Source of funds have increased by Rs.18,265 cr from March 2019 to September 2019 that is slightly lower compared to increase of Rs.19,740 cr from September 2018 to March 2019.
Debt Securities which include Commercial Papers , NCDs and other instruments increased by Rs. 5,237cr compared Rs.9,304cr in previous six months.
Borrowings which include Term Loans and other loans increased by Rs.8,718cr compared to Rs.8,039cr in previous six months.
Deposits which mainly include public deposits increased by Rs. 4,440cr compared to Rs.2,179cr in previous six months.
Source of funds profile saw a change in terms of tenure. The higher tenure products such as bank loans , public deposits which have a tenure of 2-3 years plus are replacing the short tenure products such as commercial paper which are 6-9 months. Though this gives more long term stability to source of funds but it also increases the leverage of the company for a longer period and consistent ability to raise funds through such sources becomes very difficult as cashflow profile changes.
As on September 2019 leverage was 5.42 times compared to 5.16 times in March 2019 and 4.7 times in September 2018. Leverage as increased substantial as compared to previous year same period as the growth of AUM is surpassing growth in reserves. This makes QIP important as it would help reduce the leverage and improve balance sheet.
Cash & Investments that provide instant liquidity if the company need arises is at Rs.10,207cr which is 8.51% of total debt compared to Rs. 8,946 cr which is 8.81% of total debt in March 2019.
Loans have shown a growth of 16.24% on QoQ basis and 38.43% on YoY basis. Advances to Debt ratio lower at 1.09 times compared to 1.10 times in March 2019 and 1.15 times in September 2018.
There has been increase in current tax assets given the company has shifted to new tax structure and it raises the tax assets in current fiscal.
There is a new addition in terms of right of use asset that is operating lease which has come due to change in Indian account standard this increases the depreciation cost.
There is some reduction of instant liquidity compare to the increase in the debt though the new debt is long term which will require lower liquidity in short term. Loan growth is sustained given the company has increased its focus on mortgage lending through its subsidiary Bajaj Home Finance.
Curious Case of Receivables :
Total Receivables which have operational and financial receivables increased to Rs. 2,358 cr from Rs.897 cr in March 2019.
As we analyse it further we see the main the increase has come through the Other Receivables which mainly includes good but unsecured receivables this are most financial in nature and amount to 1.17% of total advances compared to 0.08% in March 2019. It would require further clarity from management and monitored in March 2020 financials.
Given the liquidity and source of funds profile change that would ease post QIP. But the receivables increase also needs clarity and whether it increases in March 2020.
We have downgraded to HOLD from BUY rating