has also come up with the sluggishness in the AUM numbers quarterly. There was negative growth of -6.2% in Q1FY21, which reduced to -0.7% in Q2FY21. The company reported some positiveness in AUM growth by 4.7% in Q3FY21 and the same stands at 6.6% in Q4FY21.
• Likewise, AUM Growth has also turned to positive levels on yearly basis too. The company has reported only 1 quarter with negative growth YoY i.e., in Q3FY21 of -1.1%. Previous Quarters that is Q1FY21 & Q2FY21, posted a single-digit growth YoY of 7.1% and 1.2% respectively. But, now the AUM growth of the company YoY is 4% which is a positive sign.

Bajaj Finance: AUM Growth Rate (%)

iii) Consolidated Liquidity Surplus:

• Consolidated Liquidity Surplus/Buffer refers to the amount which is kept aside by the company and which will not be utilized for the business and will be only used for the sake of uncertainties if any in the business.
• Levels of Consolidated Liquidity Surplus/Buffer of Bajaj Finance had increased from Rs. 11,645 Cr. in December 2019 to Rs. 24,775 Cr. in October 2020, but then it went down to Rs, 14,347 Cr. in December 2020, and now again it has increased to Rs. 16,000 Cr in March 2021.
• The healthy amount of Consolidated Liquidity Surplus till October 2020 presents the conservative approach of the company. And the recent numbers clearly show that the company is deploying this ideal money into productive assets.
• This liquidity buffers as a percentage of Total Borrowing has gone down from 21.9% in October 2020 to 11.6% in December 2020 and now the company is expected to go back to pre-covid liquidity buffer of 7%-8% of Total Borrowing by March 2021.
• This presents the shift in the company’s approach from Conservative to Aggressive.

Bajaj Finance: Consolidated Liquidity Surplus (Rs. Cr.)

iv) Capital Adequacy Ratio:

• Capital Adequacy Ration simply implies the position of the Banks and NBFC and how strong the company can handle risky situations.
• The company continues to remain very well capitalized with Capital Adequacy Ratio at 28.40% as of March 31, 221.
• This ratio also presents the healthy situation of Bajaj Finance even if there is the pressure of NPAs.
• The company has adequate capital to meet its next 3 years growth aspiration.

Bajaj Finance: Capital Adequacy Ratio (%)

v) Deposits Book:

• The company is focusing on retail deposits to raise money. This can be termed as Liability Franchise.
• The Deposit Book of Bajaj Finance has increased continuously while there was a bit of downfall in June 2020 from Rs. 21,472 Cr. in March 2020 to Rs. 20,061 Cr. but then again it increased from that level to RS. 25,800 Cr. in March 2021.
• The Retail Deposit Share percentage to Total Deposits Book is at 76% as of December 2020 which has been increasing from past quarters like 63% in March 2020 to 70% in June 2020, and 75% in September 2020.
• Deposit Book Contribution to Balance Sheet has also risen from 17% to 19% in December 2020.
• Consistently improving the share of retail deposits in Deposit Mix is in line with the company’s strategy of reducing its dependency on corporate deposits.

Bajaj Finance: Deposit Book (Rs. Cr.)

Conclusion:

Bajaj Finance has performed exceptionally in Q4FY21. It has shown a path of recovery by taking its figures to pre-covid levels. All the discussed points like Customer Franchise, Asset Under Management, Consolidated Liquidity Surplus, Capital Adequacy Ratio, and Deposit of the company are remarkably well.