Bajaj Finance investors to cut expectations as second covid wave hits

Bajaj Finance has given out an estimate that its asset under management (AUM) will take a hit of Rs4,000 crore-Rs5,000 crore in the current financial year and most of this would be suffered in the first quarter.

Bajaj Finance has come out as the first lender to show up that investors need to tone down their expectations as the prospects for consumer lenders aren’t as bright as anticipated earlier.

Asset quality too was hit hard. The lender has witnessed a drop in collections and an increase in bounce rates of equated monthly installments. In other words, more loans are being defaulted upon than originally anticipated. The lenders expect its credit costs to increase by ₹1100-1300 crore over and above what it had indicated earlier.

There were stringent lockdowns rules in May in most of the states imposing curbs following the second wave coronavirus infections.
The lenders’ business-to-business was hit hard as most shops and establishments staying shut in May.

It also impacted vehicle loans, the lender said. Bajaj Finance could see just 60% of the return payments it had originally planned for.
“Considering the short duration of the high-volume products, they also contribute meaningfully to fee income for the quarter,” pointed out analysts at Motilal Oswal Financial Services Ltd in a note.

The lender is facing a drop in collections and an increase in bounce rates of equated monthly installments i.e more loans are being defaulted upon than originally anticipated.

Bad loan ratios are going to be higher. The lenders expect its credit costs to go up by ₹1100-1300 crore over and above what it had shown up earlier.

The company is expecting things to come to normalcy by early July.
Shares of Bajaj Finance dropped 5% in early trade today.

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