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Is Bajaj Finance a Compounding Machine? | Q1FY23 Result Analysis

Is Bajaj Finance a Compounding Machine? | Q1FY23 Result Analysis

Published on 29 July 2022 .Views 110 .Comments 0

The business growth figures of Bajaj Finance are quite astonishing and consistent. The company has recently announced its Q1FY23 results on 27th July 2022. Here the company has also given some long-term guidance for its business which looks promising. So, let’s understand the result and discuss the long-term guidance of the company in this article as we move ahead.

Q1FY23 Results Preview:

  • The Core Assets Under Management (AUM) of the company is Rs. 2.04 Lakh Cr. which has grown by 25% YoY, if we assume the CAGR growth rate of 25%, then the company can double its AUM size in the next 3 years.
  • The Net Interest Income (NII) is the difference between Interest Expenditure and Interest Received by the company is at Rs. 6,140 Cr. in Q1FY23 growing 48% YoY.
  • The net Profit of the company in Q1FY23 is Rs. 2,596 Cr. which is the highest ever quarterly profit for Bajaj Finance. Net Profit of the company registered 159% growth YoY due to lower provisions in the Q1FY23.
  • The return on Equity (RoE) of the company stands at 23.07%.
  • The gross Non-Performing Assets (GNPA) of the company is at 1.25% in Q1FY23 while the Net Non-Performing Assets (NNPA) figure stands at 0.51%.
  • Bajaj Finance disbursed 74 Lakh new loans in Q1FY23.
  • The company added 27.3 Lakh new subscribers taking the total customer franchisee to above the 6 Cr. mark.
  • The Cross-Sell Franchisee is above the 50% mark. Cross Sell means the awarding of more than 1 loan to a customer.
  • Operating Expenses as a % of NII are consistently going down from the levels of 50% earlier to 35.9% currently showcasing improvement in operational efficiency.
  • The capital Adequacy Ratio is at 26.16%

Long-Term Guidance:

  • For GNPA, the company has given long-term guidance of 1.4% to 1.7%. Interestingly, currently, the company is having lower GNPA figure than its long-term guidance which shows adequate risk management by the company.
  • For NNPA, the company’s guidance for the long-term is in the range of 0.4% to 0.7%. The Current NNPA figure also falls in the range of the long-term mark of the company.
  • Further, the company has given long-term guidance in the range of 25% to 27% and 23% to 24% for AUM and profit growth respectively.
  • For Return on Assets (ROA), the company has given long-term guidance of 4% to 4.5% which is generally in the range of 2% in the case of banking and NBFCs companies. The company sets a target of 19% to 21% for Return on Equity (ROE).

What Should Investors Do:

The companies especially in the Banking and Non-Banking Financial Corporation space which have good risk-management capacity have huge scope for growth in the future. The long-term guidance provided by the company for its various financial metrics showcases the potential of Bajaj Finance being a compounding machine. The company’s stock generally trades on a premium valuation due to its robust financial performance in the past and promising growth prospects ahead. Hence, investors should keep this stock on the radar from a long-term perspective but should follow due diligence before making an investment decision.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.

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