Bajaj Fin Q1 loan growth is solid but cost of funds may be a drag

livemint.com:

₹7,920 apiece on the National Stock Exchange. This excitement comes on the back of the company’s June quarter (Q1FY24) provisional data which was robust on key parameters. The company reported solid assets under management (AUM) growth of 32% year-on-year (y-o-y) to ₹2.7 trillion—a multi-quarter high.

With this, the company has exceeded analysts’ expectations on this front. According to the company, the AUM mix was stable during the quarter. This indicates that the growth is likely to have been broad based across segments.

For FY24, the company is targeting AUM growth of 28-29%. Other metrics also saw impressive growth in Q1. The company added 72.98 million customers for a 21% y-o-y incr-ease.

Disbursements were healthy as the new loans booked grew 34% y-o-y. Efforts to expand digital footprint and foray into new product segments including microfinance and auto loans, in past few quarters,could have aided disbursements and boosted cross selling opportunities. “Step-up in velocity of loan bookings and new customer addition is reflective of sourcing and cross-sell benefits emanating from the recently launched mobile app/web consumer platforms," Rajiv Mehta, lead analyst of Yes Securities, said in a note.

That said, concerns on net interest margin (NIM) outlook remain as cost of funds are seen rising in the coming quarters. Recall that in the Q4FY23 earnings call, the company’s management had indicated that the margin decline is likely to be gradual in FY24. “The NIM could see a marginal decline in FY24, but there are other levers including the growth from the company’s newer business segments, and sustained customer addition by the company, could help cushion the impact on margin," Kaitav Shah, analyst at Anand Rathi