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Strong customer acquisitions; liquidity remains healthy

* Bajaj Finance (BAF) had a healthy 4QFY21. The company acquired 2.3m new customers during the quarter. This is almost similar to 3QFY21 levels (2.2m). Typically, 3Q was the strongest quarter for the company – on account of new customer acquisitions owing to the festive season. The overall customer base increased to 48.6m.

* The number of loans disbursed was at ~90% of QoQ/YoY levels at 5.5m. The share of new customer loans to overall loan originations increased to ~42% v/s ~36% a quarter ago and ~31% a year ago – indicating an improving risk appetite.

* AUM grew 6.5% QoQ to INR1.53t (+4% YoY), marginally better than our expectation of ~3% YoY. We expect the company to have seen healthy traction in consumer B2B loans and commercial loans. We also expect a gradual uptick in mortgage loans and consumer B2C.

* Liquidity on the balance sheet is largely stable QoQ at INR160b (10.5% of AUM).

* The deposit book grew 9% QoQ and ~20% YoY to INR258b. Notably, cost of incremental deposits stands at ~6.5%.

* CRAR has remained healthy at 28.4% as of 4QFY21.

* The gradual increase in disbursement volumes is encouraging. Sequential AUM growth is largely in line with our estimates. With the broader economy reviving, asset quality is likely to fare better than initially expected. This would give the management more confidence to pursue growth opportunities. Margins are likely to expand as the drag from excess liquidity is slowly coming off, coupled with lower cost of funds. With normalization expected from the next fiscal, RoA/RoE is likely to rebound to 4.8%/22%.

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