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G. Madhan

THE fixed deposit programme of Bajaj Auto Finance is a good investment option. The interest rates are lower than that offered by other NBFCs such as Ashok Leyland Finance. But an investment up to one year can be considered. Considering the current decline in the profitability levels, the cyclical nature of the auto industry and the intense competition in the retail lending segment, an investment beyond one year can be avoided.

Schemes and features: Bajaj Auto Finance accepts fixed deposits under cumulative and non-cumulative schemes. Under the non-cumulative scheme monthly and quarterly options are offered only for the 36-month period. The interest rates for both these options are the same while the minimum deposit varies (see table). Under the cumulative deposit scheme, the effective yields per annum for 12 months and 36 months are 7.22 per cent and 8.38 per cent respectively. Further details can be obtained at the registered office of Bajaj Auto Finance Ltd, c/o Bajaj Auto Ltd, Akurdi, Pune - 411035.

Business prospects: Bajaj Auto Finance, a group company of Bajaj Auto, is in the business of hire purchase financing of two/three-wheelers of Bajaj Auto, and consumer durable such as computers, air-conditioners and refrigerators. The company also leases equipment and vehicles and does bill discounting. The chunk of the revenue, however, comes from the hire-purchase finance business.

Considering the strong growth in domestic sales witnessed by the automobile industry in the year ending March 2003 the growth prospects for the company appear bright. However, this need not necessarily result in an improved bottomline for the company, as there is intense competition.

Financials: For the nine-month period ending December 2002, the company's income from operations slipped by 1.1 per cent to Rs 68.5 crore, from the corresponding previous period. The net profit dropped by 29.5 per cent to Rs 17.6 crore. The net profit margin stood at 25.7 per cent (36.1 per cent).

The spike in the miscellaneous expenditure coupled with rising dealer incentive expenses and increased staff costs appear to have dragged down the bottomline of the company.

For the year ended March 2002, the company's total disbursements grew 5.3 per cent to Rs 629.5 cror over the previous fiscal.

The capital adequacy ratio during that period stood at 35.9 per cent, well above the RBI norm of 12 per cent. However, the increase in the provision for doubtful debts and bad debts by 15.4 per cent to Rs 7.6 crore, in the nine-month period ending December 2002 is of some concern.

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