Covid-19 impact on Bajaj Finance seen to be temporary, say analysts

“We see temporary moderation in these businesses and expect some part of the lost demand to be compensated by the start of the unlocking,” analysts at Motilal Oswal said in a report on 6 June.

“With good pent-up demand, we may see a positive surprise in the second half– provided there is no impact in the form of a third covid-19 wave, or the wave is less intense in nature,” the report said.

The non-bank lender said on 4 June that business-to-business (B2B) and auto finance businesses were most affected due to strict lockdowns in majority of states. “These businesses delivered 70{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of their planned volumes in April 2021 as multiple states started imposing lockdowns from mid-April. Their volumes dropped to 40{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in May 2021,” the statement said.

However, Bajaj Finance said other lines of businesses were less impacted in April and delivered 85{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of planned disbursements.

Analysts said the severity of earnings impact from the covid-19 second wave has been much lower than the first wave. The management, it said, is well-prepared to deal with this and compensate the lost business with the start of the unlocking process.

“Digital initiatives have been upfronted and are likely to provide significant benefit on the cost and growth fronts. The cross-selling of products to the existing credit segment customer base of 39 million would be a key growth driver in FY22 as well,” the report pointed out.

Meanwhile, Bajaj Finance estimates an impact of Rs4,000-5,000 crore hit to its assets under management (AUM) growth plan for FY22 on account of the disruption caused by the second wave. However, Q1 FY22 will see higher impact on AUM due to lower volumes in the B2B businesses, it added.