Ladies and gentlemen, good day, and welcome to Bajaj Finance Q4 FY 2022 earnings conference call hosted by Morgan Stanley. This event is not for members of the press. If you are a member of the press, please disconnect and reach out separately. For important disclosures, please see the Morgan Stanley disclosure website at www.morganstanley.com/researchdisclosures. Please note that this call and your questions will be recorded and may, in certain circumstances, be distributed to clients and/or made publicly available. By participating in this event, you consent to such recording, distribution and publication. All participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Subramanian Iyer from Morgan Stanley.
Thank you, and over to you, sir.
Thank you, Steven. Hello, everyone. This is Subramanian Iyer from Morgan Stanley. Thank you very much for joining us for the Bajaj Finance earnings call to discuss the Q4 FY 2022 results. To discuss the results, I'm very pleased to welcome Mr. Rajeev Jain, Managing Director, Mr. Sandeep Jain, CFO , and other senior members of the management team. We thank you for giving us the opportunity to host you. I now invite Mr. Rajeev Jain to take us through the key financial highlights for the quarter, post which we will open the floor for Q&A. With that, over to you, Rajeev.
Thank you, Subbu. Thank you, Morgan Stanley for hosting us for this evening. Very good evening to all of you. I realize it's late in the day. We also just finished our board meeting ten minutes ago. Here we are with the quarter. I'll refer to the deck that we have uploaded on our website in the investor section. I'll quickly jump in the interest of time to panel four. You know, essentially, headline, you know, the heading of that is quarter gone by. Overall, I would say, you know, last quarter we had said it was good quarter, and I was hoping that we'll have a better quarter than the good quarter, and that's what we had said excellent for.
Excellent quarter for the company, I would say, Q4 that went by, both portfolio quality and profitability. We're quite satisfied with the quarter that's gone by. Q4 is always very important to us because it fundamentally determines what is our entry run rate into the next fiscal is in general. The omnipresence agenda across geography, app, web platform, which I'll cover in some time, continues to accelerate in Q4 as well. Overall, I would say, as I said, entry run rate is very important from a business standpoint. We're quite excited about the FY 2023 prospects. If you took a level two view on the key metrics, the core AUM grew to INR 1,92,000 crore, a year-on-year growth of 26%.
OpEx to NIM came in at 34.6% versus 34.5%. PAT came in at a record high of INR 2,420 crore, year-on-year growth of 80%. ROE came in at 5.7%, not annualized, but a year ago it was 3.7%. On a full year basis, the ROE came in at 17.4%. The exit run rate for the last two quarters of the ROE has been 22.4%, 22.5%. Net NPA, we are back to pre-COVID levels, marginally lower than pre-COVID. December 2019 was the last quarter of what I would say pre-COVID quarter. You know, both gross NPA and net NPA are back to pre-COVID levels.
Net NPA came in at 68 basis points. A year ago, it was 75 basis points. On a full year basis, you know, balance sheet has grown 26%. OpEx to NIM has come in at 34.6%. Full year PAT growth has been 59% at INR 7,028 crore. Full year ROE is 17.5%, and net NPA is at 68 basis points. Some more color to the financials. Over to panel five, I'll only cover the high points. You know, point number three is relevant, 6.28 million loans versus 5.5 million loans that we did in Q4. Overall, we booked just a tad below 25 million loans in the year that went by.
Overall, you know, the fourth point is a new metric that we started to provide from this quarter onwards, the B2B consumption businesses. The divergence between volume growth and value growth has increased dramatically. I thought it's appropriate that we start to share this metric with you. The volume growth in the last quarter was 15%. The value growth was actually 27% in the B2B consumption businesses. Overall disbursements were INR 13,200-odd crores against INR 10,400-odd crores. We acquired 2.2 million customers. Overall in the customer franchise stood at 57.57 million. That's a 19% growth. Last year was the year that we acquired the highest number of new customers to the franchise. We acquired 9 million customers.
Cross-sell franchise, 32.77 million, a year-on-year growth of. Franchise grew 19%, but cross-sell franchise grew 32%. Bodes well for the new acquisition that we've been putting on board in the last seven-eight quarters. We remain comfortable adding 8-9 million new customers to the franchise in FY 2023 as well. We added 81 new locations. Total locations presence are now 3,504 locations and 133,000 distribution points. Competitive intensity, I talked about it in the last quarter, remained elevated. As I've said, we'd rather focus on profit margin than to focus on balance sheet growth. If I have to trade off between the two, clearly we would choose margin.
Margin we continue to protect. On aggregate basis, it reflected in AUM growth was 26%, and NIM growth actually came in at 3%. We continue to protect margin in Q4 that went by as well. Our cost of funds continue to help came in at 6.7%. Liquidity buffer is now, you know, we've been working hard to dial it down. As of April 30, it would have dialed down to this number because the Q4 number is a little artificially suppressed by INR 3,000-odd crore. It was because of the large tranche of IPO financing that we did, which was quarter crossing.
It would have looked like INR 13,000 crore in absence of that number, but it would have dialed down to sub-INR 10,000 crore as we close April. Overall, one of the large drags in the P&L has also gone away from what was legacy of COVID over the last two years. Now, over to finance stats, deposits grew across INR 30,000 crore at INR 30,800 crore. Consolidated mix is 19%. OpEx to NIM came in at 34.5%. As we said in Q3, we continue to invest in teams and technology for business transformation.
We are now reasonably clear that given, and we so far talked about geo expansion and app platform and what we're going to share with you today in next few slides is we are investing very deep in building a web platform as well for the last eight-nine months. Given the deep investments in all these three areas, which we think are clearly needed for what we think is a you know a full-fledged omnipresent financial services company, we think OpEx to NIM will remain elevated for FY 2023 as well. That is really one of the views that we have, and I thought it's important we articulate that. Loan loss and provisions came in at INR 702 crore. On a run rate basis, they were at INR 602 crore.
We took INR 100 crore charge on one large B2B commercial account, which went into NPA across the banking system. It was the case with us as well. We took an additional charge in that account. It's a INR 383 crore account. We've now provided INR 200 crores. Overall, loan loss to average receivables in the quarter was 40 basis points. That technically gives us a run rate of 152 basis points. As I said, the INR 702 crores has a one-timer of INR 100 crores, so probably gives us a run rate of 145-150 basis points as we get into FY 2023.
On a quarterly basis, you know, this metric is now better than pre-COVID levels at this point in time. We continue to carry management overlay. We have not diluted overlay. We had management overlay of INR 1,052 crores ending Q3. It's coming at INR 1,060 crores. We continue to watch out for fourth wave, and as a result, have chosen not to dilute any management overlay. We're watching for any signs of, if the next six months are fine, then we will slowly start to work towards releasing part of this management overlay. Portfolio metrics overall and debt management efficiencies continue to improve. They improve further in Q4 versus Q3 and are clearly on new acquisition.
Management of the portfolio, debt management efficiencies are better than pre-COVID level across most businesses. Not all, but most, I would say. Gross NPA, net NPA, I've talked about it, came in at 160 and 68 basis points. They're better than pre-COVID. Stage Two on an absolute basis came down by INR 1,300-1,500 crores between Q3 and Q4. Even on an absolute basis, the numbers, leaving aside the percentages, came down. Stage Three came down, remained flat. This is mainly on account of this INR 383 crore account that actually slipped in. Adjusted for that, it came down by INR 383 or INR 400 odd crores.
Despite such a large account flowing in, the overall Stage 3 assets remain flat. Portfolio composition across Stage One, Stage Two, Stage Three at a mix level is now better than pre-COVID. Very quickly, just from a management assurance standpoint, I'm in band number 17. Portfolio quality, 10 portfolios in our management assessment are green, and 1 is yellow, which is still two-wheeler and three-wheeler, but it's moved from red to yellow. Remains so for the next four, five months. Should be somewhere in green, we are hoping, by end of Q2 . Consolidated profits I already talked about grew 80%. Capital adequacy remains strong at 27.22%.
Tier 1 capital was just a tad below 25% at 24.75%. The Board of Directors of the company, given the strong performance of the company and given that the aggregate balance sheet grew INR 39,000-odd crore and we still did not dilute capital adequacy, have recommended a dividend of INR 20 per equity share, you know, which is a 1,000% dividend. This will amount to the dividend policy of the company says that we can distribute dividend between 15%-25%. This number comes to 19.7%, subject to shareholders' approval. Sorry?
19.2.
19.2%. Sorry. 19.1%. Point number 22, RBL allowed a deferment, but we've chosen, we've already transitioned, so we've chosen to not take it and, it's a way of life for us now. BHFL overall, AUM grew well, from a profit standpoint, they came in soft. AUM grew by 37%. Profits for the quarter grew by 11%. They're mainly caused by OpEx. In the last two quarters, we have taken a position to significantly accelerate investments in growing distribution. So, it's a transient OpEx phase.
We also infused INR 2,500 crores of additional capital, so it's the right time for them to make decisions to invest for the next level of growth of the company. On the fifth of April, we
Seventh of April.
Seventh of April, BFL infused INR 2,500 crore of capital in BHFL. BHFL gross NPA, net NPA performance continued to remain quite strong among the lowest in the industry, came in at 31 basis points and 14 basis points. I would say it's a creditable performance on credit costs given the amount. As I said, delivered 11% growth to INR 198 crore for the quarter. Capital adequacy came in at 19.72, but would have moved up further to close to 27 odd percent as a result of the infusion that we've actually done. Bajaj Financial Securities, we continue to systematically and gradually continue to build the company.
Focus on quality of franchise rather than quantity of franchise. Added 62,000 customers. Activation rates of this customer franchise is now anywhere between sixty-day activation on broking accounts is between 30%-37%, is really where the number is, and that's our focus rather than adding new customers and having inactive customers, we've chosen to focus on activation rates, which are sixty-day activation, at a design level. Margin trade financing, which we think is the future of the business, the balance sheet grew to INR 720 crores, and we think will be an important dimension to build a large broking business, from our perspective. Profit came in at INR 9 crores. That's really the key financial indicators. Overall, quite satisfied with the quarter. All metrics are looking good.
We are quite excited about the prospects of FY 2023. Now let me just cover next five minutes on panel number 10 on Omnipresence strategy. You would notice that we have essentially transitioned from using the word business transformation to articulating it as a Omnipresence strategy. That's really how as our audited accounts get released and the MD&A and information infrastructure appears, this is the frame of Omnipresence strategy that we intend to, you know, to continue to work on over a period of the next three to five years. Let me just give you some texture on that.
Just from a forward-looking standpoint, first point is that omnipresence strategy will expand from geography and digital app platforms. These are the two pillars so far of the omnipresence strategy to also include creating a digital web platform. These are the three pillars. We also think in the future there will be social and virtual. Eventually, there may be five pillars, but so far, we're working on building two pillars until September 2020, which were geography and digital app platform. As digital app platform takes a life of its own, we decided that it's time to invest in the third pillar, which is the digital web platform.
Fundamentally between the app platform and digital web platform, the digital web platform will get delivered in two phases between September and March, September 2022 and March 2023. That's one part of the conversation. It intends to essentially you know web remains the largest driver of traffic, volumes and service to customers in the digital space. It's bigger, it remains bigger than app. App comes with many benefits, also comes with a set of limitations. If we want to be a digital enterprise, we are very clear that we got to play in both these spaces equally large, equally strong and equally strategic. That's really how we've taken a decision to build a web platform, which will fundamentally provide a platform agnostic experience.
You can start in app and go to web and you start from there, and you can go to web, start from there and start from app. At a design level, that's really where we are. In the last eight-nine months, we've been investing in building the domain talent and technology to build a large digital web platform. We've added 250-odd new people in this space to build this out. We will, as I said, completely transform the web experience enabled by common technology infrastructure layers between web and app to what I would say to the extent possible, reasonable extent possible, I would say, is really where the design thought process is.
We're taking a customer in view rather than a company out view. The UI UX will be identical to a digital app platform for ease of navigation and customer experience. It'll look like an app, but it will be a web platform. Phase I by October and second phase by March 2023. We expect by March 2023. By March 2023, just on staying with the conversation, even on the digital app platform, we would have delivered phase II , which I articulated in the last quarter. We would have, I would say, across all these three areas, by March 2023, completed our transformation journey that we fundamentally embarked on in August 2020.
It would have been a long two and a half years of running the company and building an enterprise for the future. I think we have last 11 months to go as we complete the transformation process in our assessment. Jumping to the two things that are going concern dimensions of our or you know going concern pieces of our omnipresent strategy. One being geography. We added 81 new locations, and we continue to invest in UP, BR, and northeastern states as we work on omnipresent geographic infrastructure. Next panel, which is on panel 11. The insurance marketplace went live in March 2022.
It's a large, very large capability across nine insurance companies, across, you know, eight insurance products, 345 pocket insurance products, four motor insurance products, and nine health insurance products. Allows customers to compare, review, buy policies. Service section includes policy document, claim request, and so on and so forth. It's a reasonably large asset that we've been working on, creating over the last 12 months as part of our business transformation strategy, which went live. The investments marketplace, in partnership with Bajaj Finserv Direct, also went live in February, offering various mutual fund and fixed deposit options to customers. Allows customers to explore, invest, seamless onboarding for mutual fund investors, easy online KYC process and so on, calculators and portfolio view.
These are two large marketplaces that have been under wraps that we've been building over the last, I would say 14 odd months. Phase one of these, both these assets have gone live, and we have full-fledged plans to, like we talked about our platform, grow them both in size, in terms of size and depth as we execute through the year in FY 2023. The reward management system, critical to the entire digital journey, which is RMS, also went live in March 2022. It will drive higher customer engagement on the app, will deliver much higher conversion rates, which is its purpose.
It delivers to us as a company the ability to offer reward points, cashback into wallet, and vouchers for online and offline purchases. I think it delivers a reasonably robust infrastructure for us to be able to engage customers across product services, payment options and so on and so forth. That also went live. Overall in Q4 on the app platform, which went live as phase one, we added 2.6 million net users, and as against 3.6 million in Q4. Due to seasonality, normally, you know, B2B point of sale remains our largest new customer gatherer. Due to seasonality, you see that number drop from 3.6 to 2.6.
In Q1, you will see that number go up. In Q2, you will see it go down. In Q3, you will see it go up, and Q4, you will see it go down. Overall, in FY 2023, we intend to add 14-16 million net new users. That's really the run rate that we are working with to bring between 14 and 16 million new users to the franchise, taking us hopefully to 30-35 million users. Net users should be on the app platform, given that we are on 19 million active users at this point in time.
If we add between 14-16 million, we should have between 30-35 million net active users on the platform by as we exit March 2023. I had talked about it, and we put it in public domain for investors to understand that we would do, we have planned that we would deliver as part of phase two, 17 new features and components. The final addition as we completed our planning process is essentially that in three sprints, we will deliver 62 new features and components as part of the design as we deliver phase III . The timelines are not changing. They may shift by a month or so here and there. That really doesn't matter from a directional standpoint.
I think by the time we finish phase II , we would have a reasonably robust app platform infrastructure both for NTB and for ETB customers. I'll just take two more minutes, and then I'm done. Just on some statistical data in terms of how the app platform is helping us engage or acquire new customers. We acquired 455,000 new EMI card customers digitally in the quarter that went by. That SIF itself is now 1.8 million. That delivered 234,000 new loans in Q4 alone. Overall EMI store visits, which is the third flagship marketplace that we have. The flagship marketplace is B2B marketplace, followed by, as I talked about, insurance marketplace, followed by investments marketplace.
Eventually. Our goal is that as these three marketplaces become large and for consumers to compare, review, purchase products, I think should be generating INR 200 million-INR 300 million each in a year as we build them out. I think that's really what the thought process is. In the quarter that went by, it had 37 million visits. We're investing deep even in EMI Store. We are putting in place a plan to build a ground-up EMI Store infrastructure, which should be going live sometime by June 2023. The reason I'm making the point to give you a texture on when I say OpEx to NIM will remain elevated because we continue to invest.
Investing for the future, investing for engaging customers, investing for mobilizing and creating, hopefully, exceptional properties for consumers to do business with us. In the digital app platform, we delivered 1,800 worth of personal loans in the quarter that went by, and 29,000 credit cards. Debt management transactions on the app platform came in at a tad below 400,000. People who had defaulted paid using the app platform. We're quite encouraged by the level of momentum of the app platform for what I would call accidental defaulters to use the platform to pay us. Flexi Loan transactions, you know, stood at 780,000.
Again, a high transacting product, you know, beginning to be relevant from an app platform standpoint, is coming in. 18 engagement partners we added on the app platform, and totally now we have 48 odd engagement partners. Payments, we've talked about it in the last one year. Now, numbers have started to come in. First of all, the QR-based P2M acquiring business went live. It's our first acquiring business gone into production. The distribution expansion of that of the QR-based P2M is now underway, so we'll build that out. We have aggressive plans for that in FY 2023. We are continuing to, we have, you know, significantly accelerate our investments in building a full service payments business.
Nitish Asthana, who's joined us as the President, Payments, he came on board in the first of March. He's driving the entire initiative of building a full service payments business. He has 15, 18 years experience in just the payments space, and we are giving him the platform to build out a large, credible, relevant payments business over the next three to five years horizon. We are setting aside reasonable amount of money. We are very clear we will do full service payments business across P2P, EDC terminals, the payment gateway business. We'll do it either on our own or through strategic partnerships.
As I said, we've set aside deep investments both in CapEx and in OpEx to grow the payments business as we journey through FY 2023. Just the last point on this. 1.7 million wallets got added against 2.5 million. As I said, this is again little seasonal. Overall 6.5 million customers in wallet. The rewards management system will significantly accelerate rewards wallet journey. You know, as I said, whether in terms of rewards in terms of coins or in terms of cashback, all our engagement with our clients will now go through rewards management. It'll create significant transparency, significant, and will reduce any customer-related issues.
I think transparency levels and customer service-related issues will fundamentally, I could argue with you, get eliminated as a result of our entire rewards management folding into the payment strategy. We are very clear we would like to engage more with clients rather than have you know noise from a customer standpoint. We started our UPI journey. We added 1.1 million UPI handles against 550,000. These numbers will multiply significantly as we move along. 1.4 billion bill payment transactions also happened. 85% of them are actually our customers. This is really how we're working on our franchise.
The acquiring business will work on our distribution ecosystem, ring-fencing, harnessing, mining, whether our customer franchise or our distribution engine is really where the focus is of the payments business, and we'll build that out. That's really on the quarter. I've spoken longer than I normally do, but there were lots of things to cover. We can move over to Q&A.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kunal Shah from ICICI Securities. Please go ahead.
Yeah. Hi, Rajeev. Congratulations for good FY 2022. three questions. Firstly, in terms of the entire web platform, maybe as a part of the one of the pillars that was earlier articulated, and what are the kind of maybe the benefits vis-a-vis the cost if we have to see, okay, compared to that of the app platform? Will this involve more cost compared to that of app and vis-a-vis that, what would be the benefits which we expect to accrue? That's the first question. Second, in terms of the master deductions on credit card, what is your assessment of the impact from your end? Third question is on consumer durables.
When you see the rise in the delinquency bucket, but still it's not been there in yellow or so. Now what could be the reason for the rise, and how do you see that going forward? Yeah. Thank you.
You know, as I said, Kunal, that it's the largest driver of traffic. I think that's a principal point we need to remember. If we do want to build someday a 100 million customer franchise from 57 million customer franchise, we think web is as critical to the frame. App serves its own, as I said, purpose. Its engagement levels are better. It's not a trade-off or it's not either/or, we've got to do both. Now that's today, at a 30,000 feet level. I'll request Anurag or Rakesh to probably further expand on this. Either of you.
Yeah. It's not a new strategy for us, a web platform. We are basically today, over the investments over the last 10 years, 20 million of the people come onto our web platform. Huge investments in SEO already done. 10.5 million come on that one. What we are saying is this is more or less a web platform 2.0 for us, okay? As a follow through, okay, of the app, okay, which we have already launched. What we want to do, as Rajeev has already highlighted, to deliver, okay, similar customer experience, consistent, okay? That he can switch between app and web. That's number one. It's not a cost angle.
It is more of a common customer experience and consistency in experience because the choice the consumer can make on how he wants to interact with us, how he wants to consume our services. Lastly, the explore frame of web is immensely huge, okay? That's the multiplier benefit of being on the web, okay? That's the reason we were just talking about building our web platform.
The cost of web platform will be significantly less than building the app platform as Rajeev had articulated in the transformation section, wherein the infrastructure layer will be common between the app and the web. We'll be utilizing the common layer to address the web transactions also. The cost will be less than the development of the app.
If you can, just to the last point, Kunal, on that point one, that technically it was run by a marketing function. It will be run as a business asset. The way I see, I keep saying within the company that the largest branch is, let's say, app. The second-largest branch will be web. We will have 3,504 more branches. That's really how I see the business to be. That the largest branch is app. It can become web tomorrow. I mean, because as we said, the reach, you don't have to log in. You can explore the products and the services of the company without having to log in or download. No.
I think, it'll offer a integrated experience, a seamless experience to customers, as Rakesh said.
It's our omnipresence.
Yeah. It would complete our omnipresence strategy. Clearly, that's level one. Credit cards are a large, it's a master circular that's come in. We're studying the master circular at this point in time. Fundamentally, we will, and we'll go by what the circular has essentially articulated. Don't have a point of view on good or bad, positive or negative. It's as directed by RBI. We got to all follow whatever is stated. Fundamentally, consumer durable, we have captured their bottom. The large B2B account is sitting there, Kunal. If you go to that panel, you will fundamentally-
Oh, okay.
See that. Yeah, yeah.
Okay.
Otherwise, it's at the same levels as it was in Q3. Marginally better, I think, three-four basis points. It's 99.6% versus 99.58%. I told the team to restrict it. They've not restricted probably. That's all. Nothing else.
Okay. Sure. Yeah. Thank you.
Just the last point, CD business remains at an ever best performance in terms of through the door and throughput, noted here. In the portfolio section, you'll see it. Thank you.
Thank you. Before we take the next question, a reminder to the participants, please limit your questions to two questions per participant. If you have any follow-up, may we request you to rejoin the queue. The next question is from the line of Abhishek Murarka from HSBC. Please go ahead.
Hi. Good evening, Rajeev and team. First of all, congratulations for the year. I think great performance given the challenges. I have two questions. The first is on SME. I believe a couple of quarters back, you had called out some pricing pressure and just wanted to get an update. How is it now? A lot of large banks are growing at 8%-10% QOQ. What do you see in the market? The second one is basically on your net interest margin outlook, especially now that your liquidity buffer is normalized and potentially there could be yield pressure on some of the businesses.
How do you see your NIM going forward, and what range of cost to income should one expect for FY 2023, given all the investments that are in the pipeline? Yeah, those were my questions.
You know, the SME business, we've now done that for 14 years. We've seen lots of people get excited by the NIM, the gross NIM that comes with it. Eventually, when the losses appear, step out of the business. You've seen that play many times other than, I would say, one large player, nobody has remained consistently. You can do channel check with dealers, with DSAs to know that very clearly. It's one more season where we're seeing a lot of people get into the business, and excited by the gross margin that it brings to the table.
Hopefully learn some lessons as they realize that the net margin is eventually more relevant than the gross margin. That's point number one. Point number two, we have been creating significant granularity in the SME business over the last 14 years. We do this business in over 1,500 locations. It gives us the ability to diversify, one, you know, maintain margin profile, but needs significant skill. If you hurry up too quickly in this business, you get hurt. You do it too slowly, the cost kills you. That's really what our view on the whole MSME business is, and it has not changed.
We believe that after our B2B business, it's one of the biggest skills we've created over the last 15 years in terms of distinctiveness and differentiation. NIMs are overall. Product mix is defined by two, three things. Overall pricing, number one, as I said, we don't want to dilute pricing. It's because we don't know if there will be more waves. Point number two, product mix is a driver of NIMs. Cost of funds is a driver of NIM. We don't want to dilute margin. That's point number one. As I said, I'd rather dilute growth than to dilute margin. Point number two, product mix.
You should estimate that a product mix would continue to remain steady, largely with one or two percentage points here and there. Probably 100 basis points given the size of our balance sheet. Point number three, cost of funds. I've always said our liability balance sheet is longer than our asset balance sheet. That's been true for a long, long time. At least in the near future, which is, I would say, most of the year, we should be fine. We will, we'll go by the year as we, as the year plays along. For now, we are comfortably placed. I would say for the next two or three quarters, and we'll play along from there. I think that cover...
OpEx to NIM, I've said it is. It will remain elevated. Elevated being defined as it's a metric that we've also had to circle up in our head. Let me be honest with you. I've said this to some investors in that we eventually it will lead to better OpEx to NIM ratios. Eventually. Now, that eventually, in long term, we are all dead. I think let's talk FY 2023 at this point in time. Given the solid momentum we have on most metrics, the stance of ours as a company is to invest. We think it's the moment for us to invest. We've been investing in the last 18 months.
We should invest in FY 2023 as well, so that we can create a completely transformed organization, which is fully digital, by end of FY 2023. It will remain elevated. Now elevated so that your understanding of that is not different from mine and from somebody else. It should remain within this corridor, in a on a quarter-on-quarter basis, it may go up. It will remain between 34.5% and 35.5% is really how we see FY 2023 to play out. It should start to go down, but as I was saying right now, Abhishek earlier as well, we are looking at building 2.0 of marketplace. That's a large investment commitment.
We are continuing to invest in geographies because we think it's a huge opportunity in some of the north and central states in India. Continuing to invest in app platform. While delivering, I must say that this OpEx to NIM, please keep it in the context that we don't foresee the long-term guidance metrics of profitability to get compromised in any given manner. A higher OpEx to NIM should not in any way be construed as that leading to a lower ROE or a lower profit growth. There is no direct correlation at least for FY 2023. That's why we as management believe from a long-term standpoint it's the rightful moment to invest.
That if the ROE is not getting compromised, if growth momentum is strong, that's the moment to invest rather than investing when you're going through a bad time. We are looking forward to FY 2023, and given how the metrics are looking, are choosing to invest without compromising on, as I said, ROA/ROE, in any given manner.
Sure, Rajeev. That was very comprehensive. Thank you so much. Just squeezing in one very quick question.
Mr. Murarka?
Yeah.
Sorry to interrupt, but for any follow-up may we request you to rejoin the queue, please?
Sure. Thank you.
Thank you. A reminder to the participants, please limit your questions to two per participant. The next question is from the line of Apurva Deshmukh from CRISIL Limited. Please go ahead.
Hi. Good evening, sir. Congratulations on your results. Thank you for taking my question. My first question is, I would like to understand what would be the percentage of consumer durables and personal loan individually in your standalone AUM of Bajaj Finance and, what is your market share in these two segments among the NBFCs?
Apurva, if you go to panel 47 of the balance sheet, you would fundamentally see that of the balance sheet INR 15,000 crores of the INR 146,000 crores of standalone balance sheet is in. Add two, INR 15,000, INR 14,977 and INR 4,129. Now this is close to INR 20,000 crores in terms of balance sheet of the consumer durables financing. It of course has many other businesses sitting there in that. There is consumer electronics, there's furniture, there is e-com financing, and so on and so forth. On aggregate basis, it is 10% of the balance sheet.
Okay. Similarly about personal loan individually?
Personal loans you should, just staying with the same panel, you should look at the consumer B2C business and the rural B2C business. If you see 37 and 15, that's 53. You should knock off from that, let's say INR 2,000-odd crores, or INR 2,200-odd crores of gold loans. It would be 50,000-odd crores, plus minus.
Okay. Thank you so much, sir. One-
Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead.
Hi, am I audible?
Yeah, yeah. Yes, Nischint.
Could you spell out or give some guidance on, you know, what could be the total quantum of rewards that you could pay out next year in terms of its impact on P&L?
Nischint, I would say. I mean, as I said, there's no need for a specific number, but sales promotion continues to be a discretionary play. If you're doing well as a company and we want to engage more, we would accelerate. If we are not meeting our goals, then we would decelerate. For any company, it remains a discretionary number. We have a plan for the year. As I said, we would put all our rewards, which we did even earlier, through various means, is now going to go through a rewards management system. For last year, I don't have the number in hand. Would be.
Last two years have been soft because we were given the kind of charge-offs that we were taking from a loan loss and provision standpoint. I would say if we take 2019-20, that number would have been around INR 300 odd crores, maybe a little more.
Would that kind of change significantly?
Maybe Vishwajeet may be saying the number is not correct, so maybe Sandeep can correct the number.
Now the number was in the range of INR 180 crores-INR 200 crores.
INR 200 crores.
That's the correct number.
INR 200 crore is the number. Yeah.
Would it just scale up with volume for the future years or should the percentage go up given the fact that?
No. That,
into a more competitive business?
Two parts to this, Nischint. This was prior to payments. This was to stimulate our customers to do more business with us. Okay. The payments point that I made earlier is over and above, it's in addition. Let's say just on a customer franchise basis, if the number of 200 goes to 300, let's say for hypothetical sake, it'll be INR 300 crore, that would go through the rewards management framework. In addition, whatever we have given to the payments as we view will be additional. However, as I said earlier, Nischint, it depends on how we are doing. Fundamentally is determined by, what's our stand in terms of management of on customer franchise origination and management of P&L. It's discretionary.
Sure. Thanks. The second question is actually on the app developed by Bajaj Finserv. You know, we're just trying to understand that do other lenders on that platform get access to your EMI source?
No. That company is on an arm's length basis. It's got nothing to do with us. They work with us. They have two roles that they play. They build marketplaces for us. They build the marketplaces on an arm's length basis as a technology vendor. They also do distribution of products for us and that's all. What they do is independent of them.
The EMI Store is also visible on the platform, right?
Sorry. They run like any digital distributor would run. They run an algo or an engine which determines that based on the segmentation of the customer, they may prop up, prop us up, prop somebody else up, or prop up a new age lender. It depends on how deeply integrated their lending distribution partner is with them, and it's organized that way, to the best of my understanding.
The entire EMI Store is developed by them, what I can see on there.
Yes. As a technology partner. Yes. What is also happening is that we just held it back. We were to go live on 15th of April. We've held it back because we are in season from first of July onwards.
New brand name, Bajaj Mall.
Yeah. We are creating a new brand called Bajaj Mall and, from first of July, even these two assets will become completely distinct from each other. Actually it's ready to go into production. We've held it back because we are in season time.
Okay. That answers my question. Thank you.
Thank you. The next question is from the line of Sameer Bhise from JM Financial. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Just wanted to get a sense on how are you thinking about the payments business from a scale-up perspective. Obviously we have initial head start given the strong physical presence. But in the digital world, any sense there? Secondly, would be the whole markets versus Bajaj Finance app. Would that also entail a creation of two parallel branding mechanisms there?
Two parts, as I said earlier, Sameer, that our focus of the payments business, if we ever wanted to make it viable, is to essentially focus on a franchise. Franchise being defined as customer franchise for payments and their wallet and acquiring franchise for our B2B frame. That's really the and that these are the two pillars on which it will stand. The third franchise being to enroll or onboard millions of merchants. If fundamentally companies have dedicated staff here because we're sitting in those marketplaces with people in the stores, and they have intermittent times during the day when they're busy and rest they are not, they would we have something called mobile salespeople or mobile sales staff who do that as well.
These are the three pillars fundamentally on which we are looking at building a payment business. We are building this business so that these are the three pillars. View is a three-five year view. We are very clear that we need a large payments presence to build out the digital strategy of both app and web for us as a company. These are the three head starts we have, and we are babes in the woods. We are just starting the business. We don't want to put Nitish, who's here on the call, under pressure. We build businesses with a long-term view, and that's a mandate to him, and that's a mandate we have taken that it's a long view.
Markets.
Markets essentially, as I said earlier to Nischint, it's independent, so there's nothing else to comment on that. I think I've answered this question two, three times in the last three, four quarters, and nothing has changed, other than as Rakesh said, we're launching Bajaj Mall on first of July. That'll create further differentiation and distinction in the from a distinctiveness standpoint.
Sure. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Kuntal Shah from Oaklane Capital. Please go ahead.
Hi. Thanks, Rajeev, for taking my call. My first question is, you know, you are building all the Lego blocks of the digital payment systems, RMS systems, CRM. Is there a plan to monetize it via third-party sales of APIs and open architecture to third parties in the next, say, couple of years? Because it doesn't make sense for everybody to build everything, right? If somebody's built at scale, then can it be delivered by others to deliver service to your customer and their customers? Second question is, you know, you mentioned about credit card, but now the norms are out. What's your view on the going rate? Because it seems, RBI is aligned with the view.
I think the purpose of building the entire technology stack is for us to monetize our franchise.
Yeah.
I think that's our objective. We continue to originate 8-9 million new customers. If we stay to the same run rate, we'll hopefully have 90-100 million customers in the next four-five years. That's a very large franchise. Our activity rates, activation rates, share of wallet remains very low with these clients. I think that's no monetization can ever make up for what we can do with our franchise. I think the skills as part of understanding credit, dispensing credit and managing risk that comes with it. I think that's first part, but there's never say never. Maybe who knows, five years down the line, we think it's something to do, but naturally is not in the next five years, Kuntal. That's one part.
As I said earlier, we are studying the credit card guidelines, what it means. We'll seek some clarifications, and then we'll determine next steps.
Thanks for the call. Thanks for joining me. Thank you.
Thank you. The next question is from the line of Parag Jariwala from White Oak Capital. Please go ahead.
Yeah, Rajeev, just one question. In terms of, you know, we've seen the HDFC-HDFC Bank merger. You know, our thought process on, you know, converting into a bank, does it, you know, kind of impact us anyway? Because, you know, overall, there is a general belief now in the market that, you know, over a period RBI wants larger NBFC to convert into a bank. So, any thoughts on that line? Have we, you know, tried to pre-pone or, you know, go fast towards bank conversion? That's my question. Yeah.
Yeah. No, it's a fair question, given it's a topical question. If ever this was to happen, there'll be three stakeholders involved in this conversation. I only represent one, which is management. Our management view, the second will be shareholders. Third, not in that order necessarily, will be regulators. Maybe the first will be regulators, second will be shareholders, and third will be management. As management, our view at this point in time from a long range standpoint is that our focus is on building a payments and financial services business. We are satisfied with the strategic frame that we have created and don't have a view as management, at least from a next three-year standpoint, on bank.
As management, let me make my stand clear. On whatever I understand from shareholders, I think Sanjiv is in public domain talking about what he thinks, how financial services is changing for the future. He's in fact going one step forward and talking about decentralized finance as a frame. If I read between the lines, that's not what his view also seems to be at this point in time. We'll play along. Our view at this point in time, in very uncluttered manner and very clearly, is that we are focused on building from a financial services business to a payments and financial services business with hopefully 100 million franchise in the next five years. Companies are built for long periods.
In the long term, given our ambition, could we be one? Probably, yes. Long term is long term. I mean, we'll play along. It's not on the horizon for next two-three years.
No, Rajeev, the point is, you know, I as a shareholder also believe it's great to be a payment and financial services, but, you know, as you rightly said, if on a regulatory side building the pressure, we can't do much about it, right?
You know, RBI has made its stand clear, at least in public domain with the new scale-based regulation and has very clearly articulated that you, if you're upper layer company, upper tier company, you are bank-like regulation. You deem it appropriate to be like bank-like regulation and be a non-bank, be our guest. At this point in time, we are reading it exactly the way it is. If I take that those regulations, our stand is to remain a non-bank for next two-tree -year standpoint, meet all the requirements of bank-like regulation. We don't believe in any it in any manner dilutes our business model. We think actually it strengthens it. We've been working on it, you know, over the last 18, 24 months.
We've always been very clear that arbitrage does not create business models, at least long-term business models. Over the last 15 years, we'll complete 15 years of transformation as we started this year. I think we never believed in arbitrage. I think it's helped us in good stead. If you look at various, I mean, we used to be 180 days past due, we were allowed as NPA. We saw that go to 150, 120, 90. I mean, 2007 never saw any impact. You saw us transition to DPD, never saw any impact on us. Because we believe color of money is green. Regulations eventually only serve a particular purpose. If you're building a long-term business, we must focus on long term.
What is right for a bank to do must be right for us to do. You know.
Okay. Thank you. Thank you, Rajeev. Thank you.
Thank you. Ladies and gentlemen, due to time constraint, we take one last question from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah, hi. Thanks for taking the question. Just two very simple questions. Rajeev, I think you used to say that.
You had about a 70% market share in the subvention pool. I mean, what would be your best estimate now of the subvention pool? Has it gone past pre-COVID levels, and where has this 70% number moved?
It remains. I mean, we track it every month. It's remained between 68%-70% for the consumer electronics business. It's remained between 57%-59% in the digital business. These are two large categories. In the digital space, this number used to be 51-52%, so it's obviously moved up. In the CE space it's remained steady between 68%-70%. I think that's really the number I would say. It's closely monitored and tracked by us because we are dominant in the space and we would like to ensure we protect our market share in the space.
Great. Just one more question from my end, Rajiv. I mean, I think in one of your slides you've articulated that in the last quarter you had identified some 17 features and components as part of your phase two, and it's now kind of gone up to 62, if I'm not wrong.
Yeah.
Have you identified some new use cases on the payment side? That's the first question. I mean, couple of times during the call you suggested that you're building the payments business with a slightly longer, three-five-year kind of a view. Do you think, I mean, for the next two years, this payments business is not going to be accretive to your bottom line?
It'll never be accretive. I mean, Nitish may not fully agree. Given what would go into engagement versus what, let's say, tomorrow the infrastructure business or EDC business may make, will never add up. When we invested in the business or decided to venture into the business knowing fully well that someday he can surprise us and build out make the math work, but it looks quite hard to make up, at least in the medium term. There's no concept of long term. Looks hard to make up in the medium term. You know, we are purely the goal is to create significantly higher engagement. That's the purpose, both on app and web. I think that's the mandate. We want millions of customers use the platform.
We want them to remain engaged. We bring entire whole host of financial services, including three large marketplaces to these consumers. We have, I think, 48 partners that by FY 2023 will actually go to 100 engagement partners. So 48 engagement partners, just by plan is going to 100 engagement partners. Three large marketplaces, entire bouquet of retail financial services products, payment options and 100 engagement partners. That's a very large ecosystem. We use this, all this to engage clients. That's really the purpose. Payments tool for 100 engagement partners or marketplaces to do transactions. I think that's really the goal of the payments business at a design level.
The 62 new features, fundamentally, when we articulated it, we were in the middle of what I would call a long-range planning process. By the time we completed the planning process, from project, the app platform has now transitioned to a business. The company runs metrics on how many customer downloads it had yesterday. It's a whole host of hard metrics that Kurush Irani had talked about two, three quarters ago. We still don't publish them. We are just waiting for some level of maturity before we start to publish them. From a project, it has transitioned to a business. In the current year, the goal of the company is to mobilize the 32,000 people of the company on speaking the language, managing the asset, generating business through the asset, generating services through the asset.
We were in the middle of a planning process. By the time we completed the planning process, and just in the interest of transparency, I thought we'll outline what the final feature output would actually look like. Over the next eight months, the idea is to just deliver them in three sprints. We're learning as we build this out. You will see significant changes appear or enhancements appear in as phase two starts to arrive. End of phase two would mean we are satisfied with what we thought if you were a new customer, he or she would be able to get buy products and so on and so forth.
I think that's really where what we are seeking from a satisfaction standpoint. I just wanted to make one last point. I think it's an important point, which I should have mentioned earlier. You know, I've had two, three questions that I got asked on credit card. We work on credit card with two leading partners, being RBL Bank and DBS. We have large franchise. We have deep relationships with them. We continue to remain committed to. We don't do partnerships for short term. We already have a four-year partnership with RBL. We've just started to dispense new cards with DBS. It's taken us 12 months to build out the partnership.
We are very clear we build partnerships for long term, and we remain committed to these partnerships for the long term. Whether we can do our business tomorrow or cannot do our business tomorrow, our commitment to these partnerships for growth and commitment remains very strongly rooted. I thought I'll just make that point. I should have made it while responding to one of the points on credit card, but I thought I'll make the point. I think that brings us to the end, Subbu.
Thank you.
Much.
I now hand the conference over to Mr. Subramanian Iyer for closing comments. Over to you, sir.
Thanks a lot, Rajeev, Sandeep and the Bajaj Finance team for giving us the opportunity to host you. Thanks everyone else for joining. This concludes the call for today. Over to you, Steven.
Thank you. Members of the management, any closing comments before we disconnect?
No. Thank you and good night.
Thank you. Ladies and gentlemen, on behalf of Morgan Stanley, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.