By Nishit Navin
BENGALURU (Reuters) -India’s Bajaj Finance said on Tuesday it expects to see normalisation in loan losses only from October, after it missed first-quarter profit estimates due to higher provisions.
“Loan losses may remain at current levels in second-quarter and should start to normalize by the third-quarter,” the company said in a post-earnings release.
The non-banking financial company’s loan losses and provisions rose due to muted collection efficiencies, which is the percentage of loan’s demanded amount that is collected.
“The company is augmenting its debt management infrastructure as a mitigation measure,” it said.
Analysts said that Indian lenders grappled with increased delinquencies during the quarter, as heatwaves and the national election affected companies’ ability to collect repayments on the ground.
Bajaj Finance reported consolidated profit after tax of 39.12 billion rupees ($467.5 million) for the quarter ended June 30, compared to analysts’ estimates of 40.29 billion rupees, as per LSEG data.
Its net interest income – the difference between interest paid and received – rose 25% to 83.65 billion rupees.
Loan losses and provisions – the money set aside to cover potential defaults – grew nearly 70% to 16.85 billion rupees, well ahead of analysts’ estimate of 14.66 billion rupees.
Indian lenders’ provisions have also risen as exuberant lending in unsecured segments had led the Reserve Bank of India to mandate an increase in capital requirements for personal loans and credit cards in November.
Bajaj Finance’s gross non-performing asset ratio – the ratio of bad loans to total lending expressed as a percentage – weakened slightly to 0.86% at the end of June from 0.85% at the end of March.
Shares of the company closed down 2.3% ahead of the results. They were down 0.5% in early trade, but fell in a broadly volatile market following the budget presentation.
(Reporting by Nishit Navin; Editing by Varun H K)
