Bajaj Finance Q2 results on October 22: NBFC expected to report double-digit growth in NII, healthy rise in net profit

The leading non-banking finance company (NBFC) is set to announce its earnings for the second quarter ended September 2024 (Q2FY25) tomorrow, October 22.

Earlier this month, the company informed exchanges that a meeting of its Board of Directors will be held on October22 to consider and approve the unaudited standalone and consolidated financial results of the company for the quarter and half year ended September 30, 2024.

According to a provisional quarterly business update submitted to stock exchanges earlier this month, Bajaj Finance reported a 29% increase in AUMs to ₹3.74 lakh crore for the September quarter compared to the year-ago period.

The company said that new loans booked grew 14% to 9.69 million in Q2FY25 compared to 8.53 million in Q2FY24.

Customer franchise, however, increased sharply by 3.98 million to reach 92.09 million as of September 2024 compared to 76.56 million as of 30 September 2023.

Previous quarter performance

Bajaj Finance's net interest income (NII) surged by 25% YoY in the June quarter of the current fiscal to ₹8,365 crore compared to the same quarter a year ago. Total revenue from operations had increased 28.8% year-on-year to ₹16,098 crore for the quarter.

However, loan losses and provisions had spiked by 70% to ₹1,685 crore in Q1FY25 compared with ₹995 crore in the same period last year. The rise was attributed to reduced collection efficiencies.

Market experts observed that Bajaj Finance’s Q1FY25 earnings were hit by lower margins and a rise in credit costs. They had mentioned that Q2FY25 earnings may also see similar pressure on net interest margins (NIMs) as higher credit cost would be absorbed.

NII likely to grow 24-28% YoY in Q2FY25

According to estimates by market observers, the Bajaj Group company is expected to register a YoY growth of 24-28% in its net interest income in the quarter ended September 2024. The NBFC’s NII could be in the range of ₹8,810 crore to ₹9,187 crore, according to the street estimates.

The company’s profit after tax is expected to grow in healthy double digits in the September quarter, largely led by strong NII growth and softening provisions on loans and losses. In the September quarter of the previous fiscal the company had reported a consolidated net profit of ₹3,550.8 crore.

Outlook on margins

Experts believe that though Q2FY25 margins may remain under pressure, there could be a turnaround from H2FY25 onwards based on the expected Reserve Bank of India (RBI) rate cut in December 2024. A decline in cost of funds led by lower interest rate cycle is expected to support NIMs, given that around 48% of Bajaj Finance’s borrowings are from banks, which are largely linked to external benchmarks.

According to market experts, the company’s NIM could be in the range of 9-10% for the September quarter of FY25.

Credit costs

Credit costs will also remain a key monitorable for Bajaj Finance in Q2FY25. According to experts, any increase in FY25 credit cost guidance would be taken negatively by the Street and vice-versa.

Bajaj Finance share price

Bajaj Finance shares traded flat at ₹6,786 apiece on the NSE at 11:13 am ahead of its Q2FY25 results.

The stock price movement of Bajaj Finance, in recent times, has been far from encouraging. In the last five trading sessions, the stock has dropped over 7%, while plunging 11.7% in the last one month. The NBFC stock has declined nearly 14% in the last one year.