However, there’s a word of caution as well. Some analysts believe that lower moratorium does not necessarily mean an improvement in the firm’s asset quality outlook. This is because lenders have become conservative while extending moratorium under the second phase (June to August), and even if one instalment is paid, the account is not considered under moratorium, which results in lowering of the moratorium book.
Therefore, the trend in slippages (accounts turning bad) and management commentary on overall asset quality would be crucial. Bajaj Finance
also indicated a higher provisioning for Covid-19 in Q1, after making a Rs 900-crore provision in the March quarter.
In Q1, its AUM and deposits fell by 6-10 per cent, sequentially, to Rs 138,000 crore and Rs 20,000 crore, respectively. While year-on-year growth for these two parameters decelerated to around 7 per cent and 33 per cent in Q1FY21 from 27 per cent and 67 per cent in Q4FY20, respectively, analysts believe once the economy is on track, regaining ground will not be tough for Bajaj Finance, given its strong brand and expertise. However, this too is debatable given that consumer sentiment has taken a hit because of job insecurity, income levels, etc after the lockdown.
The company’s capital adequacy (26.4 per cent) and liquidity position remains strong in Q1.
Overall, investors are recommended to await clarity on moratorium and asset quality, as the stock is already up 72 per cent since June, and trades at 4.7x its FY22 estimated book value.