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Strong loan growth but new customer acquisitions relatively muted; liquidity normalization will aid margins

Bajaj Finance (BAF) acquired 2.24m new customers, similar to the level achieved in 4QFY21. This was despite the minor impact of Omicron-led COVID wave in Jan’22. Total customer franchise rose to 57.6m (up 19% YoY)

New customer acquisition run-rate appeared to have slowed slightly in 4QFY22, wherein it increased by 2.2m. Despite this, BAF recorded the highest-ever annual increase in customer franchise (of 9m) during FY22

New loans booked were up 15% YoY at 6.3m (v/s 5.5m in 4QFY21).

Reported AUM grew ~29% YoY/9% QoQ and stood at INR1.97t, ahead of our expectations of 27% YoY growth. In our view, BAF has witnessed healthy traction across product segments (except maybe auto finance where it has been intentionally slowing down). In 4QFY22, the core AUM (adjusted for IPO financing) grew INR109b to INR1.92t (up 26% YoY/6% QoQ).

CRAR stood at 27.2% (up ~25bp QoQ despite strong loan growth). Deposit growth moderated in 4QFY22 and stood at INR308b, up 19% YoY/1% QoQ. Multi-quarter low deposit growth of 1% QoQ, reported by BAF, could suggest its inclination to prioritize relatively lower-cost bank term loans and debt market liabilities.

Consolidated liquidity surplus stood at INR100b (v/s INR143b in 3QFY22). Surplus liquidity declined to 5% of AUM (from 8% of AUM in 3QFY22). This suggests a normalization of the surplus liquidity buffer and will reduce the negative carry on margins.

Despite the RBI postponing the implementation of the NBFC NPA circular to Sep’22, BAF has not opted for this deferment.

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