Yesterday’s Market Performance

Nifty: 15632.10 I 120.30 (–0.76%)
FII Sell Net: 2834.96 CR
DAX: 15,422.50 I 206.23 (1.36%)

Sensex: 52198.51 I 354.89 (-0.68%)
DII Buy Net: 873.14 CR
FTSE: 6,998.28 I 117.15 (1.70%)

(Nifty, Sensex, FII, and DII numbers are of 20th July)

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Howdy Toasters!

In today’s issue, we discuss;

• Key highlights of Bajaj Finance Q1FY22 Results: Posted a PAT of INR 10 Bn; up by 4.2% YoY, AUM up by 15.2% YoY.
• Asian Paints released their Q1FY22 numbers- profit more than doubles to Rs 574.3 crore, revenue jumps 91% YoY.
• Asian Paints’ performance, other important financial news, and an educative concept to help you keep learning. Read along!

Asian Paints: 3159.05 | 177.10 (5.94%)

• The stock jumped over 5% after the company’s Q1 net profit more than doubled to Rs 574.3 crore against Rs 219.6 crore in the year-ago period

Tata Motors: 302.15 | -6.70  (-2.17%)

• The share price shed over 2% after the big bull Rakesh Jhunjhunwala reduced his stake in the company to 1.14 percent (3,77,50,000 shares)

Note: The market numbers are of 20th July.
Above are not owned by the authors of the newsletter and are neither recommendations to buy the stocks; not our style at FinLearn.

Bajaj Finance had a quarter to forget (?), much like other lenders, with rising NPAs hogging the narrative (unfairly so?) 😶

• BAF reported an AUM (assets under management) of INR 1509 Bn (+15.2% YoY and +4% QoQ), mainly supported by growth in mortgages and commercial lending

• Core AUM growth (addition to AUM in this quarter) stood at INR 41 Bn (to give you context, Q4FY21 core addition was INR 91 Bn), clearly showing the cautious nature and risk-averseness adopted by the company (accentuated by the pandemic, and especially the second wave)

• Number of New loans sanctioned (in quantity terms) dipped to 5.05 Mn, down from 6.03 Mn (during the same period last year) and 6.04 Mn (in the preceding quarter); new customer addition inched up marginally (2.3 Mn vs 2.2 Mn in the previous quarter)

• BAF is the HDFB of the NBFC space and with such a cautious stance, we can only wonder what the real deal on the ground is? (the lender expects growth in AUM over the next three quarters to be at pre-Covid levels, assuming no Third Wave (??))

Damn! Okay, give me the cost and NPA numbers (I’m ready) 🤔

• The lender posted a PAT of INR 10 Bn (-26% QoQ, +4.2% YoY), which was far below street consensus estimates of INR 18.5 Bn, on the back of a sharp rise in NPA / Provisions (seriously?)

• Gross NPAs jumped to ~3% from 1.8% (preceding quarter), and the lender provided INR 17.5 Bn in provisions as well; auto finance business (3W segment, which is almost 30% of total loans) was affected severely with as much as 1/5th of the book turned NPAs, followed by a surge in slippages in the Personal Loan segment

• BAF maintains INR 4.8 Bn in overlay provisions (over and above), and has guided for INR 42 – 44 Bn in provisions for the entire year

• Elevated Write-Offs aren’t a new phenomenon (in the recent past, atleast) for BAF (to put it straight); the lender’s asset quality has taken a beating (INR 9bn in Q1FY22, INR 20bn in Q4FY21, INR 23.4bn during Q3FY21)

• Lockdowns have severely impacted the company (you don’t say), with limited mobility directly affecting the lender’s ability to recover dues and perform collection activities (a strong point in the past)

• BAF as a lender and company has always been at the forefront of innovation and that has not stopped (even with the size they operate in right now); the company announced a slew of new business transformation measures, that have us enthused

• The company is in the process of launching an integrated Payments Solution, ‘Bajaj Pay’, comprising of UPI, PPI (Prepaid Payment Instruments), EMI Card and Credit Card (presently they have a partnership with RBL Bank, to include DBS going forward as well)

• The lender also plans to introduce an omnichannel network that will enable a customer to move between an online & offline channel in a frictionless manner; Mobile App launch is expected by October 22 and Merchant App in Jan’22

• The company added 320,000 users in July to its integrated wallet and expects to add ~5 Mn customers by FY22 end (spend of INR 75-100 per customer to engage through vouchers)

• Business transformation is exciting, so is the foray into the Payment space; BAF has a customer base of 50 Mn, and has plans to target them, rather than just focus on acquisition

• Lockdowns and more lockdowns will hurt the company; the CMD alluded to swift recovery in collections during the first half of July (ie. post easing of movement restrictions)

• Asset quality remains precarious (for lack of a better word), and the management has refrained from committing to a number for Gross Bad Loans, the stock looks expensive? (has run up quite a bit in the last 3 months)

Asian Paints released their numbers; What do you need to know and what else do the numbers for India’s largest home furnishing player mean? 🧐

What else caught our eye? 👀

Swiggy has one-upped Zomato again (of course, jk jk)

• Food delivery platform announced a USD 1.25 Billion fund-raise from SoftBank Vision II Fund and existing investors Prosus, Accel Partners and Wellington Management, now valuing the ‘start-up’ at USD 5.5 Billion; Is there anything that Zomato does that Swiggy won’t? Jk jk
• While Zomato has spoken about managing its bottom line and being unit economic positive, Swiggy has different plans; the company aims to continue discounting and investing in non-core (non food delivery) businesses to build scale
• 25% of Swiggy’s revenue today comes from Non Food Delivery verticals, with plans to decrease dependence and build out food & non-food verticals alike

Mumbai records over INR 4,000 crore in luxury property deals (get out!!) 

• On the back of stamp duty reductions & discounts offered by real-estate developers, India’s largest property market has witnessed healthy buoyancy in the luxury segment, recording transactions worth more than INR 4,000 crore in the first half of the year

• ~60% of the total transactions were recorded in the area of Lower Parel in Mumbai; >45% of the homes purchased were in the range of INR 15-20 Crore, 40% for between INR 20-30 Crore

• ~60% of the transactions were recorded at the 2% stamp duty, indicating the slashed stamp-duty incentivised buyers heavily (if only the government took notice :P)

Snapdeal targets an under-served (or under-reported?) market 

• Targeting ‘Value Shoppers’, Snapdeal has over the years consciously stayed away from targeting the high GMV accruing products, instead focusing on players like Vishal MegaMart & V-Mart to build scale

• Typically targeting, Tier 3 and beyond, the company is looking at an average ticket size of INR 200 – 400

• The key area of focus for the e-commerce player is optimising supply chain and ensuring no delivery costs doesn’t weigh too heavily on their bottom line (sustainability and all that)

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