Robust new customer acquisitions aid strong AUM growth; surplus liquidity could lead to a minor drag on margin
* BAF reported a healthy customer acquisition with 2.4m new customers added in 2QFY22 (acquisition run-rate back to pre-COVID levels). Total customer franchise increased to 52.8m (up 4.7% QoQ/19.7% YoY).
* New loans booked were up 37% QoQ at 6.3m (v/s 3.6m YoY) and were back to pre-COVID levels. The share of new customer loans to overall loan originations remained largely consistent ~38% (~41% in 1QFY22), suggesting no major change in risk appetite. This ratio had declined to ~30% in 1QFY21 during the peak of the first COVID wave.
* AUM grew ~5% QoQ to INR1.67t (+22% YoY), largely in line with our expectations. The company has witnessed healthy traction across product segments (except Auto Finance). Even Mortgage loans and the Consumer B2C business (impacted during the second COVID wave) would have exhibited healthy growth in 2QFY22. Adjusted for IPO financing, consolidated AUM increased by INR106b in 2QFY22 (+7% QoQ).
* Consolidated liquidity surplus increased to INR165b (from INR109b QoQ) and stood at 9.9% of AUM v/s 6.8% of AUM in 1QFY22. This would have resulted in higher negative carry and could be a minor drag on margin. It is also possible that the company has opportunistically raised low-cost borrowings and prepared itself well in advance for the upcoming festive season.
* Deposits recorded a healthy sequential growth of ~2.7% and was up ~33% YoY to INR287b.
* CRAR remained healthy at 27.7%. BAF still has the best capital adequacy among large NBFCs.
* Around 5% QoQ growth in reported AUM suggests disbursement volumes were encouraging. The 2QFY22 business update seems to suggest that there has been a rapid normalization across business segments and this trajectory would continue in 2HFY22E as well, with RoA/RoE likely to rebound to 3.8%/18.2% in FY22E.
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