Bajaj Finance plunges after missing Q3 profit estimate

Bengaluru, 30 January: Shares of Bajaj Finance, which is a non-banking financial company (NBFC) are down around 5%. This comes after it reported a smaller-than-expected rise in quarterly profit on Monday, hit by a regulatory ban on two of its lending instruments and higher bad loan provisions.

In November 2023, India's central bank banned Bajaj Finance from issuing loans under eCOM and Insta EMI Cards, saying the lender did not issue key information to borrowers.

The company's consolidated profit after tax rose 22.4% to ₹3,639 crore (about $438 million) in the quarter ended 31 December 2023 from a year earlier. Analysts, on average, expected a profit of ₹3,756 crore, according to LSEG data.

Consolidated numbers include the businesses of the lender's subsidiaries, Bajaj Housing Finance and Bajaj Financial Securities.

The company did not specify how much of its loan portfolio comprised loans given under the two products.

"Elevated loan losses and impact of regulatory action have led to profit growth being lower by approximately 5%-6%," the company said in a statement.

Loan losses and provisions, the money set aside to cover potential defaults, increased more than 48% year-on-year in the quarter to 12.48 billion rupees.

Exuberant personal loan and credit card lending – which do not carry collateral and pose a higher risk – led the Reserve Bank of India to increase capital requirements for the segment.

Gross non-performing asset ratio, the ratio of bad loans to total lendings, deteriorated to 0.95% at the end of December, from 0.91% at the end of September.

Its overall new loan bookings climbed 26% year-on-year in the quarter, while deposits jumped 35% to 580.08 billion rupees as of December-end. ($1 = 83.1300 Indian rupees)

Inputs from Reuters