Ladies and gentlemen, good day, and welcome to the Bajaj Finance Limited Q1 FY 'twenty two Earnings Conference Call hosted by Bank of America Securities. This call will be recorded, and the recording will be made public by the company pursuant to its regulatory obligations. Certain personal information such as your name and the organization may be asked during the call. If you do not wish for it to be disclosed, please immediately discontinue this call. This call is not for media representatives or Bank of America Investment Bankers or Commercial Bankers, including corporate and commercial FX.
All such individuals are instructed to disconnect now. A replay will be available for Bank of America Investment Bankers and Commercial Bankers, including corporate and commercial FX. The replay is not available to the media. As a reminder, all participant lines will be in the listen only mode, And there will be an option for you to ask questions after the presentation concludes. I now hand the conference over to Mr.
Anuj Singla From Bank of America Securities, thank you and over to you, sir.
Thank you, Rupuja. Good morning, everyone. This is Anuj Singla from Bank of America Securities. Thank you very much for joining us for the Bajaj Finance earnings call To discuss the results, I am pleased to welcome Mr. Rajeev Jain, Managing Director, Bajaj Finance Limited, As a senior management senior members of the management team, thank you very much for the opportunity to host you.
I now invite Mr. Rajeev Jain to introduce the management team on the call and take us through the financial highlights for the quarter, post which we will open the floor for Q and With that, over to you, Prajak.
Thank you, Anuj. I have with me Sandeep Jain, our CFO Atul Jain, CEO, BHFL Manish Jain, CEO, Bajaj Financial Securities Anoop Saha, Deputy CEO, Bajaj Finance Anurag Choudhani, CIO Fakhri Surjan, our CRO Deepa Waladi, our Chief Collections Officer And, Kuroshirani, our Head of Operations and Business Transformation Project. I also have our Compliance Head and General Counsel, Bhavra. Thank you, Anuj, for the opportunity, and thank you for hosting us. And I'll be referring to the investor presentation that is being uploaded on the Investors section of our website, let's quickly jump on to Panel number 4.
I'll be essentially referring to pages 4, 5, 6, 7 And Page and panel 40 3 and 45, and then we're opening to questions. We'll try to return in a self explanatory manner, But I'll still read them out to make sure there's clarity on what we are trying to communicate. Overall, we are all aware We just went through a very severe second wave. Clearly, the quarter was a muted quarter. That's not
a word that I've used in
the last 14 years of doing 4 quarters each. This is, in a way, 56 Quarter that you're doing, but that's really what pandemic does. It was a muted quarter impacted by severe second wave of pandemic. Both business and that management efficiencies were affected due to strict lockdowns across most parts of India. Overall, As I've said in 2 calls that we did during this period, sometime in June and one at April end that It's been an emotionally hard quarter given the number of debts we've had actually in the company.
Despite that, the show goes on. The business transformation remains on track for Phase 1 go live in October 'twenty one. The company still continues to remain in business reasonably aggressively through Q1. Let me go to so as a result of that, AUM grew to INR 159,000 crores. OpEx to NII came down to 30.6%.
Pat just remained a tad above INR 1,000 crores or INR 1,002 crores, Year on year growth of 4%, ROE came in at 2.7% not annualized. That means 11 odd percent Run rate and net NPA, which is really where the big bust was, we had given a warning to that effect in our June 4 release, Moved from 0.5%, which was again not relevant due to moratorium. Having said that, it is a year on year number, So as to be represented, came in at 1.46%. Let's dive deep into the numbers. Let me go to panel 5.
First of all, I must state the year on year numbers are not comparable. Last year was a complete lockdown till May end. This year is in parts. Last year, there was EMI moratorium. There is no EMI moratorium this year.
So they are not comparables at all. It's the first point I must make. Overall core AUM growth was INR 4,100 crores. From this, I'm knocking off INR 2,980 crores of IPO financing book. I'm knocking off the interest reversal adjustment as you can see below.
So Core growth in Q4 was INR 9,500 crores. Core growth in this quarter was INR 4,900 crores, mainly on account of B2B business dialing down. Essentially on a quarter on quarter sequentially, The if we had a normal quarter and didn't have second wave, that book normally sequentially goes up by INR 4,000 to INR 5,000 crores. So actually the biggest part of impact is actually on account of urban B2B and rural B2B business. But it is what it is.
The core growth was RMB 4,000 crore. If there is no 3rd wave and Life stays even the way it is at this point in time Since, let's say, I would say 21st June onwards, I would say we expect the quarterly year yield growth rate for the balance to be at pre COVID level. If life if there is as I said, if there is no 3rd wave and life continues the way it is at this point in time. We booked 4,630,000 accounts. We acquired 1,880,000 new customers.
We crossed at least there was one good milestone that we crossed. We crossed 50,000,000 customers to end the quarter at 50,500,000 customers, Overall growth of 17%. Cross sell franchise stood at 27,500,000 customers. Total geographic footprint was at 3,113 locations, 115,000 distribution points. We added 125 new locations.
We started our financial inclusion journey. We added 50 locations There is no bank in Q1. It is part of the plan. There There's plan to open 50 more such branches if this pilot was to run successfully in the Q4 of the current fiscal. The company also added a full year, 49 just a tad below 50 branches in existing locations, mainly 25 Stand alone gold loan branches in 2 cities in India.
We are now going bigger into gold loan as we walk into it. We opened 25 branches in Jaipur and sorry, 13 in Jaipur and 13 in 12 in WISAG and 24 dedicated branches for FD we launched in Q1 as well. Our overall margin profile adjusted for interest income reversal remains And as a result of cost of funds going down, otherwise remains steady across all businesses. The interest income reversal came in at INR 4.51 crores, it's even higher than what it's been in the last two quarters were real. The first two quarters was a place card.
So we've taken a place card number of INR306 crores knowing fully well this would come last year. So last year number was place card, but this year It's a real number which is INR 451 crores. You're trying to pace out the interseversal. That's how we've taken last year's Q1. Cost of funds, we guided will continue to go down.
It came down to 7.11 percent overall as we dial down the liquidity buffer Around 8,500 odd crores, that's 1. And even now company has very little CP. There is virtually no CP sitting in the company, Less than INR1500 crores of CP is what is sitting in the company. We are very clear that CP is to go to 8% to 9% of the Balance sheet, as that goes in that direction, we will see 7.11% go down further. On Panel 6, deposit book continues to grow, giving us granularity on the library side.
Its contribution now is at 21% on a consolidated basis. OpEx to NII came in at RMB30.6 million. Several actions are again taken to try and Partially mitigated the financial impact and that's how the number is it saved close to 200 or close 2.50 or close of OpEx In the current quarter as a result of the actions that we took on the quarter basis. Overall, we expect that this will normalize to around 33% By Q4, you may see a jump up in Q2 and settle it closer to This number in Q3 and hopefully stabilize fully by Q4. The EMI bounce rate, that's something that we guided the street.
Overall, we have provided data for Q for April May And June, this is for July. The overall July bounce at a fundamental level has actually come in marginally lower than What it was in on an average basis in Q4. Even this metric we did not see deteriorate through April, May, June. So if there is some light at the end of turn on this, this point Fundamentally reflects a positive Metric is what I would say. Power flows clearly were constrained due to debt management efficiencies.
Overall things have eased at this point in time, but it's I'm not providing guidance because but overall July seems in line with March or I would say marginally better than March. March As we had when we had given Q4 results, we had said that we have not seen numbers like this. So it's pretty volatile. If If things were to not harden, lockdowns were not to happen again, we are probably better placed to navigate through this. Loan losses as a result of point number 11 as a result of being unable to collect From an ECS standpoint, Vertex got 17.50 odd crores, not 17.50 odd crores.
So clearly, it's a number higher than even Q1 last year number that we had taken on. Management overlay provision from INR840 crores, we consumed part of it. As of 30th June, we had INR483 crores. Gross NP and net NPA as a result of outflow movement came in at 2.96% and 1.46% versus The right thing to do is to compare against on a sequential basis rather than comparing year on year because last year, as I said earlier, we were in moratorium. Exiting Q4, we are at 180 basis points that moved 115 basis points to 2.96% and 75 basis points in NNPA which moved to [SPEAKER SRINIVASAN VENKATAKRISHNAN:] And 46 basis points.
Let me just go given the kind of movement in gross NPL and NPL, let me just go to level 2. Overall G and P for the quarter increased by INR2,06 crores from INR2,007 My 2006 crores from INR 2.731 crores to INR 4.737 crores. The biggest bust was actually in the Auto Finance business. As you go to Panel 43, you will see the gross NP and net LPA fundamentally other than that portfolio Versus December has actually improved. So even Versus March, some of the businesses are improved, while versus December, there is positive movement in which is when we were actually getting out of pandemic in that sense.
So that's something that I'll talk through When I get to panel 43, but overall the GNP has reached from INR 2,701 to INR 4.7 crores. Auto Finance, as I said, was affected. The AF business put GNP increased from INR 1200 crores to INR 2,000 INR426 crores. So just in this line of business, there was a movement of INR1227 crores. Other lines of businesses, which is 159,000 minus 12,000 crores, the movement was only 800 odd crores.
Moving to panel 7, which is the NNPA panel, which is the NNPA metric came in at INR 2,007 crores versus INR 1,136 crores as of March. Secured contribution moved from 50 odd percent to 74 odd percent in terms of NNB metric. Non overdue OTR, which is one time restructuring, which was announced, which was shared in March as well, actually moved down from INR17.39 crores to INR1300 crores either as a result of pay down or as a result of movement from 2 Stage 2 and Stage 3. Now overall, what we are very clear about is that in the risk business, the true health of the business fundamentally is represented by the GNP and NNP number. That's the metric that essentially determines the health of the business.
It's very clear we are at 2.96% and 1.46%. We are very clear that we will do whatever is needed to be done to bring the GNPA back to 1.7% to 1.8% and NNPA to 0.7%, 0.8 1% either by flowing through the P and L, accelerate or portfolio improves. It's only one of the events that's going to happen, but we are quite clear that towards the long term guidance range [SPEAKER SRINIVASAN VENKATAKRISHNAN:] For gross NP and net NPV, net NPV at 0.7% to 0.8%. Based on that, at this point in time, our The overall credit cost for the year will be between INR 4200 crores to INR 4,300 crores for us to be in the corridor of GNP recorded out of 1.7 to 1.8 and NNP recorded out of 0.7 to 0.8. This is something that we don't want to tolerate slipping in any given manner.
As a result of these events, The consolidated profit I already talked about. Capital adequacy, of course, growth was 15%. AUM growth was only 15%. So capital adequacy remains strong 28.5%, Tier 1 crossed 25% mark. So we are very well positioned from As COVID eases, as growth stands, comes back, we are reasonably well positioned from a capital standpoint.
VHFL, grew by 24%. Capital adequacy of VHFL also remains very strong. VHFL post tax profit grew 75% actually from INR90 crores to INR161 crores. BFSL has now started to warm up to retail clients, Added 95,000 customers, acquired 52,500 customers, is running at 100 now 40,000 to 50,000 Customers in a month. We do foresee that sometime between September October, we will start to run Have a 100 of 75,000 to 90,000 customers in a month.
Over to the next panel, Today, we talked about on business transformation very quickly that at the AGM, we shared the home page and how our consumer app will fundamentally look. It's also uploaded on the Investors section of our website. Please do have a look at it as to how we imagine we will look for customers As we start to roll out in October the entire new digital platform. I've talked about point number 2 as well in the AGM. It's a reasonably large ecosystem of Over 2000 plus screens across all businesses and service modules, 7,000 plus content pages, it's reasonably large work that we've been at for the last 8, 9 months and hoping that we can pleasantly surprise consumers as we launch this.
As I said Phase 1, Tuberis investors have said that as we launch this in Phase 1, there will be a Phase 2. Phase 2 being defined as That we perfect it. We have a long list of things that we want to do. So I would say between October and Or mid October to March is when we think we will have we will get to a degree of satisfaction, which gives us Satisfaction to the work that we that the team has been at. The wallet business, we got the PPI license From RBI, we launched the business 1st July.
So far, we've onboarded 320,000 customers. We are reasonably On track to originate 5,000,000 customers for our wallet business in FY 'twenty two given the run rate that we have at this point in time And the adoption that we see. Of course, it'll have phases. Customers have to start to use the EBIT functionality. Clearly, a team has been created to run and drive that business.
But step 1 is to onboard our customers to start to activate clients. Vijay, intention to as we move to as we deliver the entire digital platform, we were super clear even last year that The second phase of that would mean significantly enhanced presence or control over the payments business because as you see the home page, After that product, the next component fundamentally is that of payments. So to us, It is very clear that it's very, very strategic in nature, but it is also very clear to us that it is very hard to make money in the business It has to be done from an engagement standpoint and from a retention standpoint of clients on the platform. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So it's needed, doesn't make money, but needed to engage clients. Having taken the strategic call, we do not want to do Make partial effort.
We've taken the Board approval now. So we have so hard PPI license gave us issuance. We now want to get into acquiring. There are 3, 4 different modes of acquiring. We expect to see ourselves being present across all the 3, 4 modes of acquiring.
We are now beginning to based on post approval, we will build out the Teams to build out this business. So there are 2 licenses that we will apply for, which is a payment aggregated license, We've taken the Board of Rule today and BB POU license. BB has the launch of this app on 31st May. Let me now jump quickly To panel number 43, which provides some texture and detail on the provisioning coverage and the growth NPL and NPL by lines of businesses. Fundamentally, as you can see, at the Overall bottom block you see that the GNP in 31 December quarter ending quarter 3 was 2.86%.
It dropped to 1.79% and has inched back to 2.96%. Net NPE was 122 basis points, has It went down to 75 basis points and has inched back to 146 basis points. So to that extent, COVID has taught us These things can be volatile. They can oscillate. We don't like it, but that's the nature of where we are in pandemic.
If you see what I was saying to you that if you see the Auto Finance business, that is really where the if you Compare December to June comparison. And between December March, at the design level, you will remember that we landed up taking only INR 12.50 crores of incremental provisions in Q4. So it's not like we took between December March very high provisions and that provisions reduced. We took INR 1230 crores of provision between Q3 ending quarter and Q4 ending quarter. But as you can see here, the gross NPA of the AF business is really where the movement is.
From 11.5% it went to 19%, But Sales Finance business went down from 1.91 percent to 1%, 3.34% and Consumer B2C to 2.84%, 2% to 1.35%, 3.64 to 2.85, 2.63 to 2.15 and 95 to 88. So clearly, when I was saying that the worst effective was Auto Finance Business of ours, that's really what I was meaning. If you see the net NPA, you see very similar From 6%, net NBIT went to 12%. Sales finance 24% to 24%, 122% to 95%, 26% to 29%, 145 to 92, 84 to 70, 56 to 61. So clearly, that's the more Of the portfolio metrics fundamentally in Q1 essentially came in from the auto part of the Business for us.
I'll just go on to my live slide. That's a little more busier than even this, but it will provide some more degree of texture To what the comparison that I did between December June, you can see a lot of numbers here, but the numbers to focus on fundamentally is how you see OTR has moved, which is column number 3 from 2,000 to 1300, from INR 6,000 crores to 6,000 And from INR 4,200 crores to INR 4,700 crores in terms of Stage 2 assets. In terms of provisioning, it's very similar except For one thing to remember is that AF, while the gross NPA and net NPA moved, it's also important to remember that it's a repossessable asset. It's an asset that can be repossessed, and We do believe that the that if there is no continued lockdowns or things were to continue to the way they are, We should be able to bring control to that portfolio in the next 3 to 4 months down, months' time. That's really all from me.
We provided all the details that are necessary for from an analysis standpoint and That we can add to Q and A.
Thank you very much.
Yes. Rupesh, go ahead, please.
Thank you very much. We will now begin the question and answer The first question is from the line of Mehrokadjania from Alara. Please go ahead.
Yes. Hi, good evening. My first question is on NPL. So Obviously, COVID has impacted auto loan collection. But why is it that your NPLs on auto is secured?
So why is it that your NQ alone secured is so much higher than on the unsecured segment. So that's my first question. And my second is that What is the proportion of Flexi loans, if at all? That's 1. What was the total conversions in FY 'twenty one?
And also in terms of unsecured loans, Are flexi loans all unsecured loans or there is a secured portion to the flexi loans as well? That's my second question and then I have one more.
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My third question Chin is on your card. So basically, what is the status of your retail EMI card and health EMI card? And
So let's start with the first one. See, look, very clearly, even in AF or auto finance, as we call it, If you look at the numbers, the biggest stress there actually is not even that portfolio because we didn't want to keep breaking portfolios and Providing data, at a fundamental level, the 3 wheeler business there, which is 30% of the business, is more severely impacted. The reason one did not see the pressures of it last year was essentially because we are in moratorium. So out of 11,500 crores book that you actually that we have, 4,000 odd crores, 11,347 crores book that we have, 3,500 close to 4,000 crores 3 wheeler business. That was far more impacted.
So that's one part. 2, We do deal, you have to realize and we have said that many times that that's the only business where we fundamentally deal with mass customer. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] They were far more impacted or they are far more impacted. Even in wave 1, they were impacted. If you see the number Of the same panel on a full year for last year, you will see there is a proportion of balance sheet to proportion of loan loss was significantly higher.
So it played out last time as well and it's playing out this time. On Flexi loan, I thought you will not ask me this question. [SPEAKER SRINIVASAN
VENKATAKRISHNAN:] Given the data that
I gave you, if you go to Panel
43 again,
that Flexi loans were converted in consumer B2C. Flexi loans were we do it as a business in SME. We do it as a business In mortgages, so if the numbers are telling you anything, we are now 1 year into it. I think this debate should be settled by now. And probably I'll answer it for one last time today Because I've been polite in making the point, but probably today is the last time I'm responding to a direct question On Flexi, let me add a point just before anybody else wants to ask, did we do any Flexi loans in the current quarter?
The answer is no. So that when we put it to that's once and for all. Two point number to question number 3. On EMI Card, we continue to acquire EMI Card. We acquired that's also there in the deck.
That's on panel 40. Overall, AMI cards, it is at 24,000,000. That's on panel number 40 that you will see. Sorry, yes, it was a 21,500,000 in last year same time, it's at 24,000,000 in As of 30th June. That's the 3rd business.
That's the third point. Retail UMI Card Spend Business, we have capped that business at 50,000 accounts a month. At this point in time, we are transforming the business. The ticket size in that business used to be 9,000, 10000 per account. We became very clear post COVID that unless and until it's INR 14,000, INR 15,000 per ticket, there is no economic frame.
So that's something that we are As a result, it meant categories changes and so on and so forth. So we [SPEAKER SRINIVASAN VENKATAKRISHNAN:] We are doing it, but reduced to 150,000 accounts a month. We are now we have tamped that business as 50,000 accounts, and we are continuing with the business and with a higher ticket size, and it's profitable to that extent. We can move to the next question.
Thanks.
Thank you.
Thank you. The next question is from the line of Kunal Shah from CCA Securities, please go ahead.
Yes. Thanks for taking my question. Firstly, two data points. In terms of the write offs, how much would have been and post that there has been this kind of an increase in GMPA. So if and would decrease in provisioning coverage from 58 to 51, Would that be largely on account of and maybe when we look at it the write offs in the queue that can help?
You should go to write off.
So given the write off is approximately INR900, INR 950 crores for the quarter. Balance is the addition in the program that you will see in In the statement as well. So the other question in terms of movement of numbers in terms of GMP etcetera It's largely concentrated around the Autosandas business vertical.
Sure. Yes, that's fair.
And in
terms of restructuring, so you said like it's either moving into Stage 2 or Stage 3 and that's the reason it's coming off. But broadly, maybe under OTR 2 also there would have been request. So is it implemented or Maybe this is OTR1 which has come off and we are yet to implement the request which are there under OTR2 and there could be more restructuring additions.
The request for OTR2 has been very little so far. We have not seen our customers coming and seeking OTR2 unlike what we have seen in OTR1. Previous question you were also asking about
It's also reflecting just to add to what Sandeep was saying, it's also reflecting in default rates or bounce rates. If that was high, you will see IODR requests. That number has actually gone down. So just to correlate the point.
And your previous question on the provisioning coverage ratio is going down marginally versus what where we were in, let's say, December March. That's mainly account of customers moving from Stage 2 to Stage 3 and being in early delinquency in Phase 3 rather than going to de delinquencies.
Okay. And in terms of wallets, you said like maybe it doesn't make money, but any kind of burn that would happen or maybe the kind of 1st, we are planning to incur given that we are looking at onboarding almost like $5,000,000,000 or customer. So finally, how much would be the cost? So definitely there will be an engagement plan as well to ensure or maybe retention of the customers. But would we be burning the money and it could really P.
Vijay Kumar:] It's possible to maybe highlight that. P.
Vijay Kumar:] No, it's a fair question. Do we foresee that based on customer segmentation, It could go all the way to dropping INR 150 into per client account, it's possible. But the large part of the frame is actually built on Our entire voucher management infrastructure that you created, which generates offers from our retail ecosystem, which is what is going to drive that on second usage, he will get money dropped into wallet. So there are various promotion frames On an aggregate, however, you should assume that we will end up spending, investing Anywhere between INR75 to INR100 per client in warming him up to a wallet account. So and that's planned for.
Okay. And when we highlight in terms of OpEx to income ratio that is broadly Considered while getting into that. Yes.
Because we also significantly foresee much higher velocity in the process. So, answer is yes.
Okay, sure. And lastly, in terms of the rollout, so the last time It was quite a detailed one in terms of within all the marketplaces, how we are seeing this rollout. So many of them would have already got implemented. But maybe if you can further highlight in terms of now what's happening out there in terms of the various marketplaces and what is pending and until October, what Are
we planning to implement in the Phase 2 FY 'twenty? Yes. So e store is now reasonably warmed up. Just to give you texture, our 4,600,000 loans are that we did 120,000 loans came from Between attribution and contribution directly from e store. In that, the June number is actually 60,000.
We foresee that we will be doing 150,000 on accounts by October, November. We are a lot more confident Offers integration increasingly between the omni channel frame. It's our first big test on omni channel. That Is a call received by the customer from our point of sale person in 15 minutes' time, either by him or her or the retailers. So that's something that We are a lot more comfortable with and confident of and we are beginning to see that in reflect that in numbers.
It's obviously hard, but I think we are a lot more confident that we will continue to deeply integrate The e store ecosystem, same thing will happen as on 31st October, the insurance marketplace and the Investments marketplace goes live. So clearly, the omni channel frame is about Integrating offline, online, online, offline and just keep tightening the screws between Offline to online to reduce friction for customers. It's hard, but we are clear that that's the only way to play. And we are
P. Vijay Kumar:] Okay.
And Partner 1 app and Merchant 1 and Merchant type is also very much on track in terms of?
Yes. So Partner 1 app, we have now I mean, so Merchant 1 app will be the one that will be the consumer app which will go live between October November, Anurag is looking at me, it's January, that's correct because That will go live in January or Phase 1 of merchandise will go live in January. That will in a way further augment The Retail EMI Spend Business. Our new avatar of Retail EMI Business, to the earlier question, is actually linked to a new merchant hub ecosystem. So that will go live.
Phase 1 of that in sometime in January Is when it will go live. Partner 1 app, we are now aggregating the whole thing into one place. Anybody who wants to become a partner of the company will go through this single interface. We expect that to go live also between February March. So in a way, we have lots on our plate and our hands full.
But Anyway COVID is creating more volatility in the business. Might as well spend our time getting business lot more ready for the future.
Sure. Thanks. Thank you so much.
Thank you. The next question is from the line of Aditya Jain from Citigroup. Please go ahead.
Thank you. So in the presentation, there is this mention of wallet business, about 320,000 crores, 320,000 customers added since the launch on 3rd July, so that's a pretty sizable number. So could you talk about how much of it is, That's a completely fresh customers and how much are coming from the existing customer base? And then related to this, the 5,000,000 target for wallet, Does that assume again some cross sell from the existing customer base? And is that cross sell assumed sizable and how much of it is Correct, Daphne.
So 1, it's all existing but 2, they have to open the account. So they are fully KYC ed. So that reduces friction. That's level 1. Our focus is not on new customers.
As the ecosystem develops, new may happen, [SPEAKER SRINIVASAN VENKATAKRISHNAN:] But we don't need new customers. So that but it is not automatic. Let me just make that point. We will land up doing, let's say, 1,600,000, 1,700,000 customer run rate on any given month. But of that, as you can see, so far till 'eighteen, only 320,000 We have opened the account.
So, there is one hop. So, it's not automatic. There is a hop. He has to register.
So for us, because they're full KYC customer, Majority of our customers, the wallet is opened at the point of sale. So 70% is at point of sale and 30% is at home. And because the customers are full KYC, we are able to open a full KYC PPI wallet. It is a one extra hop in the app where customer has to take
the concept. And based on various promotions that we already talked about, we may do voucher drop, we may do money drop And if any links is behind, I'll start you.
Because as Ajiv said, the whole frame for payment for us is around the reward currency. Since you work with the 100,000 merchant, we work very closely in terms of the voucher management frame, which are co opted in terms of the promotion. And that will be the core heft on the PPI for us.
Got it. Thank you. That's helped a lot. On the sales finance in both rural and urban, while the GS3 hasn't risen much, The GS2 increases in the quarter are fairly high. So one behavior here is fairly And from the personal loan side, so what is driving that?
And then going forward, does that mean a different expectation here? So in the next Quarter onwards could be a 3 gs increase in the sales finance fees in rural America?
So I say you are
not clearly audible. We have not answered your question, please.
Can you just repeat, Aditya?
Sorry. My question was, does the GS2 increase in sales finance, Both rural and urban is fairly high. Although the GS3 increase isn't high, but the GS2 increase on a percentage basis is fairly high. So does that mean that there is would you expect a reasonable amount of this to convert to GF3 in the next quarter? Or is there expectation that there should be more recoveries from this?
[SPEAKER SRINIVASAN VENKATAKRISHNAN:] See, you meaning Stage 2? When you say GST, you mean [SPEAKER
SRINIVASAN VENKATAKRISHNAN:] Yes, yes, Stage 2.
Yes. So fundamentally, if you look at the Stage 2, Look, the fundamental difference between sales finance business, which is both sales finance business, which is sales finance and rural sales finance And versus others is it churns very, very rapidly. That's the only fundamental difference, [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Churns very rapidly, flows very rapidly, I mean that's the only way that's the only distinct difference between [SPEAKER SRINIVASAN
VENKATAKRISHNAN:] This business and rest of the businesses.
And that's all you should read from this and nothing else. I mean, is all I would just Aditya, I don't know whether I am responding to the question that you're asking. I'm not
Maybe enough for now, but just last question for me, the restructuring, could you just give us Qualitatively, which segment the restructuring is more in within the different products?
On Panel 46, as you can see, If you go to Panel 46, the ODR is there for 630. Majority is as of today sitting in mortgages, 700 crores And INR400 crores in sales finance and very little in the numbers are right there.
The next question is from the line of Akriti Kapha from Goldman Sachs. Please go ahead.
Yes. Hi, good evening. This is Rahul here. So, Ajiv, two, three questions. Number 1, on the Wallet side, clearly, I think You're revitalizing the use case of wallet by talking about the voucher management.
But looking about 3 to 5 years out, Eventually, what really would be the game plan of this? Because I understand this and correct me if I'm wrong, but there are discount options that are available. You do cards also co branded cards, which can be useful for reward management, etcetera. And this wallet always existed. So is it a critical part of the strategy that over time we get into other lower ticket size items through wallet?
That's question number 1. Question number 2 is on the payment side, how critical the payment piece is going to be for the success of this platform? And in payments, we already know there are various types of form factors that are available for both customer centric and merchant centric. So which part of the ecosystem are we looking to target?
Yes. So fundamentally, Rahul, I'll answer the first part, Anoop can
The first part is
meant for our existing customers. Number 2, as I said earlier, the second component after our product offering is payments. We are seeing payments as a 4th Single checkout page will be following. EMI card, credit card, UPI, PPI. This is the and rewards.
This is the rewards as currency. This is the by because rewards will come in by January, February, [SPEAKER SRINIVASAN VENKATAKRISHNAN:] But this is the single checkout page strategy that we are headed to at a fundamental level. That's how important integral and critical payments to us. When we launch on 31st October, you will see UPI, PPI, credit card and EMI card. The 5th one rewards will come in sometime between January February.
So that's one part. We are also very clear that this is what will create stickiness in engagement. So as I said earlier, Rahul, This is a burn frame. That also we are clear about. It means burn.
But when we look at various players in the market, the only thing that we found lacking was that people are doing more nobody is doing structured reward management work. Everybody is essentially doing when people want to acquire customers, They throw in money and they go away. 3 years ago, lots of millionaires in my office were all using Google Paytm, then they started using Google Pay, then they started using PhonePe. People want to acquire customers, throw money, burn $500,000,000 and go. We don't have a customer acquisition problem.
We are generating we have 50,000,000 customers. We are fully KYC ed. That's the second point I must make. 3, we continue to acquire 1,800,000 to 2,000,000 customers in 3 round cities in India. Engagement is really where our entire focus is.
That is really why the digital acceleration transformation is well. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] And in that, payment is critical. Why are we bringing it now? Because we had to first get the money [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Making machine going, then we will get the engagement machine going. So you will see on as we go live in October, These single checkout spreads across these 4, but so that's a strategic trend.
Now let's talk about At a mechanics level and at how broad we are looking at playing the PAPG and the Anup can cover that in a moment.
At an overall level, as we bring our 3 in-one asset live to consumer, What we are missing is the high frequency transaction. So as Rajiv said, payment fills that gap for us. And second is We don't have a challenge of consumer downloading the app. What we because our point of sale is where we get maximum of our customers And as we get them in for the payment, they stay with the app because payment is a daily transaction. However, in terms of our EMI transaction, credit card transaction, loan transaction, all of that will be available in there.
Having said that, that's the PPI licenses where we believe we can originate significant amount of our acquisition in terms of customers and payment. What you are now bringing because if you want to play the payment, you need to play the full stack payment, which is what we have now taken approval on the acquiring side of the payment And also the Bill Pay, OU license. These are the 2 licenses we are now going to apply to RBI because the other big Plan for us is we are available in 3,000 cities. We have point of sale people on 3,000 cities where The real payment, the transformation will come because what we are seeing in our market by market is the adoption of digital As we go beyond the 120 market is dramatically very high. Our presence in 3,000 cities is going to cover that.
And in a way, if you break this up into population, 2 third of population is sitting beyond the 120 cities. And I think that's where our key heft is. Having said that, the bigger city as well, we have dominant market share in our counters. Consumer acquisition costs, we don't need to spend. We can get them downloaded at the point of sale.
Payment ensures that the daily transaction happens and they remain sticky on the app. And the offline retailers need a solution to get the customer on the store and which is where they contribute along with us the reward framework, so when you look at reward, as Bajaj Finance, we don't need to burn all the money ourselves. The 100,000 merchants are participating on an ongoing basis. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] And as we bring the asset, they get a sub wallet to spend as well.
[SPEAKER SRINIVASAN VENKATAKRISHNAN:] So
just to the last one, I think Anubhav made extremely important point that Outside of 100 cities, the distribution doesn't exist. The second important point that he has fundamentally made is [SPEAKER SRINIVASAN VENKATAKRISHNAN:] On offline detail, look, in the last 3 years, there's lots of noise in competitive activity at point of sale. At a margin profile level, our margin profile improved rather than deteriorated. It was a very easy call for us to let's say, also want money because we need this customer acquisition. We never let that happen.
That's really how voucher management frame was born, Being able to originate vouchers from merchants and Making or making them participate in the train.
And this would be a one time cost when the customer Do we need to this would be a recurring feature to keep the customer active because of The competitive landscape, as you rightly pointed out, still remains fairly
It will be determined by customer NPV. Larger than customer NPV we will see, n is equal to 1 will determine that, quite honestly. Yes. So credit card rewards to the point Anoop is making, We already burn at stores. If you have reward points on Vyaches sensor, RBL credit card, you can burn them today at the point of sale.
We've been doing that now for the last one and a half years. So we'll keep ring fencing. The customer around it through these frames is really what we are creating clear about rather than burning your hole through the P and L.
And also, at a design level, PPI, UPI are small ticket transaction. As you go to larger, they are the credit card and The new My Car transaction and reward comes in for Split and Pay because down payment is adjusted to reward. And today we run that burn for 100,000 merchants with our credit card rewards. So as we bring in all the 4 instruments of reward, That KITIO reward becomes far larger for the consumer.
Got it. Just final follow-up on this. So would it mean that we'll also To get into the offline pause or that would be done via our tie up with RTRs?
It's become very we are very clear [SPEAKER SRINIVASAN VENKATAKRISHNAN:] That we will do offline. As Anoop says, 75 cities are now out, nobody is there. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] It's a problem that needs to be solved for.
And as Anoop said,
we are there. We are physically, as I said, in AGM, [SPEAKER SRINIVASAN VENKATAKRISHNAN:] We learn, collect and deliver the last mile. So we have looked at all three form factors. We will now we are post approvals, we will build our teams. We are not doing this with a short term view.
We are doing this as a full fledged business, Warming up to issuance, now we'll start to warm up to acquiring.
And also on the As Rajeev said, you will have the QR based acquiring, which is the all in all QR with the all four instruments live on it. You will have the point of sale QR, which is the physical machine depending on the type of merchants and you will also have the online Acquiring business which are the high velocity business. So as we are applying for it, we are applying for all. And since unlike the other players, we have point of sale people there in 3,000 markets. We will be able to bring that at a significantly lower cost.
And sorry, just remind you, when are we going live with this, Offline pause or not?
It will take time, Rahul. We have to first deliver 31st October The consumer app, as I said in January, we're launching merchant app. With that, we'll go live the QR. So [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So Q1 will go live along with the merchandise. So that's one part.
But again, I must just say that these Strategic frames, we will start to peel them as we get into Deeper and deeper into Consumer Financial Services, what we rolled out today, Rahul. So QR In January along with merchandise and you will hear from us over time on rest of the things as we get License from RBI 2, Gordon Lewis.
Makes sense. Just one final question on asset quality, if I may squeeze in. So excluding AF, the performance It's pretty solid as it appears. What would you attribute this to? Is it the reflection of better selection over the last 12 months?
Or generally, the market itself Has now matured and the underbelly of 10%, 15% customers have been written off in general across the system. What would you
Yes. So Bounce rate fundamentally represents default. I am super clear about that. So, In fact, you can ask me the counter question then we should not say the loss will be this much. One could argue that.
But We are in uncertain times. We don't want to guide wrong. And I want to deliver 1.8% gross NPA and 70, 80 basis points net NPA. So we're keeping that to me is non negotiable. The default rate represents the default rate, let me give you one texture.
Even exiting moratorium in October, November, December last year, The bounce rate were running at 2.2x of post Morad as it pre Postwar being February what it was, what it opened in what it remains right away in October, November, December. That is not so the case as you just articulated as we articulated in June and as we articulated in July as well. But I just want to make sure that we tie it through July August, if there is no disruption in July August, it's possible that we We are sitting in a better place.
But Rajiv, when we see the NATCH data, it still appears to be around 30%. Pre COVID, it was about 24%, 25%. Now I understand there are various nuances to this data, but that's what it appears to be for the whole system.
[SPEAKER SRINIVASAN VENKATAKRISHNAN:] Now you have to just
remember, Rahul, there are various aspects to this and let me give you texture so that we are all clear because when we peel the onion for you, you guys Even a Stage 3 customer is banked, please remember.
Yes, okay.
Okay. If I have written them off, I am a write them off, but I will keep banking For every bank, we will continue to bank him. Please remember this. I am I have an obligation or the banking system has obligation [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] To continue to bank, current bucket bounce is really where the frame is. You were not in default last month, you are in default this month.
That represents current bucket bounce rate. So, I mean, I can peel this for you in various ways. You are looking at and That represents many, many other aspects of SI and so on and so forth. We are giving you banking of 14,000,000 customers. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] I think banking base is what?
JPY 40,000,000. JPY 50,000,000 is a banking base is what really we are giving you I can't speak for rest.
Sorry to interrupt. May I request We request you to please limit your question to 2. As you have further questions, you may rejoin the queue. The next question is from the line of Kuntal Shah from OPM Capital. Please go ahead.
Hi, Rajiv. Kuntal here. So one way 2 data points is that once
you saw our auto finance
loan is now in GNPA And at the same time, we have now you said bounce rates are stable and but provision coverage ratio has dropped from 65 to 51. So is it your assessment that many of these earning assets will come back online or can be repossessed and there is some recovery there that's why the provision coverage is kept Hello, how do we read this provision coverage also going down in view of the rising GNPA?
[SPEAKER SRINIVASAN VENKATAKRISHNAN:] You can read it in point number, Guntal, point number just one second. You see the mix On panel number 7, NNPA was 2,307 versus 11 36. 74% of this is now secured. So the mix has really moved, is really how you should see. Earlier to the point that I made to Rahul, We do foresee that while auto finance will move dramatically, the repossessibility as clients flow should lead to significant improvement, but I can't bet on it or bank on it [SPEAKER SRINIVASAN VENKATAKRISHNAN:] And that's why
when the account
flows, I have to provide for it.
Okay. I think that clarifies. My other question is on our reliance on 1 bank for the credit card partnership and 1 service provider Mastercard. Are you planning some second partnership? Yes.
We're going live with DBS sometime in early December.
Okay. And my last question is on the friction between marketplace and the OEM products which both of them will go [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Concurrently, if I buy an asset on aggregator marketplace, but I want to then subsequently borrow from Bajarat Finance, all those kind of Interoperability issues will come in and would there be a friction? How do you
capture the
transactions between the 2 marketplace, your marketplace and the Bajaj Hindu market place?
[SPEAKER SRINIVASAN VENKATAKRISHNAN:] So look, no, no, there is no 2. There is only 1, number 1. If you are our customer, you will see you will use your EMI card, create a loan and walk home, Number 1. 2, we are bringing a whole host of partnerships on to that platform. So let's say Samsung is going straight in a way using EMI card Samsung now is going straight to the consumer.
So in a way for Samsung and LGs who have the SKU infrastructure, inventory management infrastructure, [SPEAKER SRINIVASAN VENKATAKRISHNAN:] We are working with all manufacturers now closely to go direct. In fact, one of the outcomes out
of this [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Has
also been that, that it's helping manufacturers go direct. So there are no and they use essentially EMI card [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Our credit card to do the transaction. That's really how the conclusion of the transaction, Kuntil is.
[SPEAKER SRINIVASAN VENKATAKRISHNAN:] Yes,
tell me.
Got it. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] No, so what
I meant is suppose if
I buy an asset on the aggregator platform through some 3rd party But want to then borrow from Bajaj,
how it will work? No, no,
we have
to stitch. That's the whole point. That EMI that's the reason I gave you the math. Sorry, sorry. Anup was trying to make a point.
As we stitch our the way it happens today on Amazon and Flipkart that let's say 200,000 customers or 250,000 customers in a month use EMI Card on Amazon and Flipkart Customers in a month use EMI Card on Amazon and Flipkart as a payment instrument as we stitch more and more of such partnerships. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] More and more EMI cars can be then be used for the same. So we're doing that With e commerce, we're doing that with MakeMyTrip, we're doing that with the whole host of travel like EaseMyTrip and so on and so forth. We'll just keep On professional courses, so wherever we have bilateral relationships, it's used as a EMI Card is used as an instrument to create a loan.
If it is an aggregator, then our product gets seen as an instrument. When it comes to our e store, the retailers are also brought in by us and the instrument is also available for you. So we work both offers and honors here.
Yes. Thanks. That clarifies my question. Thank you.
Thank you.
Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Anuj Singha for closing comments.
Yes. Thanks, Ruchita. Thank you very much to the management of Bajaj Finance and Rajeev for giving us the opportunity to host you. That concludes the call for today. Thanks everyone for joining and have a good
Thank you, Anuj. Thank you all. Thank you.
Thank you. On behalf of Bank of America Securities, That concludes this conference. Thank you for joining us, and you may now disconnect your lines.