Ladies and gentlemen, good day and welcome to Bajaj Finance Q4 FY 'twenty one Earnings Conference Call hosted by JM Financial Institutional Securities Limited. 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. Please note that this conference is being recorded. I now hand the conference over to Ms. Bani Pabji from JM Financial.
Thank you and over to you ma'am.
Thank you. Good evening, everybody, and welcome to Bajaj Finance earnings call to discuss the 4th quarter FY 'twenty one results. To discuss the things we have on the call, Mr. Rajiv Jain, Managing Director Mr. Vandeep Jain, Chief Financial Officer Mr.
Atul Jain, Chief Executive Officer Mr. Bajaj Housing Finance Mr. Anoop Saha, Deputy Chief Executive Officer, Bajaj Finance Mr. Deepak Pargadhi, President I'm Mr. Fakhani Surgeon, Chief Risk Officer.
We request CMD, Mr. Rafi Jain to take us through the financial highlights
Good evening And good morning to some of you who are in other hemisphere. We've uploaded the press release. I think we are waiting for BSE and NSE to upload the Investor Day and that's why you have not uploaded In our section of our website, it's been done so now, I'm told, so you can refer to that. But I'll run through a few slides quickly to give you texture on the quarter that went by. Overall, if I look at the assessment of the quarter, I would say, given the circumstances, a good quarter for the company with I'm on panel number 4 with most lead financial indicators Fundamentally normalizing to pre COVID level, our business transformation plan that we've been sharing over the last 3 quarters is on track.
We expect to launch the overall 3 known financial services infrastructure in a phased manner between August September as a company. If you look at the quick financial highlights, on a year on year basis, we ended March 31 with AUM of 100 Just to add on IN, IN, 53,000 crores, a growth of 4%, OpEx to NIM versus 31% last year came in at 34.5% and I'll cover that in with some texture in a moment. Pat came in at INR 1347 crores. It's a growth of 42%, but The year on year comparisons are not really relevant fully, but I'll still and that will remain so the case for the next Four quarters as we go from here. So this is we'll have to live with some degree of I would say this We'll have to give you these numbers at least for the next 3, 4 quarters.
ROE came in at 3.7% versus 4th or not annualized, which is versus 2.9%. Net NPA came in at 75 basis points versus 65 basis points as of March 31. Let's quickly run through the key numbers. Overall AUM, as I said, I am on panel 5, 153,000 crores, year on year growth of 4%. Core AUM growth was INR 9,400 crores versus a year ago INR 2,061 crores.
If you look at the AUM growth between Q1, Q2, Q3 of FY 'twenty on an average the AUM growth on a quarterly basis of INR 9,700 crores. So we are within the 95%, 97% run rate of quarterly helium growth in Q4. We were at 8,500 crores core helium growth in Q3 And that's NOK 9,400 crores. In terms of accounts booked, the company booked 5,500,000 accounts versus 6,000,000 accounts a year ago. We have updated the investors in general about 2 businesses that we have put either in a pause mode or have Constrained their lending mainly our wallet loans business which used to be 175,000 to 200,000 accounts, they are that business kept in abeyance.
And our retail EMI Card Spend business that is capped at this one in time at 50,000 accounts per month versus 150,000 accounts that they used to do pre COVID. Adjusted for this, we on an apple to apple basis, we are at just about 6,000,000 accounts on a quarterly basis. The company added the new customer acquisition run has come back to pre COVID levels at 2,260,000 New customers you acquired in Q4, in general, that's our Long term guidance in general is between 7,000,000 to 8,000,000 customers in a year. In the last two quarters, we fundamentally hit a 4,000,000 kind of number. So we are well on track to normalizing new customer acquisition in the last two quarters that to pre COVID level.
Overall franchise was RMB48,600,000. The Croftel franchise was RMB27,000,000. Overall on a year on year basis growth of 27,000,000 gives us a reasonably good platform to grow from once we are out of the second wave as a country. Total geographic footprint, 3,000 just a tad below 3,000 locations 110,000 distribution points. In terms of margin profile, we are holding margin profile Except mortgages, in the Q4 that went by, we took an interest reversal of INR 300 crores As compared to INR122 crores that we were taking in Q4 last year, the interest levels peaked in Q Sorry, in Q3 that was INR 450 crores, it's already come down to INR 300 crores.
We think it should fully normalize by Q3 Back to INR 120 crores to INR 140 crores range. Overall cost of funds, we had shared that as we start to Bring down our liquidity buffers as we start to have greater confidence on growth, we will start to also In improving our borrowing, which should fundamentally lead to reduced cost of funds given where the environment is. The overall cost of funds came in at 7.4% or 7.39% versus 8.37% a year ago. That's a close to 100 basis points differential. The liquidity buffer still held quite high.
We expect to Bring this down to about INR 9,000 to INR 10,000 crores in the current quarter as things normalize. As part of the process to bring down our cost of funds, we have shared even in Q3, we have now paid down close to 7,500 close to banking system to various banks as part of our strategy to optimize. The deposits book with the intent to continue to granularize our liability balance sheet Grew 20%, it's now crossed INR25,000 crores, just a tad below INR26,000 crores at INR25,803 crores. Overall, corporate and retail in that, retail is 77%, corporate is 23%. OpEx, as I said earlier, I would cover in a little bit of detail, came in at 34% versus large share 31%.
In absolute terms, OpEx was higher than INR53 crores, recovery commission In that line was higher INR140 crores and employee related costs were higher INR151 crores. OpEx, So part of it was mitigated by prudent management of other expenses. So while the number was higher by INR 300 crores, the net number was higher only by 153 odd course. If you look at the ratio, which is OpEx to NIM ratio, fundamentally came in at 34.5 versus 31. In general, as we are looking at the management of OpEx, we are also clear that as the Aireum starts to grow over the next 2, 3 quarters Operating leverage starts to kick in and we expect collections cost to fully normalize by Q3, you should start to see OpEx tuning go back to pre COVID levels.
And hopefully by Q4 of the year as we deliver business transformation fully should start to look lower. Let's come to loan loss and provisions. We have guided that we would take between INR 12.50 crores despite the fact that overall Bounds collection efficiencies, even as you were speaking in January, we're looking better. As a prudent measure, we decided to continue to take provisions. We took provisions of INR 12.31 crores.
We also did actually write off to the tune of 15,930 crores on account of COVID related stress and have fundamentally on a go forward basis advanced our right of policy. So this is really how you will see the numbers play out as we move from here. Overall, last year, we as a result of COVID, we entered FY 2021 with a INR 900 crores of COVID overlay, we are again entering in a way second wave with 840 odd crores of management overlay and macro provision. Gives us confidence that we can navigate through this crisis if it becomes 1 in an efficient and effective manner. Gross NPA and net NPA, we think represents the health of the business, came in at 179 basis points 75 basis points versus 161 and 65 basis points.
The absolute net NPA was up only INR 200 crores from where it was in March 31, 2020 at INR 11.36 crores. Even in that, the AF, our auto finance portfolio and mortgages Largely saw an increase of INR 300 crores as you can see from the numbers here from INR 4.19 to INR 6.09 crores, that's INR 100 and INR 80 crores and another INR 120 crores. The non overdue, which is portfolio which is current but classified as one time restructuring stood at INR17.39 crores. It includes INR9.18 crores of secured exposure, essentially again auto finance and mortgages. One large B2B retailer account of a strategic partnership that we have of INR397 crores and INR424 crores of unsecured asset.
We have essentially considered the OTR book as indicator of Significant increase in credit risk and as a matter of prudence classified it as Stage 2 assets. Against these assets, are holding a provision of INR328 crores which is a 20% provision. The non OTS tissue asset Stood at INR 5,000 crores against INR 3,950 crores. We hold a ECL provision of INR 12.40 crores, which is 25% against INR589 crores which was 19% that we held on against INR 3,000 crores of assets as of March 31. Of the non Stage 2 book, secured assets are INR 3,000 crores and unsecured assets are INR 2,000 crores.
Bounce rates, if I look at origination over the last 6 months, fundamentally, Amantanil 7, Clearly across businesses are in line or better than pre COVID origination ought to be in general. The current bucket bounce rate, which is good customer Slipping into default is back to pre COVID levels now. The current budget collection efficiencies are significantly better than prior to pre COVID levels. The overall collection efficiencies across Current bucket, bucket 1, bucket 2, which is 30 DPD, 60 DPD, even write off recovery continues to be Significantly better than the experience that you have had for a long I mean, do you not experience these kind of collection efficiencies across our portfolios in the last 14 years since at least I am running the company here. Overall, it gives us the confidence that we are well positioned to navigate any temporary stresses on account of second COVID wave that may actually emerge.
In fact, we've talked about INR 1347 crores versus INR 948 crores. The Board of Directors, Given that we have accreted capital in the current year, have recommended a dividend of INR10 per share, which is 500%, which is the same as last year. Capital adequacy remained very strong at 28.5%, 28.34% and Tier 1 in that was 25.1%. BHFL, the mortgage arm of the company, the AUM grew by 19% to Just a tad below INR 39,000 crores, its capital adequacy is again strong at 21.5% and its post tax Profit is paid for the quarter was INR 179 crores versus INR 91 crores, a growth of 97%. Overall, it's our view as management at this point in time That the company is entering FY 2022 or has entered FY 2022 on a reasonably strong footing, Barring, I would say, nationwide lockdown or extended lockdown in large GDP contributing states or For a national lockdown leading to a moratorium, I think barring these 3 events, we are reasonably confident that of delivering our long term guidance metrics in FY 2022.
Given that we are at a moment where I'm in panel 8, We are in a moment where in general people are also asking as to what's the feel on the ground. I will just give you some texture To give you where we think we stand and how some of our high frequency businesses are From an origination standpoint or doing at this point in time, we are virtually headed into end of April and the disruption in general across the country started in the last 10, 12 days. There are 7, 8 points, let me just quickly cover that. As I said barring a national lockdown, 3 to 4 large GDP contributing states going into simultaneous lockdown for 3 to 5 weeks and another moratorium on loan repayment. Barring these 3 big events, we are Reasonably confident of delivering the long term guidance metrics in FY 2022.
We are also wiser, I think, having experienced the first wave, we believe That is disruption in the Q1 could be reasonably mitigated in the balance three quarters. I think none of us expected how quickly the economy will bounce back In September quarter and the January quarter gives us confidence that Even if it's a disruption of between April May, a month is lost, let's say for a moment, hypothetically, it can Definitely we made up in the balance 10 months of the year. Having said that, we are in a rapidly developing situation. We are watching the situation closely and are taking appropriate actions to navigate through this. So that while we are confident about it, we don't want to be overconfident about it And we are watching the situation very, very closely.
One of the things that we are also clear about from the last event is that we will remain Fully open for business as a company in whichever way we can. Despite the significant disruptions that one has seen In few states, in the last 10, 12 days, we remain open in line with local administration advisory. If you take the last 7, 10 days, in general, we continue we are still originating even with largest state being 15%, 16% of the GDP. 50% GDP comes from Maharashtra, Delhi is a very large market and so on and so forth. We are still originating 50%, 55% of daily volume in our B2B business.
Given our deep distribution and widespread geographic footprint that we have, 80% to 80 5% of our business in B2C and SME businesses 40% to 50% of the business in mortgages is really how last 7, 8 days have fundamentally panned out. The reason for the confidence is also because I think in the last 1 year, last time around, we didn't have opportunity to be None of us got any time. I think in the last 1 year, we significantly augmented our digital capabilities to remain fully functional, Whether it's for new origination, for full fledged service, full fledged operations or collections in a work from home situation. I think there is significant preparedness and readiness to navigate through this a year later into the pandemic. We are also clear that we have 25% to 30%.
You are aware, we added 1800 of odd Capacity in terms of staffing in our collections infrastructure, are running with 25% to 30 percent extra collections infrastructure at this point in time as a company. We also have a view
that Sorry to interrupt. So this is the operator. We are getting some disturbance from your line.
Understood. Got it. Just shut the window. Yes. I'm just down to last two points and then I'll hand it over to your questions any which ways.
We We are well on track to launch our 3 in-one financial services between in a phased manner between August September. We also believe that If the recovery in general is a backhanded recovery given the COVID second wave, I think it will help us accelerate our market share as the Economic momentum accelerates is really what our point of view at this point in time is. There has been no cuts that you've taken so far In the last 15 days, the risk in collections data is not warranting any kind of risk stance change at this point in time. However, we will continue to remain data dependent as a company and we will make this decision as May opens up and so on and so forth. I think As I said, we are lot more prepared.
I think the business continuity for micro containment, which we increasingly call playbook is lot more prepared. Lastly, but an important point, I think while we all were worried about the health of the franchise, it did not This time we are really worried about the health of our employees and are given the high transferability and More lethal as it seems and are closely monitoring the situation. We had a reasonably Generous financial aid program last year, the company spent INR 37 odd crores on that. We have reinitiated that program. We also decided to we've initiated work with vaccine producers to vaccinate all our employees and our associates as quickly as we can and the company will bear the cost of it.
That's the preliminary assessment. Let me give you update on business transformation, which is really what we are most excited about. Fundamentally, As you are aware for our and I am panel number 10, the 3 in 1 financial services for our let's say by the time we launch this, we will be 51,000,000, 52,000,000 customers that we are launching as a omni channel frame for our franchise. We launched as an update form on our Expedia app. I think by the time we launch, we will have 10,000,000 customers on it already.
At this point in time, we have 7,500,000 Xperia users. So it will cut short or shorten the onboarding process significantly. Parallelly, as we do this, the productivity apps, Our sales app ecosystem, our merchant app ecosystem, collections app and partner app ecosystem will go live between May September In a phased manner, again, between now and between yes, we are virtually into May between May September. The Bajaj Pay for consumers, which is our payment infrastructure, the BBPS service has gone live, UPI and CUG has gone live And we're just waiting for regulatory clearance for PPI ready to go live. We're just waiting for approval for the wallet business to for the PPI business to go live.
The 3 marketplaces, which is our e store, insurance and Investments marketplace are in advanced digital development at this point in time. The first phase of e store has gone live in February. We have now 25,000 SKUs on it. For Consumer Electronics business, 40,000 retailers have been onboarded And the full the final capabilities of the e store will go live between July August 21. The insurance and investments marketplace will go live between July August as well.
The onboarding app of Bajaj Financial Securities has gone live And trading app will go live on 31st May. 12 adjunct partner apps are already live And overall, 28 hours will go live as the financial services as the 3 known financial services goes live. Quickly on customer experience, I had outlined that We are clear that if we have to be a moment of truth company, we will need significant transformation in customer engagement and experience. We think Engagement is a function of engagement comes from service. So there is just to give you a texture, 33% of the overall app ecosystem is dedicated to service Just at a frame level, so clearly we think it will lead to That is really the core reason why customers will engage more and will do more business with you.
You see a set of points here On Panel 11, the total infrastructure is working quite well, 15%, 16% of the calls are happening to that. We are deploying an AI solution to analyze these calls along with a bag of words. We opened collection service desk across 10 branches. We are adding 7 more, so we'll go to 17. We are on a proactive basis, we are investing in DRA certifications, 7,000 of our agents who have already got trained.
We will cover that in full year. The NPS for collections probably we are the only exception Anywhere in this part of the world doing that, 97% of our customers are giving us 4 and 5 scores. So that's an update quickly. Let me just jump in the interest of time all the way down to how are we seeing the portfolio health To be, that's virtually down to panel so that I leave some time for questions. Panel 50?
Okay. Yes, this is Panel 49 fundamentally represents, I've talked about it that fundamentally RMB141,000 of assets are in Stage 1, OTS assets are INR1739 crores, Stage 2 is INR5 1,000 and Stage 3 is INR2 1,000 31 versus last year, as I've articulated, 3,900 crores is normal Stage 2 versus at its 5 And 2,400 cores last year was Phase 3, it is 2,731. And we had a coverage of 60, we had coverage of 59 in Stage 3, 58.5 in Stage 3 And we had a coverage of 2019, we had a coverage of 25%. In general, I'm down to 51, 52 represents 11 of our different So it's 13 of our different businesses. We have a red year, which is still our 2 wheeler and 3 wheeler financing business, which is still Significantly behind where it was a year ago in terms of Stage 1 assets, other businesses have all caught up or are better off.
The B2C loans are still behind by 108 odd basis points and as a result Stage 2 there is Higher by 120 odd basis points. Otherwise, rest of the businesses I'll back to where they were in February 'twenty. This is not March 'twenty, this is February 'twenty because March was that's the reference point that we'll use that we've used for the last 4 quarters that we continue to intend to use. So that's really the quarter gone by. And Myself and my colleagues here are ready to take any questions that you may have.
Thank you very much. We will now begin the question and answer session. 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 Raki Prasad from Alda Capital.
I wanted to get a sense of Your credit underwriting in terms of automated credit underwriting, what kind of products are you doing through automated digital methods. And any sense on what would that be on a total percentage of AUM? And how has that trended over the last 1 year?
So fundamentally, our B2B, which is the point of sale business is the one which is The fully automated underwriting, our B2C businesses are quasi Automated because we fundamentally determine based on Our analytics, who we want to give money to, but to only 10% of the customers, we are able to do we are willing to do straight through, Balance 90% go through a quarter underwriting process. Everything else would be fully underwritten. And if you look at the portfolio in that sense, the B2B businesses which essentially contribute to No, you can just go to composition. If you go to panel 43, You'll see the composition there. So the 8% of the business and 2, 10% of the business is going to be automated.
The consumer B2C and rural B2C, which is another 23% 28% of the business is called automated, rest is fully underwritten. Are we audible?
Yes, sir. You're audible.
Okay, understood. Got it.
Ms. Prasad, do you have any more questions?
Hello.
We move to the next question from the line of Aditya Jain from Citigroup. Please go ahead.
Thank you. Could you just help understand the Q o Q movement in restructured assets and Stage 2 loans? So in the last quarter, if my understanding is right, we had INR 2,000 crores restructured in Phase 1 and GF2 was about INR 5,900 crores. I mean, 4Q, the 2 collectively OTR plus GSP is 6,700. Is that right?
And then if it is, then the decline Has come from where? So is it write offs movement to GSP or upgrade?
Yes.
Harith, there are 3 questions that you're asking. One is On the OTR book, the OTR that we had offered to the customers was approximately INR 2200 crores, of which Some INR 400 crores customers have already been classified as stage 2 in the normal process because of the OD position as on 31st March. The balance INR1739 crores that you see are the customers who have taken OTR from us, but are honoring their promise as per the revised repayment terms. Had it not been for OTR, these customers would have got classified as stage 1 only. That's point number 1.
Point number 2, the pad you see in stage 2 That has gone down, the point is correct. It has gone down for INR 5900 crores in the last year to INR 4,985 crores as of now. This is on account of 2 things. 1, the recovery that has taken place in quarter in the Phase 2 as well as the customers moving into Phase 3. Most amount of write downs that we have done in the current quarter and in the previous quarter as well are basically from the Stage 3 assets and not from Stage 2 assets.
So Stage 2 is mainly on account of recovery and some migration to Stage 2 that has taken place in the current quarter.
Got it. Thank you. And one question on the digital transformation side. So if you could just help us understand in terms of size, how many point of sale terminals will you put? What will it mean in terms of change in business model of say you have X amount of people at the stores present today, how could that change?
Some sense of what the cost movement essentially will be because of all these initiatives?
So fundamentally, look, it's a fair question. You have to while we share We view that these are different apps. We see them as a single ecosystem. Let me make that point because fundamentally, We are very clear, we are in a highly regulated business. Click a button and get a money will happen for 10% of the clients, 90% will need assistance.
And that's really how you fundamentally see SalesOne app as integral. SalesOne app, MerchantOne app are integral to What we call omni channel infrastructure is integral to the overall design. It's important for and that's why we are saying an omni channel framework where customer will be able to transition in a frictionless manner between offline and online and vice versa. So I think that's something for you to Remember now let's just take an example for a moment so that it becomes clear. Point of sale, You go to any store, you are on a store at home, you look for A retailer in your vicinity, you identify product, you don't buy it, you go to let's say add to cart and you left it.
We realize that appliances is a high involvement category. We will fundamentally flow that lead to the store that you've chosen and the person either to the retailer based on our arrangement or to the point of sale person that we have, who based on appointment will speak to you and assist you and help you Call you to the store and do the transaction. That's one example of Omnichannel. The other example of Omnichannel, we may pre approve you, you've downloaded the 3 in-one financial services, You do add to cart, we but are not able to go ahead because we need You need some assistance or we need something from you. That leads based on allocation methodology will flow to a particular person in the field who would assist you and help you go through the transaction.
We are very clear that on the other hand, it may be an insurance product or an investment product that you may be able to buy in 3 clicks. It may be a broken account that you'll be able to if you're a KRA customer, KRA onboard customer, you'll be able to open in 3 clicks. So it will differ product by product and nature of the product and the nature of the transaction. So Right, when you look at it would be as it emerges between August September, as you experience it as a consumer, That's really where the imagination would become more clear. So we are as excited about Launching this, something Anoop, what's the thing?
Also Rajiv, as you said that this is a O2O framework, which This is the online to offline and offline to online. We are not taking a position that it is only online. It's a Assisted O2A framework, where the customer desires, he can go all the way to disburse. If he needs assistance, we can call Fairly quickly, I think the game here is how fast do I reach out and that's where the moment of truth will really play out.
Got it. Thank you. That's helpful. Last clarification, so how will all of this relate with the Fintur market cap?
But the company is helping us build the technology platform because we are in the middle of building 3 in one financial services. We are in the midst of significant transformation of our current core technology platform. So they are building the investments and insurance and e store marketplace for us on an arm's length basis as a technology partner.
Got it. Thank you very much.
Thank you. Next question is from the line of Kuntal Shah from Oakland Please go ahead.
Hi, Rajeev and team. Thanks for taking my call. We lost you for some time in between, at This might be a repeated question. I would just focus on the Slide number 10, giving the transformation thing. Particularly, 2 aspects that did your comments on what would be the switching cost for the customers in the Current existing other platforms pertaining to investment, insurance, e stores and the stickiness for you as on to justify the Current acquisition cost and your comment on the Fintechs, which are acquiring customers spending crazily versus your cost of acquisition.
Secondly, more comment on how this arm length pricing is going to work between the parent company and this because ultimately the platform owner owns the customer, not the So some clarity on who is owning the customer and how it will flow through between the two respective?
Okay. First of all, Kuntal, as you can see on top on panel number 10, we are not building this for new customer acquisition. At a design level, as I have said in 2 panels before, we continue to originate customers at point of sale. That does not mean That this will not originate new customers as well. We see EMI Card origination has now become a reasonably large Standalone engine, digital engine for us, we are now originating anywhere between 60,000 to 40,000, 45,000 paid customers and 60,000 to 70,000 approved customers on a month on month basis.
We think as This ecosystem becomes large. It's very much possible that that number will significantly expand, but leave that aside. Our focus is on Originated at the point of sale and acquire and cross sell has really been our strategy and that's really what this Panel and platform is intended to serve. We have enough customers. We are very clear that We will be sometime in the near future, we will be 100,000,000 customers company given the distribution and the product portfolio that we bring to the table and the geographic presence that we bring to the table.
So that's one part. Omni channel frame, originated point of sale, do more with them is really what this platform is for. Now, that's one part of the question that you asked me. They are a technology partner for us. Bajaj Finance is a technology partner on an arm to length basis.
They are paid to build the technology. The way we work with various companies, whether it's I mean, I don't want to give names, but We have various technology partners. Bajaj Finance is another important strategic group technology partner. That's really how we are doing this on a complete arm's length basis. Customer, as I said, belongs to us.
Any customer who comes on this platform takes our product belongs to us. So there is no Having said that, since there was an earlier question and there is this question, we created Bajaj Simpler Markets as a challenger in the group. That was our original objective and their objective stays. They are a challenger. We are producers, if I may say so, Between our Vedalian's live insurance company, Vedalian's general insurance company, we are producers.
Among them, we happen to be somebody who is a producer and is an open architecture large distributor as well. So I understand the confusion There are times it can we created them as a challenger to make sure that they cannot their space is very large. It's a growing space that can create a distinct and a differentiated model to find a new way to originate customers. And that's really what they've been up to for the last three and a half years. And they have their own journey.
And we as a company have our own journey. They have their own customers. We have our own customer. There is no confusion in our mind. This has happened to be you look at them as you guys understand it easily as Amazon and AWS, that's the easier way to look at them.
They have 2 parts. They do business on their own and they also do technology development. We are using their technology development arm, that's all, nothing else.
So Rajiv, just one question is, Can we expect all the engagement metrics like DAU, MAU, churn rate, CAC all to be published after the Q3?
I would say, Guntal, the way we are seeing it as is that we go live between August September. We are already working on what I would call a Phase 2 between We know that given the large ecosystem that we are looking at creating, there will be optimization opportunities and that's being polite. All large app ecosystems as they go live, that's really how the nature is. We do think there will be optimization opportunities that will appear between in Q3 and early Q4. From end of Q4 from Q4 results onwards, We will start to publish.
Answer is yes.
Okay. And what are the friction between for switching cost From one platform to other, there are marketplaces right now, right, insurance investment. So what are the switching costs and stickiness consideration involved?
So the switching cost fundamentally is appears as we see only in the mutual fund space, otherwise there are not a switching cost. You could so that's the only place where I'm aware of there is a switch Cost that appears if you move from a direct plan to a if you move to a direct plan, otherwise
Rajiv, I meant from one platform to other like If somebody has a policy or a live account of mutual fund or FDE in one marketplace, what are the inertia and the considerations
That's something that see, Kuntal, we at a design level, we are originating a customer as a point of sale. We offer him an ecosystem. We continue to give him rewards. We continue to reduce the friction for him. He will have a high drop and he will stay with you.
I think that's at the frame level, that's the journey we are going to. We think This is really how this will become the present and the future of the company from a next 5 year standpoint. So I think while COVID has had many costs, I think it has significantly accelerated Our orientation and our direction lot more rapidly than we had actually planned before COVID. And you will see it play out
well. What kind of marketing budget we have in mind to acquire customers and or at least make the products away to a widespread of potential customer base.
Puntal, we like to deliver return on equity to our shareholders. In general, I'm reasonably minor on these. We will continue to originate customers at the point of sale. I have reiterated it 4th time. I won't repeat for the 5th time.
Our origination frame is not changing. It may bring additional customers at no cost as a result of SEO And
a small INR 40, INR
50 crores a year that I currently spend in marketing in SEM, so be it. We don't need more customers. We need greater engagement and we need greater shareholder value. That we are super clear about.
Thank you. All the best.
Thank you.
Thank you. The next question is from the line of Satwik Jain from Periniale Fund. Please ahead.
Yes. Thank you. So given the Aratek lockdowns in most of the main states and cities, So could you walk us through what different you are doing versus the competition to maintain such good recovery rate?
When you say recovery rates, so in general, As I said, the capacity planning was significantly augmented in Q1 last year. If you recall, We added we virtually added a 33% additional Debt Management Infrastructure in Q1 last year, that's one part of the conversation. 2, the incremental through the door Acquisition is distinctly superior very clearly. The B2B portfolio of ours which is really where millions of customers are has largely fully churned. If you see that on Panel 50, You will get a texture of it.
Just go to panel 50. If you see our B2B business, You see since December 2018 which is virtually 4 8 quarters, we never saw it go past 99% In terms of being current, we are seeing them at 99.52, that's one point here. As I mentioned on panel number 7 or 8 earlier that the incremental through the door acquisition is looking and their current market branches are looking significantly Better. So it's a factor of both, what is coming through the door and clearly How efficiently we are able to manage those clients is really what so far has played out in the last 6 months.
Thank you. Thank you so much. All the best for the future and hope you stay safe.
Yes. That's important.
Thank you. The next question is from the line of Jignesh Sheal from MK Global. Please go ahead.
Yes. Good evening, sir, and thanks for the opportunity. Firstly, congratulate on a good set of numbers and very valid disclosures that you have given. I had just a single question now, if I can see roughly around INR840 of macro and management only I can see it up right now. Any brief idea about what kind of credit costs are you looking for the current year as well as for the next year At least for the current year, considering this COVID wave is still there, the second wave has already been there out and And our business is getting affected and all.
So any guidance of how we are going to utilize this particular overlay or how will be the credit
So you would appreciate that it is I've given you preliminary assessment. It would be so let me place this into 2 parts. Prior to March 31 or as this crisis started to unfold so rapidly, I would have confidently told you we'll look Probably close to 100 and we'll be we'll look between 150 basis points. It could have even been lower given the kind of write off recovery rates that you are seeing in the last 2, 3 months. At this one in time and we have transparently laid out The way we see the situation to be, we would have to wait for a little while for us to have a full view.
The only point I wanted to make is that we are technically not carrying any baggage rather carrying a surplus into the way into the second way. So I think that is what is very clear and important. It is also showing that the Through the Road acquisition is better. It is also showing that our collection efforts is much stronger. It is also showing that we'll remain open for business.
If the 3 events which I talked about, which is the national lockdown doesn't happen, 3 to 4 large GDP contributing states don't go into Simultaneous lockdown for 3 to 5 weeks and there is as a result of some of these events, There is no another moratorium. I think we should be between 150 basis points to 170 basis It may be a little lagged. It may not be the case in Q1, but on a full year basis, I think Sitting here, I would like to believe so, but we are as aware as all of us are.
Understood. And just one quickly, If I understood correctly, we had up an OTR offer to around 2,000,000 to 1,000,000 kind of an OTR we had offered. And 400 is already converted into normalized Stage 2. And balances, we are keeping as a stage 2, will you, but under our own method, otherwise it would have been in stage 1.
OPR, we have classified them at page 2.
Okay. Thanks
a lot and all the best.
Thank you.
Thank you. Next question is from the line of Nishnishin Chawade from Kotak Securities Limited. Please go ahead.
A very simple question from my side. What was the total write off in the quarter?
If you go to panel 5, panel 6, It specifically mentioned there that total INR 1530 crores was written off.
INR 1530 crores was the additional item that we have done On account of COVID related stress as well as on account of write off policy change, apart from that we had INR 500 crores of normal write off that happened in the month in the quarter.
The total write off is around 2,000 odd flows?
That's correct.
Okay, perfect. Thank you.
Thank you. The next question is from the line of Hasmukh Galla from Finvest Advisors. Please go ahead.
Raju, congratulations for such a great work as you are picking up in this adverse time. Just would like to know, Can you hear me? Yes, yes, I can hear you. Yes. Yes, yes, yes.
Can you just tell me how far we will be from our normal growth trajectory, Etcetera, looking to the 2nd wave and we don't know how long it's going to start. And as you said, the moratorium and other issues that could come up. So how far we are, we will be from a normal growth profile. So will you again be looking at the growth or will you be looking more at the Some of assets, good quality assets. So what will be the strategy in FY 2022?
So look and as I realize it's a fair question that will be asked. FY 2022 It's a long year and that's why we gave you a preliminary assessment. The way we are seeing it at this point of time on panel number 8, no, just go to panel 8, yes, that's on panel 8. And we exactly outlined to you the way we are seeing it. If these three events don't happen, we think we will deliver Our long term guidance metrics that you outlined for many years, a 25%, 27% balance sheet growth and 18% to 20% ROE and the current gross NPN and net NPN numbers.
If these three events don't happen, If they play out, then we'll have to see. The additional point that I made here is that I think we are lot more braver. I think having faced First wave, which caught each one of us unprepared financially and health wise, I think A lot more preparation there, which is really what you can see on panel 8 and point number 4. I think Whether on new origination service operations or on collections in a work from home situation, we will continue to deliver 90%, 95% TAT is really the way we are looking it as. Even if the flows were to increase in an intermediate Period, which is really what we saw last year, I think we have additional staffing in our debt management infrastructure to be able to support.
So I can only go by our readiness. As I've said, even if the recovery was back ended, which is possible, if this goes beyond May end, The Clean One Financial Services would have gone live. So I think and we have not baked that as part of our plan this year. As part of our planning process, do not bake that in because as I said earlier to the respondent that we think it will get launched in August, September. We are very clear there will be optimization opportunities that's really how large app ecosystems work.
And for next fiscal it will be a big play And that's why the entire management team fully sees that it's without it that we have to deliver the long term guidance metrics and we've given them the resources
for the same.
So I can only comment on our readiness, Very hard to say how things will play out. Okay. But the second
question is I thought the 9 different asset classes, which are the asset classes where we will see some good positive movement maybe for the part of the year?
Look, if you see Q on Q moment for all the 8 asset classes, we were seeing momentum. We are still a little behind in our B2C businesses, but otherwise across all and that's why The overall growth was reasonably granular whether it was mortgages or B2C or SME or B2B. It was on a Q on Q basis, if you look at them, They were all growing in a fine way. We will remain in a dependent And act accordingly is really all that I would say. The last We would want to ever do, we are building this business with a long term view that if the data does not support, we are not going to chase growth, whatever it means.
But if the data does support, we will accelerate growth. I am glad about that as well. So The readiness on both sides, the prudence requires that we play it that way. And agility is going to be Of an important dimension is really what our assessment of the last 13 months. Correct.
More agile you are, more you can mobilize.
The last question from my side, any further thinking on banking part of it, which you had touched upon in the Q1 But you are looking forward to what kind of guidelines come from RBI and then you will decide the structure and all that how to go about it. So any further thought process crystallized on that?
No, we are as I said, we are awaiting And based on that, we will advise.
Okay. Okay. That you went in. Thank you very much. Wish you all the best.
Thank you. Ladies and gentlemen, due to time constraint, we take the last question from the line of Hiren Wade from Elkami Capital. Please go ahead.
Hi, Rajeev and A. Congratulations for good set of numbers given the circumstances. I just have two questions. One is that our current cost to income ratio obviously is higher given that the growth has come down. And I remember that When we were talking about our digital transformation, one of the objectives was to structurally reduce the cost to income ratio.
Yes. So would it be fair to say that we should see a 2 stage reduction in cost to income from the current level? 1 is And then because of the transformation initiatives, you could see another step down structurally.
Yes. Actually, how I mean without the digital transformation or so called Transformation plan, we were at 31.5%. So there is no reason for us to believe that we won't go there. But as you're rightly saying, as the operating leverage kicks in, as some of the transient pieces of the OpEx Go the way as a result of the event, you will see that happen Very clearly.
Okay. And my second question is that Considering what the country has gone through last year because of the first wave and a little bit of the second wave, do you believe that your addressable market Would have got impacted, which means what I'm trying to say is that, let's say, you have a credit underwriting framework. And Let's say earlier in normal times, if you have 100 people Making an initial contact and finally 25 going through the door, do you now have to Address 125 opportunities to get 25 through the door?
So, herein, I am It's a fair question. I am looking at 2,000,000 customers a quarter. I have a little more simpler view to life. In the last 2, 3 quarters, not having faced it, I would like to believe without having in no manner, in fact, tightened Underwriting standards, if you could originate 1,800,000 customers, 2,200,000, 4,000,000 customers, I will take it as it comes. I think very deep distribution, that's one part Being in terms of geography and in terms of point of sale is ensuring that we can capture the market.
And As Anoop is rightly saying that the overall competitive intensity from a credit also has taken a knock. Clearly, not too many P and Ls have the kind of ability to take this kind of shock. We write off, But I write off showing it to P and L.
Right.
I don't write off as a balance sheet entry. If P and L has the power to They want write off, they should take it on and run a prudent business. So we have that firepower. We run a conservative business. We think gross NP and net NPA flow through to P and L reflects the true strength of a business And we'll play along that way.
Got it. Thanks a lot and best of luck.
Thank you. Thank you. And we'll keep growing customer franchise, 2,000,000 at a time or 1,200,000.
Sure. Sure.
Thank you.
Thank you. I would now like to hand the conference over to Ms. Bani Bapji for closing comments.
On behalf of JMP Financial, I would like to thank Mr. Rajiv Jain and Senior Management team, Bajaj Finance and all the participants for joining us in the call today. Good evening and thank you.
Thank you. Thank you all so much for the late call. Really appreciate. Thank you. Stay safe.
Thank you. Ladies and gentlemen, on behalf of JM Financial Institutional Securities Limited, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.