Bajaj Finance has written off ₹390 crore of exposure towards Infrastructure Leasing and Financial Services Ltd (IL&FS) and Karvy Stock Broking at a time when banks and non-bank financiers are reeling under the burden of increased provisioning due to the covid-19 pandemic.
In an earnings concall with analysts, Rajeev Jain, managing director and chief executive officer, said Bajaj Finance is not hopeful of any recovery from the companies in the immediate future. With the IBC being suspended for a year, the time taken to recover is high, the management said.
Bajaj Finance is among the group of lenders with the largest exposure to Karvy Stock Broking, which raised money from lenders by pledging shares owned by its clients. The lender has a total exposure of ₹321 crore towards the broking company, which has been completely provided for in this quarter.
Bajaj Finance has also charged off its principal outstanding of ₹234 crore towards IL&FS in the fourth quarter.
The IL&FS board of directors, under the chairmanship of Uday Kotak, has been working for more than a year to recover and resolve the ₹94,216-crore debt that IL&FS owes to lenders. The board was looking to complete bulk of the resolution process by March 2020. With the nationwide lockdown in place, the resolution process of many large accounts have been in a state of limbo.
The increased provisioning by Bajaj Finance towards the two stressed accounts comes when banks and non-bank lenders are building a war chest of provisions that would come in handy in cushioning against future slippages owing to covid-19 pandemic. Bajaj Finance has made additional provisioning of ₹900 crore on account of covid impact in the fourth quarter.
Rating agency Moody’s Investor Service said in a report that asset quality of NBFCs will be worst affected owing to the disruptions caused by the pandemic. Non-bank financiers are more exposed than banks to the coronavirus-led downturn, given their focus on riskier segments, in particular corporates and the real estate sector, which had been facing liquidity constraints even before the outbreak, said the rating agency.
