Shares of Bajaj Finance gained in the early trade on Wednesday after the company reported 19.4 percent decline in net profit for the fourth of fiscal 2020 to Rs 948 crore, down from Rs 1,176 crore YoY dragged by higher provisions.

The stock gained 2.85 percent to hit intraday high of Rs 2,023.50 apiece on the BSE. At 10:25 am, Bajaj Finance shares were trading 0.60 percent higher at Rs 1,979.00.

Net interest income (NII) in Q4FY20 rose by 38 percent to Rs 4,684 crore from Rs 3,385 crore in Q4FY19.

Loan losses and provisions (expected credit loss) for the quarter rose to Rs 1,954 crore against Rs 409 crore in Q4FY19.

During the quarter, the company has taken an accelerated charge of Rs 390 crore for two identified large accounts, an additional provision of Rs 129 crore on account of recalibration of its ECL model and a contingency provision of Rs 900 crore for COVID-19, the company said in a regulatory filing.

Adjusted for contingency provision of Rs 900 crore for COVID-19, profit for the quarter was up by 38 percent at Rs 1,622 crore, the company added.

Gross non-performing assets during the quarter remained stable at 1.61 percent while net NPA fell 5 basis points to 0.65 percent from 0.70 percent QoQ.

Bajaj Finance’s consolidated assets under management rose 27 percent YoY to Rs 1,47,153 crore.

The provisioning coverage ratio was 60 percent. "Standard assets provisioning (ECL stage 1 and 2) including contingency provision of Rs 900 crore for Covid-19 stood at 159 bps and 97 bps excluding contingency provision under lnd AS,” the company said.

New loans booked during Q4FY20 increased by 3 percent to 6.03 million from 5.83 million in Q4FY19. Adjusted for lower acquisition due to lockdown, new loans booked would have grown by 21 percent to approximately 7.03 million, the company said.

“Due to COVID-19 pandemic and the consequent lockdown, the company lost 10 productive days in Q4 FY20 resulting in lower acquisition of nearly 1.0 million loan accounts and lower AUM of approximately Rs 4,500 crore,” it added.

Bajaj Finance said that its liquidity position remained very strong, with an overall surplus of approximately Rs 15,725 crore as of March 2020 on a consolidated basis and as of May 15, it was around Rs 20,900 crore.

Credit Suisse maintained neutral call on the stock but reduced its target price (TP) to Rs 2,000 from Rs 2,800 per share. The brokerage also cut EPS estimates for the stock by 24-53 percent.

The brokerage expects higher credit costs at 4.1 percent for the company and estimates 10 percent of loans under moratorium to slip into NPA. However, it believes that strong 7 percent pre-provsion operating profit and return on assets should enable the company to absorb higher credit costs.

Credit Suisse believes that in terms of liquidity and capital, Bajaj Finance is better placed as compared to other NBFCs.

Morgan Stanley has an overweight rating on the stock, with the target price at Rs 2,740. It expects the company to have an above-industry return on equity (RoE) in FY21 and expects it to bounce back the fastest as conditions improve.

"Structural asset growth and RoE potential have been expanding, while valuations are also attractive at current levels," Morgan Stanley said.

HSBC has a buy rating with the TP at Rs 3,700 per share. The brokerage feels the COVID-19 crisis may drive a marked change in spending patterns of consumers.

"We may see 'in-house' spending being favoured against 'out-of-home' spending. Financing needs are set to rise as consumers and companies push for no-cost EMI," HSBC said.

It also expects growth moderation to be lower in the medium term than feared by the market.

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First Published:May 20, 2020 11:31 AM IST