Bajaj Finance, one of India’s largest private non-banking financial companies (NBFC), has announced a 13% year-on-year (YoY) increase in net profit for the second quarter of FY25, reaching ₹4,104 crore.
The results, released on Tuesday evening, indicate a solid financial performance, with the company's net interest income also rising by 23%. These figures showcase the company’s resilient standing in the financial sector, an aspect critical for share market investment enthusiasts.
Strong growth in net interest income
During the quarter, Bajaj Finance's net interest income surged to ₹8,838 crore, marking a notable 23% increase from the ₹7,196 crore recorded in the previous quarter. This growth was primarily driven by a significant 27% rise in interest income, which reached ₹14,987 crore compared to ₹11,733 crore in the same period last year. However, this increase came alongside a 35% rise in finance costs, which stood at ₹6,149 crore for the quarter.
Impact of Bajaj Housing Finance stake sale
A substantial portion of Bajaj Finance's revenue for this quarter was bolstered by proceeds from the partial stake sale in its subsidiary, Bajaj Housing Finance Ltd. The company raised approximately ₹6,560 crore from this public issue, which involved the sale of 93.7 crore shares through a combination of fresh issues and an offer for sale. As a result, Bajaj Finance's stake in Bajaj Housing Finance decreased from 100% to 88.75%. The funds from this transaction contributed positively to the quarterly figures.
Impressive asset under management growth
Bajaj Finance's Assets Under Management (AUM) showed a strong 29% YoY growth, reaching ₹373,924 crore by the end of Q2FY25. This quarter alone saw an increase of ₹19,732 crore in AUM, reflecting the company’s ongoing strategy to expand its lending portfolio. Such growth is encouraging, especially in a competitive lending environment, making Bajaj Finance an appealing option for those considering share market investment.
Pre-provision operating profit and provisions impact
The company's pre-provision operating profit jumped by 25% YoY to ₹7,307 crore, compared to ₹5,835 crore during the same period last year. However, the provision for loan losses experienced a sharp rise, increasing by 77% YoY to ₹1,909 crore. This higher provisioning impacted the bottom line, although Bajaj Finance still managed to report a 13% YoY increase in net profit, highlighting its financial stability even amidst increased provisions.
Asset quality slightly deteriorates
On the asset quality front, Bajaj Finance experienced a slight deterioration in the second quarter. The Gross Non-Performing Assets (GNPA) rose to 1.06%, compared to 0.91% in the same quarter last year. Similarly, the Net Non-Performing Assets (NNPA) increased to 0.46% from 0.31%. These figures suggest a minor decline in asset quality, indicating the need for cautious credit management in the upcoming quarters.
Stock market performance amidst quarterly results
Despite the strong financial performance in Q2FY25, Bajaj Finance’s shares saw a dip ahead of the results announcement. On the National Stock Exchange (NSE), shares closed at ₹6,645, reflecting a 1.99% decline.
Year-to-date (YTD), the stock has underperformed, with negative returns of 8.7%. This has been below the benchmark indices' performance, indicating that investors remain cautious about the company's future outlook, particularly in light of the rising provisions and slight asset quality concerns.
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