Lockdown set to hit Bajaj Finance’s FY22 AUM growth

Bajaj Finance had a good Q4FY21 with most lead financial indicators normalising to pre-Covid levels.

Bajaj Finance has in its mid-quarter update has said it expects an impact of Rs 4000-5000 crore on assets under management (AUM) growth plan for FY2022, because of the disruption caused by the second wave.

The impact on AUM in Q1FY22 was seen higher due to lower volumes in the B2B (business to business) segment. The company said it has taken several measures to reduce its operating expenses and cost of funds to partially mitigate the financial impact of lower AUM growth.

Given the severity of the second wave and the consequent lockdown across most of India for last 35 days, the company has estimated an impact on its financials in FY22. The second wave has caused a marginal increase in bounce rates in Q1FY22 over Q4FY21.

Average EMI (equated monthly instalments) bounce rates in Q1FY22 were approximately 1.08X of Q4FY21, the company said.

Forward flows across overdue positions were higher due to constraints on collections amid strict lockdowns across most parts of India. As a result, the company estimated its gross non-performing assets and net non-performing assets in Q1FY22 and Q2FY22 to be higher. The disruption caused by the second wave has also led to an incremental credit cost of `1,100-1,300 crore versus planned credit cost in FY2022.

According to the company update, the B2B and auto finance businesses were most affected due to strict lockdowns. Other lines of businesses were less impacted in April and saw 85% of planned disbursements. The company said it leveraged its digital capabilities to remain largely functional during May and delivered 60% of planned disbursements.

Bajaj Finance had a good Q4FY21 with most lead financial indicators normalising to pre-Covid levels. The company ended FY21 with GNPA of 1.8% and NNPA of 0.75%, close to pre-COVID levels. The company entered FY2022 with a COVID overlay provision of Rs 840 crore.