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Updated January 30th, 2024 at 12:05 IST

Bajaj Finance shares drop on reporting lower-than-expected Q3 profit

Bajaj Finance's consolidated profit after tax rose 22.4 per cent to Rs 3,639 crore for the quarter ending December 31 compared to the previous year.

Abhishek Vasudev
Nifty
Bajaj Finance | Image:Republic
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Shares of the country’s leading non-banking financial company (NBFC) Bajaj Finance dropped as much as 4.81 per cent to hit an intraday low of Rs 6,841 it reported December quarter profit that fell short of analysts’ expectations. The company attributed the subdued performance to a regulatory ban on two lending instruments and increased provisions for bad loans.

Bajaj Finance's consolidated profit after tax rose 22.4 per cent to Rs 3,639 crore for the quarter ending December 31 compared to the previous year. However, analysts had anticipated a higher profit of Rs 3,756 crore, as per LSEG data.

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The regulatory setback occurred in November when the Reserve Bank of India prohibited Bajaj Finance from issuing loans under eCOM and Insta EMI Cards, citing the lender's failure to provide essential information to borrowers.

While the company did not disclose the specific portfolio impact of the banned lending instruments, it acknowledged that the combination of loan losses and regulatory action resulted in a 5 to 6 per cent lower profit growth.

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Rajeev Jain, managing director of Bajaj Finance, addressed the situation in an analyst call, stating that the company has conducted a thorough review of central bank guidelines on digital lending.

Jain reassured stakeholders that Bajaj Finance is committed to full compliance with the regulatory order at the earliest. Additionally, the company is actively engaging with regulators and RBL Bank to address deficiencies in the Bajaj Finance-RBL co-branded credit card.

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The impact of higher risk weights was evident in Bajaj's capital adequacy ratio, with a 290 basis point reduction. Jain noted that future growth in the unsecured segment will be "calibrated" in response to the increased capital requirements imposed by the Reserve Bank of India in November, particularly targeting personal loan and credit card lending.

Bajaj Finance reported a major year-on-year increase of over 48 per cent in loan provisions, totaling Rs 1,248 crore. The higher provisions reflect the company's prudent approach to cover potential defaults amid the challenging economic environment.

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As of 10:01 am, Bajaj Finance shares traded 3.5 per cent lower at Rs 6,936. The stock was top loser on the Nifty 50 index and the company has market capitalization of Rs 4.29 lakh crore.

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Published January 30th, 2024 at 10:04 IST

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