This call is not for media representatives or Bank of America Investment Bankers or commercial bankers, including corporate and commercial executives. All such individuals are instructed to disconnect now. A replay will be available for the Bank of America Investment commercial bankers, including corporate and commercial executives. The replay is not available to the media. Good day and welcome to the Bajaj Finance Limited Q3 FY25 earnings conference call. 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 organization, may be asked during the call. If you do not wish for it to be disclosed, please immediately discontinue this call. As a reminder, 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 this conference call, please signal an operator by pressing star then zero on your touch-tone phone. I would now like to turn the call over to Mr. Anup Singla. Please go ahead.
Thank you, Neeraj. Good evening, everyone. This is Anup Singla from Bank of America Securities. Thank you very much for joining us for the Bajaj Finance earnings call to discuss Q3 FY25 earnings. To discuss the earnings, I'm pleased to welcome Mr. Rajiv Jain, Managing Director, Mr. Anup Saha, Deputy Managing Director, Mr. Sandeep Jain, CFO, and other senior members of the management team. Thank you very much, sir, for giving us the opportunity to host you. I now invite Rajiv for his opening remarks, post which we will open the floor for Q&A. With that, over to you, Rajiv.
Thank you, Anup. Thank you, both our team, for hosting us. Good evening to those who are in India, and depending on the geography, good morning. I'll take you through the investor presentation that we put on the company's website. Let me jump right in. I'm on panel number four. Just at a high level, overall, I would say good quarter on volumes, assets under management, and OpEx. Loan losses have begun to stabilize, or have rather stabilized. Came in flat in terms of percentage points virtually between Q2 and Q3. Profit growth has begun to gain momentum. ROA was steady. We overall delivered a year-on-year growth of INR 24,119 crores, the highest that we've ever delivered. Booked highest-ever new loans of 12 million loans in the quarter and added 5 million new customers.
Customer franchise stood at 97.12 million, so well on course to cross 100 million as we finish the current fiscal year. It'll be a big milestone, I would say, for us as a firm. Finserv app now has just a tad below 67 million customers. We shared the long-range strategy, which is BFL 3.0, a FinAI company, was unveiled as part of our investor day in December, on 10th of December. And overall, we're quite excited about this next phase of transformation for BFL as a company. I would say this is the 3.0. We had one phase between 8 and 16, I would say, and a second phase between 17 and 24. And this is the third phase. In terms of AUM, just a tad below 4 lakh crore at 398,000 crore, annual growth of year-on-year growth of 28%.
OpEX to net total income came in at 33.1%, an improvement over 33.9% same time last year. PBT grew by 18% to 5,765 crores. All these numbers are consolidated numbers. PAT grew by 18% to 4,308 crores. ROE came in at 19.1% versus 22% same time last year. Net NPA came in at 48 basis points versus 37 basis points last year. Panel five, AUM we've talked about. New loans we've talked about. New customers added we've talked about. We are well on course to add 17 million customers in the current year. Run rate, so far we've done 13 million, 13.5 million. So 3.5 million is a clear run rate. It should be a tad higher, I would say. We are well on course to cross 100 million customer franchise.
In terms of location addition, as we have said in the past, that clearly our geographic presence has peaked out. We added 14 new locations. In the current year, we've added only 60-odd locations, if my memory serves me right. 50-odd locations. We have 4,209 or so locations. So we've added 50-55 locations. We are adding more branches, but not more locations. Gold loan branches, as I'll take you through, have crossed 1,000. In terms of cost of funds, liquidity buffer remains strong at 13,600. Cost of funds, marginal decrease, but largely flat. Deposits grew by 19%. Operating efficiencies, net interest income grew 23%. NIM was steady in Q3. Net total income grew by 26%. OpEX to NTI improved to 33.1%. We continue to invest in optimizing our operating expenses and rapidly implement AI capabilities to improve productivity across the board.
We had shared our vision, our mission for that as part of our investor day in December. Employee headcount stood at 62,176. We added a much smaller number of people in the third quarter. We added 2,824 people. These numbers are consolidated. Annualized attrition came in at 16.2%. Clearly, as we head into the next year, it's likely that the employee headcount addition will continue to be smaller and smaller or lower and lower as we move into fiscal 26. In terms of credit cost, as I said, it stabilized, came in at INR 2,043 crores. Loan loss to average AUF was 2.16% versus 2.13%. It's a INR 20 crore differential in a way for it to be at 2.16. So that's why I've used the word stabilized. Total net increase in stage two and stage three was at INR 608 crores. Last quarter, it was 540. This quarter, it's 600.
Q1 , it is 1,100. So clearly, the formation of Stage 2 and Stage 3 have begun to stabilize at these numbers. So we continue to take proactive risk actions by cutting segments and pruning exposures. Rather, I would say aggressively at this point in time. On a full-year basis, we estimate loan loss to average AUF to be in the range of 2% to 4%. Quarter four to be in the range of 2% to 2.05%. So clearly, the downward trajectory should continue as we move from here. GNP and NPA stood at 112 basis points and 48 basis points, respectively. Continue to be among the lowest. Clearly, as I've said many times to investors, that last year was a record low in many ways, and it reflected even GNP and NPA, but we remain significantly within the range of our medium-term guidance on GNP and NPA.
We had shared with the investors that clearly three plus unsecured loans is an area of concern. So across the board, we have brought a reduced share of such customers now significantly. As we exit Q4, we'll be back to where we were at a pre-COVID level. So we have been continuously pruning. We pruned significantly even in Q3. And we would be below or equal to where we used to be pre-COVID by as we exit March 2025. Profitability, we've talked about. Consolidated profits grew 18%. I'm in panel seven. And ROA came in at 4.5% versus 4.9%. And ROE came in at 19%. Capital adequacy remains strong. Tier 1 is 20.8%. And overall capital adequacy is at 21.6%. Just quickly, two additional updates.
One is we had done a joint press release of a strategic partnership with Bharti Airtel, while it's a repeat of what we've already published to the street. But we are quite excited about this partnership. And I can take some questions and provide some more clarity if there are any. But overall, I would say two products have gone live. Nine products will be live on Airtel Thanks App by March 25. And we've created a five-year vision and a roadmap for this partnership. And I would say we are quite excited about this partnership. In terms of discontinuation of the co-branded credit card business, as you're aware, we've done a release again to the street on mutually agreeing to cease incremental sourcing of co-branded credit card with RBL Bank and with DBS. These are our two partners.
This discontinuation does not affect any of the existing cardholders who will continue to receive services from respective banks. I thought I'd just clarify that, and we, as BFL, from a P&L standpoint, will continue to earn distribution fees and revenue share under the co-brand arrangement, so I thought I'll clarify that as well, that this discontinuation does not affect the future revenue share from this arrangement. I'll jump right over to panel 43, which is customer franchise continues to grow. It's at 61.56 million, what we classify as cross-service franchise. As you can see, the addition continues to remain pretty strong. I'll jump straight then to panel 48, which is a segment-wise AUM number.
The only change that you see is you're beginning to see two-wheeler and three-wheeler composition go down as a result of us not doing Bajaj Auto two-wheeler financing since they've started and three-wheeler financing since they've started two-wheeler and three-wheeler financing captive finance company of their own. So this number would continue to go down. It may probably stabilize sometime next year at around quarter four FY26 at around 4%, between 3.5%-4%. Rest of the composition, as you can see, largely remains range bound. We'll go to panel 51 quickly on GNP and NPA. You see marginal movement in GNP and NPA across the board. That's one point I would like to make other than commercial lending and leasing, of course. Otherwise, you see marginal movement across the board.
But on an aggregate basis, I would make a point to you that, which is on a year-on-year basis, that we remain reasonably well under the long-term guidance of 1.2%-1.4% on NPA. Also, you see movement on a year-on-year basis across the board. We remain well within 40-50 basis points of NPA guidance is the point I would make. Go to portfolio quality. I think three businesses from a management assurance standpoint we have classified as amber, one being two-wheeler and three-wheeler. I'm on panel 55. As you can see, a year ago, it was just a tad below 95. It was 94.72%. It's at 92%. But mainly because of Stage 2, which was at 3.83%, has gone to 5.53% that we classified the business as amber.
However, keep in mind that this portfolio degrew in the but I have to do what I have to do, which is to state facts as they are. But there will come a point where the number may look much worse off, but we may classify it as green. I'm just flagging it to you because in a degrowing portfolio, these percentages may not make sense. But there is pressure at this point in time in this portfolio. So that's why from a management assurance standpoint, we have classified it as yellow. The second portfolio that we have classified as yellow is business and professional loans. Clearly, it was at 99.07% was the current bucket in December 2023. It's at 98.67%. And as you can see, even in February 2020, it was 99.01%. So it's from that standpoint that we've classified it as yellow.
And rural B2C continues to be yellow. It started to grow. I think that's the good news. I think the AR grew on a year-on-year basis by 16%. So the business is back in a growth mode. So some of that will get solved. And we have seen we should be back to growth mode in the business. That business should grow between 20%-23% in the next fiscal as we move from here. I think these are three businesses that we, from a management assurance standpoint, have classified as yellow. I'll open the floor to questions now. And Anup?
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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. Participants, you may press star and one to ask a question. The first q uestion is from the line of Kunal Shah from Citigroup. Please go ahead.
Yeah. Congratulations for a good set of numbers. So firstly, maybe again in terms of indicating to 2.05 credit cost for Q4. But when we look at maybe both in terms of the Stage 2 as well as Stage 3, there seems to be an increase any which way. So you alluded that at least in terms of the incremental trend, it's improving. But otherwise, any other metrics which is giving you that much of a confidence that we would have picked out in terms of the credit cost because you indicated that it will keep on trending lower? And any guidance that you would want to give for FY26?
No, it's a fair question. Both the questions are fair. The December and so far January have been better. December was better on collection efficiencies. So two things. At a headline level, early MOB results are looking better. I think that's the first point from a risk standpoint. We have pruned businesses. We've talked about it over the last two quarters. Three businesses I would flag out. The largest increase in contribution was two-wheeler. That's a winding down book. Used car, we've dropped the business by 38%. Rural B2C, we've talked about many times, but losses have peaked out. Urban B2C, given the size of the business, its contribution to the loss ought to be high, as you can see even from the provisioning panel.
I think just the end in SME or MSME, the early MOB have begun to look significantly improved. I wouldn't use the word significantly. I would say they've started to look better than they were. I think that's level one point. Sorry. Second order point is collection efficiencies. Even if I take October, November, December, October was better. November was okay. December was much better. I think that's how I would classify it. It's right now, given the overall environment as you're seeing from results across the board, it's month at a time, but gives us a greater degree of confidence that if one more quarter goes well, I would say we are in a comfortable position. That's the second point I would make to you.
Kunal, third point on a full-year guidance, I would say to you that at a design level, it has to be sub 2%. I mean, no, no. But we'll get greater confidence as we traverse through Q4. I must flag that point. I'm not creating uncertainty. I'm just making the point about the way we as management are going about it. So if Q4 is in range of 2-2.05%, then clearly next year number is sub 2% is what I would say. We will be a lot more confident. Okay. Sure. And secondly, in terms of. Unless macro environment deteriorates very significantly, which I hope it doesn't. And it's not a placeholder statement. It's given that overall economy is slowing, as we can see from high-frequency data. So that's the only caveat I would add.
Sure. And lastly, in terms of last year Q3, there were senior management changes which were announced. Now it's been almost a year. So how are we looking at it in terms of the management transitions, any discussions out there, and what would be the roadmap? So now LRS is also there. So maybe in terms of the certainty on the management side would also help. So maybe if you want to comment on that part.
No, no. It's a fair point. We laid down a comprehensive 15-month transition plan, Kunal. We are 12 months into it. As you rightly said, we announced this last December. We expect the board to take a view on the way forward by Q4. So. By Q4. Yes. Okay. Okay. Yeah. Thank you.
Thank you. Next question is from the line of Antariksha from ICICI Prudential. Please go ahead.
Sir, I'm audible, right? Sorry, sorry. We lost. I'm audible, right?
Yes, you're audible.
Yeah. Thank you, sir. So two sets of questions. The first is, can you give some color on your debt management piece in the sense what kind of effects does it incur given the fact that the system is under stress? How are costs per head panning out? Has that gone up significantly? What is the number of people involved? When does collection become unviable in terms of ticket size? Earlier, I remember you had flagged off that 15,000 is the minimum ticket size below which it doesn't make sense. Something on that and how it's panned out through this time where delinquencies have gone up.
If you recall, I had a conversation on this when I said there was a similar question that was asked in Q2, and I shared that from a capacity planning standpoint, we realized that when you deliver 161 basis points credit cost to AUM, which was FY24, we delivered in. Despite having sophisticated capacity planning models, you say, "Do you need to add capacity?" Clearly, we should have stayed true to our capacity planning model. And if you recall, we had said that we added close to 4,000 people, if I'm not mistaken, in Q1 and Q2 in debt management. So we have gone back and played as per the capacity planning model. I think that's the first point. So that's one part. And it's a lesson learned, I would say, for us as a firm. Second part, the model has not changed.
We continue to just sharpen the model. Only thing that has changed significantly is a lot more has gone digitally. I mean, today, 50%-52% of our overall debt management infrastructure is the cash has kept, despite the size having grown, cash has kept going down, and centralization infrastructure has kept going up. So I think it has ensured that we have significant capacity, or it's a non-linear model that we continue to build. So it's the last point I would make to you.
Just to clarify this, you're saying 48% of the collection is still physical, is it?
Sorry, sorry.
Are you saying that 48% of the collection is still physical?
Ye ah, yeah. Yes. It's by agencies, physical being defined as yes. Yes. Answer is yes. Answer is yes.
Okay. What would be the number of people involved? Rough sense. You said 4,000 were added.
No. So we have, as a firm, we have 64,000 people, as you saw. I think 55,000 people are in BFL. 57, 58,000. 57, 58,000 people are in BFL. 20,000 people are in debt management, but they are all managers. Yeah. They are employees, and they are managers. They do not collect. They manage agencies who collect. So the centralized call centers are also managed by them, and the field infrastructure, which is agency management, is also managed by them. Got it. Got it. And mind you, this is across 27 product lines and across 4,205 cities and towns in India. And it needs boots on the ground to be able to do an efficient whatever, 94, 95, 96%, depending on the type of or 98%, depending on the kind of business we are talking about. For those levels of efficiencies, you need boots on the ground. Non -linear, however.
That's the only point I would continue to add.
Got it. The second piece I wanted to ask is on this Bajaj Finance, Rajeev Jain. Now, you mentioned that there are about 37, 38 crore customers that they enjoy. The question I wanted to know is, what is the, I mean, non-Bajaj franchise which can be lent to in that base? Because we also have a pretty hefty 10 crore customer base on which we have enough data. I'm sure the entire 37 crore of Bajaj customers will not be backed by ability and willingness to pay. So what is the size of the opportunity in that partnership?
That's a fair question. I'll request Harjit, who's my colleague, who's running the relationship, to answer.
Yeah. Roughly about 200 million is the set we are targeting, which does not overlap with BFF. Okay.
And the products that you would start with are?
Yeah. Go ahead.
Yeah. So we're starting with nine. This basically includes Personal Loans, Business Loans, Gold Loans. We're going to be doing two-wheelers, Insta EMI Card, and a couple of more trading products and LAS, etc. So we start with nine, and then over the year, we'll then look at the next set of products.
Got it . And this last point, sir, you'd highlighted, I think, in the previous times when we had started slowing down the B2C personal loan business, that risk pricing was not being followed at both ends of the spectrum, not just the small ticket one. Has that scenario improved in the high-ticket segments in the sense as compared to?
Pricing? Pricing has not changed. I mean, in fact, anyway, as the credit growth has slowed, the pricing pressure across the board has further intensified only, I would say, because credit growth is now significantly slower. So there's pressure.
So then rural B2C taking out, especially in the higher ticket part of the spectrum, is based on what?
Sorry, sorry.
I'm saying if pricing has still not improved, then how is the higher ticket part of rural B2C better than it was? What has changed?
No, in rural, we don't do high ticket at all. We never did high ticket, actually. I mean, in fact, whatever prior to we getting into trouble, we did, that also we pulled back. The corridor there is between 100,000 and 250,000, I would say. That's the average exposure is 160,000. 120,000. 120,000. Actually, we've cut exposure by 30-odd% in the last 12 months.
So average exposure is down to between 120,000-130,000. So w e never did high-ticket loans in rural B2C.
Thank you. Antariksha Banerjee, to come back for a follow-up question, please. Thank you. Next question is from the line of Piran Engineer from CLSA. Please go ahead.
Yeah. Hi team. Congrats on the very strong numbe rs. Just firstly, in terms of just getting back to asset quality, can you share at least qualitatively, if not quantitatively, what are the 1DPD formation trends across portfolios? Has that stabilized? Has that improved? Is it better than or is it back to run rate levels?
So it's a complicated question. High TFR, number one. And across different businesses, I would say. I mean, I'm sorry. Yeah, yeah. No, I'll tell you. Urban B2B remains pretty strong. So let me go from the easier ones, right?
Urban B2B remains pretty strong from a let's go by line of business, okay? By two-wheeler, three-wheeler, we are, as I said earlier, I would flag it as yellow. So it is yellow. Its default rate plus the efficiencies, both are impacted at this point in time. Last month, collection efficiencies were better in two-wheeler and three-wheeler, but the default rates were still elevated. So that's on level one point. And you realize, Piran, right? Both are a mix of the net outcome is a mix of higher bounce and lower efficiency and higher bounce and higher efficiency and lower bounce and higher efficiency, right? These are the three blocks that every portfolio would principally sit in. Second portfolio is Urban B2B I talked about. That portfolio has remained very, very steady, I would say, despite significant growth in the business. Urban B2C, default rates are lower.
Collection efficiencies are still lower, okay? December was better, as I said earlier. October was better. December was better. November was not okay. So we're still in a watch mode. Brings me to Rural B2B. Rural B2B, and all these numbers, I compare personally with pre-COVID, for whatever reason, even within the firm, some people don't agree with me, but I say that is what we used to do. And mind you, we were one-third of the size. So they're also right from a context standpoint. Rural B2B numbers used to be significantly lower. So you see them even higher year on year. But eventually, given our depth in the business, that number was never intended to remain there. It will get closer and closer to Urban B2B now.
That gap, which used to be there pre-COVID, that smaller markets gave you lower default rate, given the massive penetration across the board by non-banks and banks, has meant that advantage for Bajaj, which existed pre-COVID, doesn't exist anymore. So if it's not there so far, it'll get there. Let me make that point. I don't know where is it exactly. Rural Sales Finance. Get me to rural B2C. As I said, we are coming out of the woods, I would say. Efficiencies improved. Bounce rate was never the problem. Efficiencies were the problem. Efficiencies have improved significantly. SME lending had, from April to October, had gone up significantly. Bounce had not gone up. Efficiencies had dropped reasonably. November, December is back to, at this point in time, the best ever that we have seen in the last two years. That's where we invested quite well.
So we've invested across the board, but I think we are seeing at least MSME deliver significant confidence, at least so far. I think that completes the breakup in a way. Car loans, Piran, just as the last point, Sandeep is flagging to me, used car, clearly, we've seen pressure. We have cut business by 30-35%. I mean, and we are among the top five used car lenders in India, but we've cut volumes from INR 400 crores down to now INR 2
50 crores, right? I mean, new car continues to remain very healthy and very strong. And that is where the growth is. Majority of the growth that you're seeing is in that space. That remains very strong, or we remain very comfortable from. That's Piran, hopefully, gives you some color.
Yeah. No, that's useful. So the main segment here among the larger ones really is urban B2C, where things are still slower. Because you mentioned that while default is lower, collection efficiency is also lower.
Yes. Agree.
Perfect.
Your observation is correct. This may take longest to be back to normalcy. Absolutely.
Why?
Anup is, as he's saying, as he's clarifying, that we took 3PL cuts, what we had flagged. This end, rural B2C is where the 3PL issue was, as you had flagged. We used to be pre-COVID at 9%, 8%, 5%. 5% here and 1% there. We're still at 8%. We have some more ground to cover in between January and February. We have covered as we and it had gone all the way to 15, 16, 13, 14%, right? For aggregate, it had gone all the way to 14%. So we have brought it down.
As that gets, mind you, still doesn't stop that customer to take more post-EMI. This is on an at the time of EMI giving a loan. So that is the main reason, I wo uld say, Piran, too.
Got it. Got it. Fair enough. And just secondly, in terms of contagion to SME, you've also marked it as amber in your PPT, but you're still growing at 40% in this business. So what really what's the disconnect here?
It's at 90. So I have to do management assurance. It's at 98.67% current in an MSME book. It used to be at 99%. So we are used to significantly lower numbers. There's one point I would flag to you. I think that, as I made in the passing as well, that an MSME book at 99% is used to be a great number. We are proud of that. It's at 98.67%. As I said, last three months, we've cut the business by 30%. That's the only point. Growth is 31%, right? It's not 40. Also, secured is also. Yeah, okay. In that, but the secured growth and both. Secured growth is not very similar. The numbers would be. Anup is making a point on this. This has LAP also sitting there. This has BLSC also sitting there. This has BL also sitting there. This has professional loans sitting there. These are the four portfolios that are principally sitting there. The slowest growing is professional loans because and LAP, actually, in terms of because now LAP, because the margin profile to the earlier question that I asked, the margin equation is just not adding up. It's a mix of four portfolios. At 98.67, we are comfortable. We want this to get back to our 99%.
That's really why the cut in business that we've done. And we'll get there.
Got it. Okay. That answers my question. Thank you and all the best.
Thank you. Thank you very much. Next question is from the line of Viral Shah from IIFL Securities. Please go ahead.
Yeah. Hi. Thank you, Rajee v. I have two to three questions, if I may. I'll go one by one. So one is on the used car business. You mentioned that, of course, the delinquencies are still relatively higher, and that's an area where you are cautious. A, first of all, what is driving this? Is this the pricing on the used vehicles front, if at all? Secondly, on this line item only, in the executive summary, it's mentioned that you are looking at accelerating this business, but on the other hand, you are saying that you are cutting down the business over here.
So, just if you can help just reconcile that piece. So, new car is accelerating. Used car is, yeah, Anup is answering.
If you think about old cars, old numbers, it's a mix of new car and used car. And of the used car, there is a sale purchase, and there is a refinance. What we are seeing is the elevated losses are mostly in the refinance, and that's where we have taken sharp cuts. New car remains quite strong, and that's comfortable. However, margin being very tight, we do it at a particular corridor only in terms of volume. Yeah. So, the major cuts have been on refinance. However, on sale purchase as well, we have done some cuts, but the pressure is on refinance. So, in a way, that's how you should see this.
So of the three blocks, the way Anup is saying, of the three blocks, two blocks continue to be in growth mode. And in a way, refinance was cash out. If you think about it. So and like all consumption loans, it's under pressure. So in a way, the pattern is very consistent. The sale purchase is not a problem. Pricing is also not a problem. New car portfolio is in pristine shape. Pricing, as Anup says, we have to run only particular volume in the business. We have created a mix between sale purchase, refinance, and new car and leasing. These are the four blocks to deliver eventually at scale a 13%-14% ROE in aggregate. We've created a particular portfolio model, which we have to maintain. Good.
And Rajiv, on the line item that you have as a car loan of 11,100 crores, that's the new car segment, right?
Both. No, it's both, both. It's all cars. So, number-wise, for 5,000 or 5,500. 5,000 will be new car, plus minus. Kind of? Almost equal. So 5,500, 5,500. 11,000, 5,500, 5,500. Yeah.
Okay. So the increase in delinquencies probably would be a function of the used car business, not as much as.
It is that only. So that is it. Yeah. No, it's only, as Sandeep is saying, it's matured, but even otherwise, I mean, the bounce rates in new car are 2% versus bounce rate in used car portfolio are 10-11%. 11-12%. Exactly. 11-12%. You see the difference is 2 and 12. I mean, so it's f air enough.
Rajeev, my second question is on the LAP piece.
Here. It is just clarifying to me 3-3.5%. Just new car, not 2. So that's to be f air. Okay. Fair enough.
Rajiv, the second question is on the loan against property piece. I know you have marked it green, and you flagged the pricing pressure. But if I look at the stage one and two over here, that is sequentially seem to be on a declining trajectory. Are you seeing any, say, signs of asset quality stress, bounce rates, slow rates? These are case by case. It's not a this is just a case. I mean, one or two case slips leads to this. So you're talking loan against property, right?
Yes.
Yes. So that number is this is an overall portfolio. This is consolidated. So this is the consolidated number. I just want to clarify. This consolidated, this includes BHFL and BFL. The number is also there. The BHFL number is, if you go to LAP, give me one second. The 10,821 is BHFL, and BFL is consolidated. So I mean, it's both. And that's a case-by-case view. Don't have a risk view. It's a pricing view. In fact, we have pruned business mainly as a result of pricing. Okay. And so basically, the deterioration that we are seeing, of course, it could be either in BHFL or BFL, but it's more of the more chunkier pieces. The case-to-case view. Yeah. It's not a more broad-based trend.
No, no, no. No. Not at all.
Okay. And Rajeev, on the gold loan front, if you can just give some color on our, I would say, not rapid growth because it's of a small base relatively, but the rapid expansion because this is coming from the context where few players have flagged some difficulties in terms of adopting the regulatory guidelines or the comfort which regulator wants in terms of doing this business. So what is kind of driving this for you that it is working for you?
No, as I had said in the past, we converted this business into what we call a strategic business unit two years ago. We decided to run it like gold loan rather than run it like BFL, and that was a fundamental change that we made. We realized it's a gold loan business. It's a branch-based business.
It has to be run as a branch management business model and so on and so forth. And we realized that this is it will be originated digitally and dispensed by branch. And the branch has to be an independent branch. As you can see, the branches, if you go to panel 13, have moved from 537 last year, same time, to 827. And this quarter, we are adding 250, is it? We have to cross 1,000 now. We've crossed 1,000 already. We'll add 250. Huh? So we'll cross 1,000 end of this year. So distribution expansion is the main driver to running it like a gold loan business rather than a.
And also because we still are a small player. Our focus is largely on tier three and tier four. So, we are not playing this in the tier one, tier two because of a fair share point, because in a tier three, tier four, I get that advantage. And the cost is also low.
So the point Anup is making is we are picking our ground given that there are much bigger players, there are banks. We are choosing wisely on where we want to compete. And so far, it's been successful in terms of helping us grow on one hand and maintain a competitive position from being a dominant share in that three-mile area, if you simplify the conversation. Yeah.
Thank you very much. Viral, I'll request you to come back for a follow-up question, please. Fair enough. Thank you. Next question is from the line of Chintan Joshi from Autonomous. Please go ahead.
Hi. Thank you for taking my questions. Thank you for the comprehensive comments on the asset quality. Can I focus on growth and NIMS next? On growth, you've indicated in previous calls that you've tightened credit standards in a number of areas. You've pruned businesses. The growth rate is pretty strong at 28%. With the outlook that you see now, how do you think about AUM growth for the next kind of 12 months? Then secondly, on NIMS, could you go a little bit more into the push and pull factors within the quarter? You highlighted stable cost of funds, but if you can give some color on kind of mix shifts within assets and liabilities. Also, how do we think about NIMS in the absence of a rate cut? How do we think about NIMS going forward? Thank you.
So next quarter would be the right time to provide the guidance, but fair enough, I mean, we have to respond if a question is asked. So I would say we remain focused on delivering our medium-term guidance. Given the current external environment, overall, I would say we would like to grow on a consolidated basis. Balance sheet should grow by 25%. Maintain credit costs at below 2% and deliver a corridor of 22%-23% profit growth as we venture into next fiscal. As I said, the only thing I would flag if the external environment doesn't deteriorate significantly. I think that's the only point I would make. We're a large business. There's no doubt about it. We'll end this year with 420,000 crores of balance sheet. We'll have 2.25% share of total trade in India.
But we think opportunity remains very large, and we have the capital, talent, franchise, distribution products. And if you enter at 2.205 credit cost levels, then we have tailwinds. So that's really how we are looking at next fiscal to be.
Got it. If it goes to 2.05, then you could even accelerate your growth rate looking into the next year.
Yeah. If credit comes into control, as I said, we have the franchise, we have the distribution, we have the product. So clearly, if credit comes into better control within our guardrails, we could, of course, accelerate. There's no question.
Okay. And then on your point, and the question on NIMS?
Yeah. So Chintan, very clearly, we don't see more than 4-5 basis points play on cost of fund in the next year. Given that most of the borrowings of the current year would see through the entire next year, and given where the situation of the banking system is at this point in time. This is consolidated. So the past due expected from bank is not significant. Incrementally, we have seen NCD money is already come 20-30 basis points cheaper than where it was probably being available exactly two quarters back. So there is some benefit that is already coming in. We have seen peaking of cost of funds. We don't see more than 4-5 basis points play with or without rate cut in the next year.
Okay. And on the asset side?
Asset side, we should be able to protect the NIM.
So I take the fight, pricing pressure in some areas. Generally, if you kind of think about both the mix and what the headline rates are, do you expect yield and advances to be stable? Of course, talking in absence of rate cuts, just to keep it simple.
Yeah. So let me just repeat what Rajeev had said, I think, a couple of quarters back. There's a triangulation of growth, margin, and profitability. We are very clear. Growth, margin, and of course, risk, not profitable risk. Risk remains the fundamental most important point. If you see risk inching up, we don't hesitate in terms of cutting. However, we don't want to grow without margin. So it's risk followed by margin followed by growth. So very clear that for us to remain sustainably profitable from growth perspective, we would not have significant compromise on margin as we go into next year.
And we think there remains reasonable opportunities. We are just, as management, continue to be at it, and we'll find the rightful triangulation.
Okay. Thank you.
Thank you. Next question is from the line of Subhrangshu Mishra from PhillipCapital. Please go ahead.
Hi. Thanks for this opportunity. The first one is around the first question almost every investor asks is, when do we convert to a bank? Is it today, two years from now, three years from now, seven years from now, ten years from now? The definitive answer would be very helpful. Second is, Rajeev, your term ends March 2025. How do we think of management transition after that? What would be your role post-March 2025? Third is, with the co-brand going off, there would be some degree of fee income pressure that we would see. What kind of fee income growth can we see from FY25 levels and FY26? And if you can speak of any new products and partnerships which are underway. Thanks.
So Anup, there are five questions. So on a lighter note, let me take the easier one first on succession. As I said, 15-month plan, 12 months into it, matter will be reviewed by NRC of the board by March. And subject to board's decision, I intend to remain in BFL and hopefully remain actively involved in shaping the strategy of BFL and its subsidiaries to drive short-term and medium-term goals is how I would look at future role, but that's subject to how the board decides. I think that's point one. Second question of yours was on bank. It's in public domain. We've said we would like to remain a non-bank. RBI also does not have a roadmap for non-banks converting to banks.
So both, then it works that we would remain a non-bank unless and until either one of us change our position. RBI changes position or we change our position. So I think you should expect business as usual for the short to medium term. So we would not. I hope that clarifies. And our ambition, on the other hand, Subhrangshu, irrespective of bank or non-bank, would be to be a 200 million consumer company, a share of 3%-4% of total credit, and 4%-5% of retail credit in India, irrespective of whether we become a bank or a non-bank. So that's two. Co-brand. Three. Co-brand, I've already articulated it will lead to incremental level dilution. So had we done more cards, we would have kept growing the franchise.
So the impact is on incremental growth of it rather than the numbers as they were currently stagnant. Four, in terms of, and it was related to even previous question, NIMS overall, we foresee stable mix, stable pricing at this point in time, but this is depending on the external environment. But I think we have mostly come in range, I would say. On the other hand, I would make a point to you that if the NIMS were to compress, given our FinAI strategy, we'll manage OpEX better. I think I just want to make that point from a direction standpoint as well. I think these were your questions. Did I miss anything, Subhranshu?
Actually, I asked for the fee income growth in FY 2026 and any new products or partnerships which we can look at going forward.
Airtel partnership could be very large in the medium term is what I would say. We are quite excited about it, as I said earlier. And both the companies are working together to create what I would call a deep, comprehensive, and a compliant partnership model which is mutually beneficial. So I would say I'm personally quite excited about this partnership from a medium-term standpoint. On the fee income growth, I would say, given the environment, we would remain in the current state. We would remain sideways on how the flows you're seeing in Q2 and Q3 is how the numbers should remain.
Yeah. I think what Rajiv called out earlier with respect to FY 2026, he said, "There's not a right time to comment about FY 2026, but let me still make a point." 25% by and large guardrail on balance sheet growth, 20%-23% profit growth. There are levers that we have in terms of OpEX. Some will work, some will not work. Some will in terms of fee, etc. We'll orchestrate those levers and ensure that we deliver the outcome for the shareholders.
Thank you very much. Subhrangshu, I'll request you to come back for a follow-up question, please.
Thanks.
Thank you. Next question is from the line of Bharat Shah from ASK Investment Managers. Please go ahead.
Yeah. Hi, Rajeev. Hi, everyone. Hi. As I observe over the last 15 years, our classic playbook has been use of technology to de-risk our decision-making and remove prejudices, use technology to deliver productivity. Also, we have constantly added new lines of lending so as to de-risk overall business plus give the buoyancy to the asset growth.
Along with that, we have always been very, very sharp in both asset and liability management to arrive at the right margin and profitability, be whatever may happen. But generally, we have very adroitly managed that. That coupled with razor-sharp focus on the quality of the credit has ensured that our credit costs have remained muted. Our use of technology has given us cross-sell opportunity plus operational costs being contained. And all that has meant that ROAs have remained very healthy and prudent leverage has ensured the superb return on equity consistently. This playbook has worked out quite beautifully over the last 15 years. Only one note I wanted to get your view on, that symphony which has played out very well, where every element of the every note of the symphony has combined together to give a rising crescendo.
In other words, asset growth leading to a little higher net interest income growth, cost containment gave a little higher profitability, credit cost containment gave a further higher boost to the profits. But of late, generally, there is more linear equation rather than rising crescendo kind of an equation. So wanted to get your view on that. When are we even just now, Sandeep made a remark for the 26, 25% plus asset growth in the balance sheet, profit growth at 22%-23%. Instead of that 25% asset growth, when do we hear 28% and 30% growth in the bottom line?
Observation, number one. You are asking if I summarize your point, you're saying operating leverage in terms of profit growth converted into a metric of profit growth being stronger than AUM growth. That's really been the case for the last 15 years.
So मैं एक तो philosophically एक चीज आपको बोलूंगा कि nothing has changed, picture अभी बाकी है. I think that's one point I would make to you because there are like the symphony world, many things have come to play from all directions whether you look at see, in 17 years, we did not see a cycle. This is a mini cycle at work. I mean, you look at various results from a financial sector standpoint. In the process, I would say RBI was wise to flag it earlier. So it's a mini credit cycle at play. Given that it's a mini credit cycle at play, I would say as a firm, given we deal with all class of customers, given the size of the franchise, you've done a decent job. I would not say good job. I would say decent job.
So if you look at the stack today, Bharatbhai, in first nine months of results, and AUM growth is at 25-26%. Let me take the numbers out for a moment. One metric which is out of symphony is credit cost, Varadbhai. And we are committed to fix it. So if you actually see for nine months, NIM growth is 23%, total net total income growth is 24%, pre-provisioning profit growth, OPEX is 22%. So there is operating leverage. In the process, pre-provisioning operating profit is 26%. So symphony is working till here. Okay. 28%, 24%, 26%. One part of the symphony which is at play is credit cost. As I said, as a prudent firm, we have taken actions, but the portfolio has to churn. As that churns through, we as managers are clear.
I agree with your point that, and on top of that, you throw in the FinAI transformation that we want to do, which means the operating expense growth has to further be lower, which is really you are sitting in the front seat. I presented at the Investor Day, and some of the investors asked later that, "Look, that means your growth should be higher." And I said, "My Excel is same as your Excel. We will just deliver the goods as we deliver the goods. As we gain more confidence, it's here for the shareholders to benefit from." So one part of the symphony not at play, Varadbhai. Rest to the symphony continues to chug in right direction. I would say one, two quarters maximum, we have stabilized from increasing. We have stabilized. We deliver.
I make the same point again that we deliver Q4 in terms of credit cost. We have a lot more confidence. But I'm just and I don't want to. I'm not creating uncertainty. I repeat that point. I want to make sure the facts speak for themselves rather than promises. Does that make sense, Bha ratbhai?
Yeah, absolutely. Absolutely. And I should have waited, but let me do it now. All through the 15 years, in general, it has played phenomenally. Whenever there have been attenuations, mostly it is due to the external environment and flux that we have experienced. But internally, we have played that symphony beautifully. It's just that Dil Maange More so was wishing, "When do I see a rising crescendo?"
No, no, 100%. I agree. We agree. And as businesses mature, it's expected of that. I have a different point of view. I mean, irrespect ive of BFL, I would make a point that mature businesses need to be more efficient rather than inefficient, whereas it plays out differently. So on some day, we'll do a discussion on this. Okay.
Thank you. Thank you. All the very best.
Thank you.
Thank you very much. Ladies and gentlemen, we will take that as the last question. I'll now hand the conference over to Mr. Anup Singla for closing comments.
Thank you, Rajeev. Thank you, Bajaj Finance team, for the opportunity again. Sir, any closing comments before we conclude?
Thank you is the only comment. We started both meetings at 9:00 A.M. We just finished at 6:30 P.M. and got into this call. So we can just breathe a little bit. Thank you. Thank you so much. Thank you. Thank you. Thank you, BofA, for organizing this. And over to Q4. Thank you. Thank you.
Thank you very much. We conclude today's conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.