Ladies and gentlemen, good day, and welcome to Bajaj Finance Limited Q1 FY 'twenty one Results 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 Mr. Karan Singh from GM Financial.
Thank you, and over to you, sir.
Thank you. Good evening, everybody, and welcome to Bajaj Finance's earnings call to discuss the first quarter FY 'twenty one results. To discuss the results, we have on the call mister Rajiv Jain, who's the managing director, mister Sandeep Jain, who's the chief financial officer, mister Atul Jain, who's CEO of Bajaj Housing Finance, mister Anoop Saha, deputy chief executive officer of Bajaj Finance, and mister Deepak Bhagati, who's president, risk and collections. May I request mister Rajiv Jain to take us through the financial highlights subsequent to which you can open the floor for q and a session. Over to you, sir.
You, Karen. Good evening to all of you. Our apologies to be late to be doing this call this late mainly because of our AGM followed by VFS AGM. I'll take twenty minutes to speak, and then hopefully, we can do q and a for forty to fifty minutes. I'll be referring to the presentation, which you uploaded in the afternoon on our Q1 results.
Let me just jump quickly to Q4 sorry, Page number four of the presentation. Let me you know, Q1 clearly was a pandemic quarter. The focus of the company was really on employee safety, capital preservation, liquidity management, business scenario planning, OpEx management, collections capacity augmentation, creating new customer propositions, business transformation framework. And lastly, but most importantly, you know, calibrated restart of business as the country started to reopen because the lockdown was sudden in nature. As a result of the fact that sixty eight days country was in national lockdown, the results are that assets under management grew by 7% Y o Y.
OpEx to NIM grew by came in at 27.9% versus 35%. PAT came down by 19% Y o Y. ROE came in at 2.9%, not annualized. Net NPA came in at 50 basis points versus 64 basis points. These numbers, given that we are in a given the whole host of situations are not really that, I would say, they need to be watched over the next one or two quarters before we make too much sense out of them is really what I would guide all of you to.
Let me just quickly cover some of the 35, 37 points that are that we've articulated here for clarity. Let me just jump to balance sheet and franchise very quickly. Clearly, till May 10, business operations are closed and gradually restarted as local administrations eased lockdown conditions. As of yesterday, we are operational in 2,003, 22 locations, which represents 85% of company's business. 86 locations at this point in time are closed for business fully.
Example being Pune, Bangalore, among the large cities, which represent 15% of the company's business. These locations do 2,003. Bombay is part of two three two two rather than part of being 86, just to give you a texture. AUM, we talked about moderated to 7%. On a on a gradual basis, over the last sixty days, companies opened business by business based on its its degree of confidence.
It started with sales finance, auto finance, point of sale business, loans against security, gold loans business. Then started in June, home loans and credit card distribution business. And in between, extension of moratorium came in, and it's only in July that we restarted all our other lines of businesses from July 1. At this juncture, based on our assessment and what we are seeing, we do believe that 75 plus cities should revert to pre COVID volumes by October. This is 75 plus, I mean, 40 to 75 cities by end November, 10 to 40 cities by January, and top 10 cities are marked.
This is assessment at this point in time. This, of course, assumes that we will not have a second national lockdown. In general, as a result, our view is that overall assets in the management growth could look like anywhere between 10% to 12% in FY 2021. We booked a set of 1,700,000 customers in the last fifty days across our different businesses. In general, the early bounce rate and collection efficiencies of these clients, we are seeing them to be marginally better or in line with pre COVID levels.
This is an early indicator. If these indicators were to persist in July and August in August, September and so on and so forth, then we could probably have a stronger growth stance in the second half of the year. Entire given the lockdown, company was also locked down. The entire focus of the company was what do we do to with our workforce? What do we do with our customers?
In the process, two big parts emerged where we could work with our existing customers, which is point number eight and nine. We had a Health Card product, which had gone live in October, November year. And given the entire focus on Health, we started to cross sell Health Card to our existing EMI card customers. The company successfully managed to sell 5.33 lakh health card customers. It generated 35 crores of net fee income in the quarter for the company.
Given the lockdown, company also decided to convert some of its existing customers with no overdue and good repayment. Traggle got from term loan to a flexi loan for a switch fee. This generated a hundred and thirty five hour crores of switch fee in Q1. I'll be covering this in greater detail given the, what I would call, WhatsApp murmur since we released this investor deck in the afternoon, the data in the afternoon. Just give me five minutes to come back to this point.
Let me just jump to point number 10. Fundamentally, company acquired 5,000,000 new customers in the current quarter. Total franchise stood at 42,950,000. Liquidity, company is sitting on INR2600 crores of cash and SLR investments of INR2550 crores. This represents 19.5% virtually 19.25% of its total borrowing.
Given the environment, we do believe that we will continue to run high liquidity buffer. Its impact on cost of fund is reasonably material, which is the point number 13. It is INR 169 crores in was the cost of excess liquidity in Q1 itself. In a way, it's a INR $6.50 odd crores run rate if we were to maintain this for a full year. Do we have that stand for at least the next one quarter?
The answer is yes, and we will take it as things progress. Deposit book stood at INR 20,061 crores. It's a year on year growth of 33%. Contribution was 17% of consolidated balance sheet. We continue to attract sizable deposits even in Q1.
We dropped rates twice by 65 basis points in two tranches. Corporate retail mix stood at seventy-thirty, in line with our stated strategy to reduce reliance on corporate deposits. As you may be aware, on point number 15, S and P Global downgraded the company's long term issuer ratings on account of sectoral downgrade due to COVID-nineteen. So that's it, update on point number 15. On OpEx, as I have said on April 6 call and in May 1819, May 19, May 19, Q4 results, that clearly we have limited control over revenue, we have limited control over credit cost, we do have control over OpEx.
So company has gone out hammer and trunks and has looked at where are the, what I would call, non value add costs and even value added costs for at least the next two quarters until things come back to normalcy. On a sequential basis, overall OpEx has dropped by INR $2.96 crores on a year on year, which is a 20% sequential drop and 11% year on year drop. We've taken several actions. We have taken a voluntary pay cut. It's across the company from 5% at junior levels to 17.5% for the current year.
We are reasonably heavy on incentives. You've taken a view to September to to pause that as well. We've done significant call center optimization and so on and so forth. All actions that we deemed appropriate that you were to take as a company to protect the P and L and in the process balance sheet have actually been taken from an OpEx standpoint. On credit cost, let me spend five minutes on it, The eight, nine points, you're aware, RBI, on account of continuing disruption, extended the moratorium by another three months
till thirty first
October. Consolidated moratorium book came in at INR 21,705 crores, which is 1500.7% of AUM from INR 38,599 crores, which was 27.1% of AUM as on April 30. Mainly, bounce rates are dropping, collection efficiencies are improving, and as a result, the moratorium booked came down. During the quarter, as a measure of prudence, company continued to accelerate its provisioning, to INR $14.50 crores of contingency provision, taking total provision that we have taken so far to INR 2,350 crores. In addition, there is a INR $6.23 crores of ECL on this INR 21,705 crores, taking the overall provision to just a tad below INR 3,000 crore on this INR 21,705 crore book aggregating to 13.7% on a on the consolidated moratorium book as of June 30.
Since moratorium book is also continuing to accrue interest, in line with our assessment, we also decided to reverse interest income to the tune of INR $2.20 crores during in the quarter. Last, we provided an update on our credit cost scenario planning model on June. We estimated that by the time, 80% to 90% increase in credit cost. Assuming lockdown continues till fifteenth May. The national lockdown continued for sixty eight consecutive days till May 31, and it was followed by multiple district and state level lockdown imposed by respective local authorities.
At this juncture, as we speak, Bangalore and Pune are in midst of, I would call, is more stringent lockdown than the original national lockdown. Based on incoming data over the last three months, we've now updated our credit cost model, and we now estimate that the overall credit cost for the year will actually rise by 100% to 110, which is a INR 6,000 INR 6,300 crores for FY 2021 over previous years. We do believe and it's evident and visible that we have reasonably strong pre provision profitability to absorb the increase versus what we had originally estimated in April. We have provided an outlook that to mitigate the significant increase bounce rates as a result of the pandemic, we are investing significantly in augmenting our collections infrastructure. We've added 2,800 collection officers so far and 16,000 collection agencies to manage the increased bounce.
At this juncture, the way it really looks to us is that 75 plus cities should revert to pre COVID collection efficiencies sometime around November, 40 to 75 by end December, and 10 to 40 cities by February. The the question that we have in front of us fundamentally is what happens to top 10 cities. It is really tough to predict. Most of you who are on call or a lot of you who are on call or in Bombay are aware of how the lockdown has been has been. We are, for the last eight days in Pune, in a complete lockdown state.
So top 10 cities is making it very difficult for us to fully forecast in an effective manner how things will pan out. And, of course, it you know, if the cases were to go up, I've we are so far not forecasting a second national lockdown. So that's really on the credit cost, and I'm coming in a moment to a set of points that I do want to cover, which are not there in Investor Day as well. But let me just complete this. Profitability came in 19% lower, mainly in account of INR $14.50 crores of mainly in account of INR $16.70 crores of provisions and reversal of interest income.
Now overall pre provision profitability remained reasonably strong. We have given an outlook to the Street that in May, we are also looking at some of the businesses where we do believe that there is there may be some opportunities from a margin profile standpoint. We've taken actions as we deemed appropriate to increase margin profile in some other businesses. Businesses that are fundamentally a business that is probably struggling, most on account of pricing pressure is the mortgage business, where there is tremendous pricing pressure at this point in time. We are repivoting the mix marginally for short to medium term to navigate through this.
Capital position remained very, very strong at 26.4% overall card. Tier one capital was 22.6. Let me now jump very quickly to what I would call to and I'll come to transformation if there is interest on that, but later, let me just jump to moratorium on which is panel 11. This is data as of April and and as of June. You know, clearly, it's it's a it's it's the data is based on you see all the information here.
There are there is some question that as I said, I'll come to what the WhatsApp chatter is and I'll try and address as to why we have changed the format in terms of not providing the bounce data, and I'll cover that in a moment. But at this point in time, as you can see, AUM as of April 30 was INR142000 by different lines of businesses, INR 38,600 crore of AUM under moratorium. It was 27%. We had overall COVID provision and ECL provision of INR $18.70 crores on that. As of June 30, it's INR 138,000 crores, INR 21,705 crores, which is amounting to 15.7%, and total provision is INR 2,973 crores, which is 13.7% of total provision.
Let me now come to and then I'll open it up to questions to some of the WhatsApp chat that's going on since in the afternoon, we published this data. Have I missed anything, Sandeep? That should go through. Yeah. I'll I'll cover that at the end.
Let me just jump to some of the points. You know, for the first time, now we were helping the street by telling them that if somebody looked at how did the fee income grew during this quarter, we said there is INR 140 crores of fee income that's coming that's coming as a result of Flexi. That was a perspective on providing update on Flexi. Little did we realize that people are connecting the wrong dots. So let me connect the right dots from our perspective.
Flexible Flexi product or Flexi loan product, as it's called, was launched in 2013 by us as a company for loans against property customers as a competitive tool against ODCC. That's really what we are competing with. Gradually, as we saw the power of it, we extended this product across all our lending businesses, like personal loan, doctor's loan, SMEs, and loans against securities. Fundamentally, if you are a customer, it allows you to draw when you want and pay when you want, giving you complete flexibility and control over interest outlook. So you may have zero drawdown and zero interest repayment, or you may have 100% drawdown and pay interest on that.
You can have you can choose a drop line flexi or a hybrid flexi. Drop line flexi fundamentally is like a flexi saver or a home saver that some of you may have had where the amortization starts on day one. Hybrid flexi works exactly like an overdraft or a cash credit account where for the for a for a particular in fact, here, this is more hybrid. The first one or two years, you're in an interest outgo, and then you transition to term. In both the products, customer has to service interest or EMI as the case may be based on utilization level.
We do charge the customer 25 to 50 basis points higher pricing. Customer does pay an annual AMC, which can range anywhere depending on the product from 25 to 100 basis points, generating a fee income on. On a lifetime basis in the past seven years, it's our experience that this product is distinctly more profitable despite loan losses being marginally higher compared to term loan due to slower amortization. The fact is it is slower amortization. There is that's the nature of the product.
If you look at today, the the the 36,000 growth portfolio that we've given data on, 90 if you were a doctor, our main product that we offer on a 7,100 crores of doctor portfolio is only Flexi. If you're a salaried customer, affluent salaried customer, 90% of 10,600 crores of salaried PL is offered only flexi. 100% of lab is flexi. 60% of lab and LRT portfolio is flexi. 65% of SME, which is 11,000 odd core portfolio is flexi because these clients have surpluses and cyclical needs.
Fundamentally, I would like 100% of these clients to get flexi products because I get more fees, they get more cyclicality, I have greater competitive product to manage my good customer portfolio. The average in fact, our challenge more often than not on this product is utilization rate. Utilization rates in in Flexi essentially run between 6085% of the approved line as a as a framework. Conversion to from term to Flexi, in general, we offer. Now this is a moment of truth business.
If any of you would like to go ahead and take it, you can offer it tomorrow and take it. Now let me just come to what the fuss is all about from WhatsApp Chatter standpoint. In q one, fundamentally, to help our good look. I want to just remind everybody, we are in a pandemic to help our good performing and never overdue customers navigate COVID and to grow our fee pool during this pandemic when everything is in lockdown and all businesses shut, we chose to offer term to flexi conversion to a set of clients. Let me reiterate, never overdue customer who never had any installments overdue in his entire relationship with VFL.
Serendipity, however, it emerged that we never offered it to our personal and cross sell customers as well. So we went out and offered it to them as well and which we will do even going forward. 8,600 crores of conversion number that we have given to the street generated a peak of $1.47 crores. Okay? Additionally, it will also generate AMC, on every anniversary depending on the nature of the, depending on the nature of the segment.
Out of a total conversion of 8,600 crores, 5,000 crores were
Participants, please stay connected.
Yeah. Sorry?
Sir, go ahead.
Yeah. Out of a conversion of 8,600 crores, 5,000 custom crores customer worth of customers were not even in moratorium. They were serving their term loans successfully even during these times. Balance 3,600 crores, who were never in delinquency and had a good bureau score, but sought moratorium to conserve cash in pandemic, here are the customers that we offered. We offered it to much larger base.
Let me make a point. We offered it to close to 15,000 crores because we wanted to generate fees, one, and we wanted to help our customers. What we are seeing on this 8,600 crores of customers sorry, the 3,600 crores customers is significantly lower bounce rate and and collection efficiency at pre COVID levels. At this point in time, based on the banking, only 26 crores of these customers have flown forward in the month of June. At a fundamental level, we believe as we get out of this COVID pandemic, we believe on a click of a button, we will on our digital assets, customer will be able to convert from term to flexi and flexi to term.
That's really where we are fundamentally headed, and I thought I'll clear the air. Intention was to draw the draw the connect the dots from a from a fee standpoint and not from a portfolio standpoint. Let me come to the second point that we have not provided bounce data. Let me just remind while you all appreciate that, and I'm aware of it, that we provide utmost disclosure to Street in general. Bounce on the topic fundamentally that we talked about in our first update on COVID on April 6.
It was important that when we came in May to not break the chain and thus and thus you published the data. However, post that, lots of you got on call with me or with Sandeep essentially, and we realized that the analyst community in general and investors struggled with the disclosure. If I if I further add to it that given reduction in monthly banking you know, the monthly banking in the last four months has actually dropped by 18%. So if you look at aggregate percentages, they would not really help. And that is that's why we've not provided the data.
But can I say to you that on a the bounce rates by each portfolio in general are dropping by three to 4% every month over the last three months? Is that it is can you provide? The answer is yes. Of course, I must just say that the big drop fundamentally will only be evident and visible by September when moratorium ends. There is there is some chatter on why on customer franchise you're not provided updated the slide.
May I just remind that we are in pandemic times and because of moratorium, everything is in a static mode. We will refresh our customer franchise data only by October. This is September and October amounts rate, number one. Repayment, number two. And view refresh, number three.
The only relevant data on that panel for q one was the addition of half a million customers to our gross franchise, which we've already disclosed. Let me come to the last point on on on last two points, and then I'll open up to questions on portfolio health charts. Let me I don't know what to remind. Everything is in a static mode. Due to moratorium, zero DPD, 30 DPD, and 60 DPD portfolio movements are on a stand alone standstill basis, either custom basis customer request or Sumoto moratorium.
The only DPD at this point in time which is moving is 90 DPD, which if you draw the dots to, has resulted in loan loss provision of $2.55 crores in q one already. And it's as as it represents, it says state free provisions and write off. If we had populated 30, and 60 as current because of Zoom auto moratorium or customer requested moratorium, it would have presented an artificially rosy picture, you know, which will which will not been a prudent thing for us as a company to do. We will reinstate portfolio charge from q two post ending of moratorium. If if RBI, let me make a point, were to extend moratorium further, we will still not be publishing it.
This will only be post normalization of ending of moratorium is the limited point I would make, not for anything else because it is otherwise artificial. Let me just come to the last point on loss forecast. You know, in general, it's our view as a company that we need to prepare for the worst and hope for the best. If you believe as a company that all is well, we would have not reduced 300 crores of OpEx on a sequential quarter despite, let me make a point, in that accounting, wherein a variable sourcing cost gets amortized within Commodore life of the loan. You know?
In in IGAP, it's a different treatment. In in that, it's over the life of the loan. So the degree of impact has to be far more brutal for the 300 crores of OpEx save to fundamentally come through. Reason for increase in loan forecast is primarily on account of continued disruption in economic activities owing to persistent lockdowns. 86 I talked about it.
86 markets representing 15% of our business are currently in complete lockdown, and so for every lender in this country. Mind you, this does not include markets like Mumbai, which are considered open but are functioning, you would know it better, probably at 25, 30% level. Even markets which are considered open, lot of nuances like weekend curfew, you know, some states are running two days curfew, some states are running one day curfew in a week, and so on and so forth, reduces fundamentally number of working days. In general, disrupting momentum. We factored in these additional nuances in our risk model or our credit cost model and have thus accordingly increased our credit cost guidance.
If things do change for the better, we have no intention to we have no let me make a point. We entered pandemic with a completely clean balance sheet. We took the two large accounts that we had. We charged them off. I have nothing to charge off.
If the so, you know, we entered at in a in in the pink of health from a portfolio standpoint. So there's nothing to clean. On the and we are we are still taking these charges, as I said, because we want to prepare for the worst and hope for the best. All actions that need to be taken to protect and prevent credit costs from rising have already been taken, but it's important that we protect the P and L to the extent possible. We will have if things change for the better, we will have balance three quarters to fundamentally adjust accordingly is really the thought process that we've had in increasing our trade cost forecast.
That's really I did have some point, but I don't want it to be a monologue. Clearly, 70% of the last quarter's effort, I'll just make only one point. I do believe that's Page number nine. 70% of the management effort actually in the last quarter has actually gone into how do we transform the company to prepare when we get on the other side of the tunnel. We do very strongly believe that never let a crisis go waste.
This crisis is throwing up tremendous challenges in the short term, but tremendous opportunities in the long term. There'll be structural change in the way our business will be conducted is really what we believe is management in next twelve months' time. And that's really where majority of our effort is fundamentally going. Some of the cost lines may get permanently eliminated if we manage to transform what we are planning to based on the transformation work that the teams are doing at this point in time. That's really 70% of our effort.
And we are quite confident that nine or twelve months' time, you will see a very different moment of truth because we are a consumer company, for us as a company as we get on to the other side. That's really all from me. Hopefully, covering most of the points. Between me, Sandeep, Atul, Anoop, Deepak, happy to answer whatever questions you have.
Thank you. Much. We will now begin the question and answer session. Anyone who wishes to ask a question, you may press star and one on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2.
Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Anyone who wishes to ask a question, you may press star and 1. First question is from the line of Antarixa Banerjee from ICIC Prudential Asset Management. Please go ahead.
Yeah. Good evening, sir. Can you hear me?
Yes. I can hear you, Antarixa.
Yeah. So congrats on the number. And first, let me appreciate your disclosures, especially on the flexi loan. I had two specific questions on the same. One is, I think the value really is on the portion of this loan that is currently under a principal holiday.
Because as you yourself have knowledge that the macros and the environment are not really great. So if somebody is today not making a principal payment or a full EMI payment, could you be in a position to say a position to say how much of this total book is currently under principal holiday and only making interest payments? That's one. And the second is while you give these products to specific sets of customers, what are the negative filters that you apply? Now I understand you say that no overdue is one of the conditions.
Are there other conditions, like, some occupations which are in a note I mean, blacklist or some other negative filters that you may have in this part?
So this is level two filter, Antarixa. Let me simplify the conversation. Yep. That this is a level two filter, which means first, whether we want to give you money. Okay.
Number one, it differs product by product. Number two, even there, based on our stance, if it is in general a lower risk business, we offer it to all. So doctors' portfolio, we offer it to 97, 98% of our customers. Salonate, PL in general, we are keen to offer it to 95% of the customers. As I said, 90% of customers of doctors only land up taking it.
So it's a level two filter. Okay? As I said, in general, we see utilization rates itself at 60 to 85%. Now coming to the structure of the product. Structure of the product has got nothing to do with COVID or moratorium.
You may be a doctor Antarixa who may have taken a year ago a flexi product of 15 lakhs. Your utilization may have been 10 lakhs. You may be in a one year product or a two year product or in a drop line product. That structure has not changed for a customer. Pre and it's got nothing to do with COVID or with moratorium.
Does that
satisfy the problem?
Just one follow-up, if I may. What I'm trying to say is since you started this product started the product or maybe the sanctions that you made for the last two years, since then, today, we know the macro have this has this I mean, it's got worsen as you yourself admit. Yes. So some of your customers' income and capability itself would have gotten worse. So in your estimate, people who are only paying interest, I mean, probably are in the first year or second year depending on the product, how much would you estimate to be under stress based on what data you analyze their income earning capability or whatever you would, you know, use to analyze that?
And, Trikshar, let me let me step back. As of March, none or none being defined as those who would was was taken into account on annualized credit cost basis. So it's pre COVID, post COVID conversation fundamentally.
Correct.
Okay. That's that's that's so then we are all on same page. Yes. We did we see lowest economic growth for us as a country in 2019, 2020. And despite that, if you take out the onetime provision on two large accounts that we took, the credit cost remains only range bound, which it moved only by 20 basis points.
So clearly and this 36,000 crores of book was sitting there. Okay? As I said earlier, adjusted for margin, this performed better on an ROE basis at a design level structurally over the last seven years.
Sure. But because of COVID, does that change, or it's still, you think, when it was?
COVID, as I said earlier, in general, we will see far greater clarity, and that's not for flex fee, for anything as moratorium ends. The big month will be when moratorium ends. Otherwise, is there a secular reduction, as I said earlier, in bounce rate every with each passing month by portfolios? The answer is yes. Is collection efficiency going up?
Answer is yes. Is it going up by what we would have liked it to be? Answer is no. Because of continued disruption in economic activities. So we we all have to fully wait as a banking system or as a financial system fully for what happens in September as moratorium ends.
Okay. Thank you so much, sir.
Thank you very much. Next question is from Kuntal Saab from Open Capital. Please go ahead.
Hi. Good evening, Rajiv, and thanks for excellent set of disclosure. I believe you exceeded almost disclosure by any other player in the BFSI segment. My two questions are, you have ECL of $6.23 crore, COVID provision of $2.03 $5.00 crore, 220 crore of Morad book interest written back, 303 crore of Carvy written off, $2.75 crore of ILSS written off, both of the last two US till security. So this amount to almost 3 and a half thousand crore of provisions slash ECL slash all the things you have taken.
This is far larger given the size of the book compared to any other player we have seen. So any light you can throw on that in on why it is such a large magnitude? Is it by business, or is it because of precaution, or what what is the reason of such a large percentage? And second is we saw that wallets have jumped 75% to 15,000,000 and credit card by almost 80%. So any flavor you can do on the on the credit card and wallets business, which you have not touched based upon in your
So, Kunpal, on your first point, I would just make a point that you would like to run a a fully costed p and l. That's really how you run the company that account for losses early rather than later. That's the reason why we are a risk driven company because when it flows through the p and l, businesses act. So it's an important point. It's tied to the fully costed p and l is fully tied to the way we run business.
When it flows through it, we run 40 different p and l as a company across businesses. When they flow through the P and L, the business manager wakes up and takes a set of actions to prune bottom 15%, 20% of the business. Number one. Number two, this pandemic is like never seen before. We have not seen this kind of bounce rate or nobody has seen this kind of bounce rate.
Nobody has seen this kind of collection efficiency. Nobody ever imagined we will all be operating from home for one twenty days. But we do, as a philosophy, believe that we want to run a fully costed p and l to the extent of information available to us earning on the side of conservatism and caution rather than believing all is well. So that's my first point. Point number two
Wallet and credit card.
Wallet and credit card. Wallet is 15,000,000. Customers are 43,000,000. Fundamentally, there should be a day when all our customers should be wallet customers, and there will be a day. That's the that's the design thought process and the framework that we are working with.
Credit card SIF has grown. We would like to be among the top three or four card issuers in India. We are the franchise and the customer base. As a measure of conservatism, we started to originate only in the month of June, new customers. We are still at only 25%, 30% of 20% levels in June.
We were in July, we hope to be at 30% levels, and it continues to remain a reasonably disproportionately profit pool for us and for RBL, who is our strategic partner in this.
And, Rajiv, anything on zero based budgeting, how what does it mean for shareholder?
What it means for shareholders is that fundamentally, there should be dramatic. If I simplify the conversation, it should fundamentally mean significantly lower friction, significantly higher velocity, net net significantly lower cost. Our OpEx to NIM, which is at 31.5%, as we come back to full demand potential sometime in FY 2022, do we believe that that number can go to 28, 29? The answer is yes. On our cost base, that's a substantial number to to to to drop into the profit pool for us as a company.
Thanks, Rajiv. All the best. I'll join the queue. Thank you.
Thank you. Next question is from Bavish Kani from ASK Investment Managers. Please go ahead.
Sir, The amount of reduction we have seen in moratorium, you did mention the extent of flexi you have had done during the quarter. Can you help us? Or probably put in perspective your understanding of how much reduction in moratorium is due to flexi or such alternate products? And secondly, by virtue of the fact that moratorium was taken out of fear and with cash flow or salary intact, people have resumed normal repayment.
Sorry. The second part of the question was what, Bhavesh?
I mean, moratorium, whatever reduction we have achieved, a part of it would be because the salaries of borrowers who had taken Morotilium in down money are intact, the concern of maintaining liquidity is addressed. So they would have resumed repayment normally. And second portion would be second portion would be where you invited borrowers to switch from normal term loan to a moderate loan. So if you can break up the reduction in moratorium moratorium in into these two buckets.
Yeah. So as I said, Bhavesh, when I when I was making the point, the total amount of conversion is INR 8,600 crores. INR 3,600 crores were clients who had who, I'll repeat what I said. Out of INR 8,600 crores, INR 5,000 crores came from customers who were not in moratorium. So let's for a moment, for simplistic purposes, let's add this INR 3,600 crores, okay, to INR 21,705 crores, the number.
And it is not so the case, but I so that we we are all not lost in the in the in the in multiple numbers. Let's add it for a moment. It is not so. Let me reiterate, but let me add so. For simplification purposes, and which is why we we try and resist from giving numbers, but we'll let me still give it.
The number still gets to 18.18%. 18.3%. It didn't it didn't it would not have, you know whether I did 15.7 or 18.3 didn't really matter, quite honestly. Okay? I could have still argued that it's a 27 going down to 18.
That is not the point. The point fundamentally was that, as I said earlier, we are trying to draw the dots from from a fee side. And and let me make a point, and it's an important point. We would like to tell the Street what we were up to in Q1. You know, we're a public company.
What were we as management up to? We as a management were up to employee safety, capital preservation, liquidity management, business scenario planning, OpEx management, collection capacity augmentation, customer proposition. Flexi and EMI cards sit in customer proposition. Business transformation framework, which the earlier gentleman had asked me, and I I responded. This is really a a flow in terms of, as a matter of fact, what were we up to in the last hundred days.
So so if you for simplicity, they add to it. It's 18%. Okay. Big deal. It is not so I'll let me reiterate for the third time so that hopefully, it's understood clearly.
Go ahead.
Yes. See, another point is, see, this product is offered to several customers who have performed reasonably well with us in the past. That's an important point to note. Secondly, I think in the current situation, it's very, very important that customer starts getting back into repayment behavior. Keeping the customer in moratorium is not in the interest of anybody, neither the company nor in the interest of customers.
It is important that customer comes back into the habit of making monthly payment.
Okay. Okay. Thanks for the
Okay.
Thank you very much. Next question is from the line of Kashant Shreedhar from SBI Mutual Fund. Please go ahead.
Yeah. Good evening, sir. Just two questions from my side. If balance rates would not give an accurate picture, maybe if you can just give us the total amount of collection that was due for June. Again, against that, how much is actually collected?
Number one. And number two, how big is the gold AUM? And, you know, are you incrementally competing with the bigger gold MBSCs? That's it. First question, I will not have Keshmirhan.
So collection efficiencies are so two things. Bounce rates, as I said, are dropping by three to 4%, and collection efficiencies have moved anywhere in the month of June, especially because lot more was open, have moved within 8% to 10%. In July, we are forecasting it to move by another 8% to 10%. Subject to how open still the country remains. Okay.
Having said that, having made both these points that there's a reduction in monitor bounce rates, there is increase in collection efficiency, as a result reduction in moratorium, we are still way off from where we used to be pre COVID. That's an important point I want to make because it connects to the eventual credit costs. So that's that's the dot to connect. Are they moving in the right direction? Answer is yes.
Slower than I would like, the answer is yes. We have forty five more days before the the moratorium ends. So that's a that's a that's an important forty or forty five days from here on. Our loan look. We started goal loan in rural markets three, four years ago.
We tried to be intelligent, realized eighteen months ago, it really doesn't work and decided to do how gold loan works. The business is now aggregating crores to 80 crores of net assets per month. It's between 1,500 crores to 1,700 crores of AR, should grow. We are rapidly expanding gold loan in 75 plus markets. Today, we offer it in 400 cities at this point in time as a standard operating I think we will grow this much more rapidly.
Sure, sir. Thanks.
Thank you very much. Next question is from Breezy Aras from UTN Mutual Fund. Please go ahead.
Oh, good evening, sir. Thanks for the first question. Sir, my question is on the collection of the network that we have.
We are to interrupt you. May I request you to speak a little louder, please?
Yeah. So I want to understand how what is the increase in the collection if the network that you have increased? If I remember in q one FY twenty, the number was 4,500. So this so if you could explain the 2,816,000 vis a vis that number.
100 officers are in addition to the 4,500 we had.
Okay. And 16,000 is fresh?
Sir officers on on the company's roles. 16,000 is agency staff.
And what was that number back in in June 2039?
28 to 20,000. Around 28 to 30,000 is is really what the ballpark number Yeah. Would be.
Okay. So so 30,000 is now close to 46,000. Yeah.
Yes.
Okay. Sir and the second question is on the employee cost. You you did mention that you have taken a that there has been salary cuts. But but how do you boost the employee morale in situations like these?
And So fundamentally, look, we it's a little ironical that in the quarter that we actually cut salaries, we became the fifth fifth best employer in India. We do believe people is capital in our business. People make a business. In a the stance that we as management have taken is fundamentally that in good times, employee first. In bad times, shareholder first.
It's the first time in thirteen years that we are fundamentally doing a shareholder first. And we will remain shareholder first until we come back to growth stance. So and we have long serving employees. They understand the point. Is it difficult?
Because the effort is two x at this point in time and outcome is half, right, or let's say 70% or 80%. If you had incentive, it's they're earning six 70% of the what they would earn. So effort is 2x and reward is 0.7x. But once in thirteen years, it's okay to have shareholder first and balance thirteen years, we'll have employee first. And we as we come back, we will ensure that we reward those who, you know, who persist with us in getting the other side of the tunnel.
Right. Right. So this 2,800 number, this is effectively moving our Salesforce network into collection?
No. No. Very little. Nothing. You've not moved anything.
Very little. Less than 150 people. Yeah.
Got it. So the last question that I had is on the auto finance book. The provisioning on the Morad AM is at 12%, which is lower than the the the overall average at 14%. So while the logic would suggest that you would probably provide higher since it's a mass segment compared to a mass affluent segment of the other of the other other, you know, portfolio that we have.
Mainly our assessment is that as a result of repossessions and the residual value in general historically being 45% to 50%, And we expect it to be a little higher because of BS VI conversion in general, the prices have gone up of secondhand assets. That's the fundamental logic behind why that number is at 11.8% versus in some of the businesses at twenty one and twenty two.
Okay, sir. Got it. Thanks, and I wish you all the best.
Thank you.
Thank you. Next participant is Rajan Chudke from ICIC Prudential Mutual Fund. Please go ahead.
Thank you so much for taking my question, and congratulations on a great set of disclosures and a great quarter. Firstly, sir, what is the collection efficiency absolute number over the three months of the quarter if you can just share that?
It differs product by product. I I lower our level. Sorry. Sorry. At a company level.
No, Roshan. It is I mean because if you have, let's say, auto finance businesses and there was in SoMoto moratorium. So it's a that number is a is a it's by business that the number has to be seen. But let me make a give you a texture on it so that you're clear I'm not off the getting the point. That in terms of number of clients, banks, largest number is in sales finances.
If you refer to page number 11, in terms of number of clients, the largest is sales finance. So the number will offset the the point. One has to look at it portfolio by portfolio rather than on an aggregate number basis is the limited point I would would make to you. As I said earlier, are we seeing bounce rates go down? Yes.
Every month? Answer is yes. Are we seeing collection efficiencies go up? Answer is yes. At the pace in which I would like it to be?
Answer is no. And, you know, so that's really what our stands is at this point in time.
Okay. What percentage of portfolio has paid all the EMI?
Percentage of portfolio sorry. Yeah. Percentage of clients who have
Percentage all the EMI.
Current portfolio. Yeah. Portfolio that is that is fundamentally current. That means minus Morad. Including Morad.
Question.
Including Morad, including everybody, what percentage of
the portfolio is pay has paid all the EMI thus far? See, Roshan, for the current quarter, that number may not be relevant because of the standstill nature of the book because of moratorium. However, what may be important to see is that the monitor book has come down from 27 to 15.7%, as Rajiv has articulated earlier. Second, the other part of the balance sheet has remained on standstill mode from classification point of view. So if the customer was in zero DPD, it remains on zero DPD.
Customer was in one, let's say, one month overdue or two month overdue remained in that bracket.
Sure. Perfect.
Last one
may not be relevant in
the current
quarter. However, I'll come back to
you separately on the on the number of part.
Okay. And so what exactly the word definition is somebody makes even one payment of the amount of three or four payment that are pending, is it deemed to be out of moratorium?
These are set of customers who have come out from moratorium based on their June repayment.
One month's repayment is good enough.
In the month of April. Customer may have paid in the month of May. Customer may have paid in the month of June. He is no longer in moratorium. Okay.
So twenty one thousand seven hundred and five crores worth of customers have taken moratorium for the month of June as well.
Right.
And and this $2.22 20 crores of interest reversal, when did we charge them to reverse it? I mean, which period have have you charged them in the first place? Let me say this is the first one.
This is the interest earned by capitalizing the interest during the moratorium period. The amount is around 1,700 crores of interest that is levied on the customer during moratorium period. The company believes while it is making provision to a tune of 13.7% on the principal component, there ought to be a provision that needs to
be made on the interest component as well.
Okay. All right. Thank you so much. Thank you. Thank
you very much. Next question is from the line of Nishin Chawate from Kotab. Please go ahead.
Yeah. Thanks for the opportunity. Hi. Am I audible?
Yeah. Yeah. Yes, Nishin.
Yeah. Sure. Sure. Yeah. Sure.
So just trying to understand these 38,000 crore, you know, AUMs and the moratorium going down to 21,700. So these customers, the difference is actually paid all their EMI still dues. Right? They have cleared all their dues.
Nishanth, as I clarified to
the previous speaker, these are set of customers who have paid their install who have not paid their installment in in the month of June. The customer may have taken taken monitor in the month of April. Customer may have taken monitor in the month of May. However, if they have paid for the month of June, they are out of monitor. If they have still not paid for the month of May, they continue, for the month of June, they continue to be monitor.
Okay. So they they so these $17,000 customers would be the ones who would have paid the June installment, and hence, they are out of the moratorium. Is it possible that tomorrow, let's say, some of them don't pay the July installment, they can come back into the moratorium?
It may so happen that for 5% of this 17,000 crores worth of customers may, in the month of July, come back and seek moratorium again. If they seek moratorium, they'll be added back to moratorium pool.
Okay. But then the thing is then what you are saying is that these 17,000 got moratorium in the first two months, sir. Today, they are no more in the moratorium. So, technically, these numbers change every month. It's not that you need to clear all the all the dues to get out of the moratorium.
I think, Nishanth, the important point is that structurally from a trend information point of view, when you look at data of April 30, we look at May 31 and now June 30. We have seen structurally the moratorium book going down. So while hypothetically, you can see the number go to a higher level when the moratorium period is over, Looking at the trend line information, looking at bounce rate, looking at the collection efficiency, we have reason to believe that we are on right right path.
No. No. That's fine. Actually, was asking the question because we are just trying to compare across companies. Right?
So we just thought I'll put it in place. The second thing is, when I'm looking at the provision of around INR 3,000 odd crores, which is around 14% of the total loans under moratorium as we speak. Now I think you've guided for around INR 6,000 crores of provision for this year, which practically means that you're looking at somewhere close to around 30% odd coverage on loans in the moratorium. Is that the right way to think about it?
Actually, let us appreciate appreciate that loss need not necessarily come from the moratorium book. We still have 100 and, whatever, 115,000 crores of balance sheet that is provided at normal rate of ECL. It will so happen that moratorium book will give you higher losses, but you will also see some losses coming from other part of the
balance sheet as well. Okay.
Okay. Okay. And just one last one was on the mortgage business where I think you mentioned that you are taking some competition. So there are some change that you are making, but, you know, I didn't kind of clearly catch what you're trying to say. Thank you.
Just just on the previous point, Nishanth, it's important so that we are all on the same page that the purpose of moratorium as Sandeep is making is purpose by RBI was that, that everything is shut down. Clients' position is is stalled at zero. So I'm not talking us. I'm talking the entire banking system. And as things come back, as his income, stroke, salary
comes
back, he as his anxiety level goes down, he starts to repay. So, technically, I could have taken a thirty six month loan. For four months, I need not pay you. When I during the four months end or six months in this case, by as given my RBI starts he starts on a from the month of September, that's fine. As long as as long as he does not default from there.
So he clears in September, does not default again, and continues to clear. So because the environment has eased or cleared. That's really the objective of providing moratorium is. Does not mean, however, that all of it will come back to normalcy, which is really how our credit model has actually been created so that we are able we are distinguishing between the two at a at a fundamental level just to add to whatever Sandeep has said so far. Last point I'll make, all of this anyway will end on September 1.
And that's why I made the point earlier that for the entire banking system, month two was in September. September beginning and September end. I mean, everybody if if I did not provide an extension of the moratorium on that day, there are no dogs and cats. There is only one thing so that we're all on on same page on the previous point. We can have different different calculations at this point in time, but all of it will end in forty days.
So, Suresh, just to just a last point, I think, as we as we publish even the portfolio charts, what we provide you is the point in time information. Let's say on June 30, x percent of the customers were in bucket one, bucket two, and so on so forth. It will not happen that some customers from bucket one may go back to zero, some from zero may go back to one, and this may keep happening over the next couple of months as well.
So it's a
static position at one. Position as at June 30,
that that's how you should look at
it. Sure.
So just on the mortgage question now. Sorry.
Mortgage, we as I said, Nishanth, we started business in June again. It is obviously very, very soft at a fundamental level. At this point in time, on top of it, there is significant competitive pressure. What I was fundamentally saying is that we will have to reoptimize between our various portfolios of mortgage offering that we do to make sure that we are able to deliver economic return to the shareholders at this point in time. We continue to remain it's a strategic business.
It's helping us during these times. That's very evident and clear for a whole lot of people who had a question that why do this business. This is providing the required safety and stability, is really why we built out a 46,000 crore portfolio. As you can see, its level of moderate rate is lower. So it's just repivoting in terms of mix a little bit to deliver minimum model rate of return on equity and nothing else.
So, basically, I think you are raising how many rates are you moving from that the salary to thousand third or something like that?
No. I I mean, we will based on as we grow little more comfortable, if you go back to the previous two panel number panel number four, as you can see there, we started home loan in June. As you can see, it's five point number five. On panel number five, we restarted loans against property only in in July. So the risk view doesn't change.
But within that, will we repo it a little bit to deliver minimum order rate of return on equity? The answer is yes. If it compromises the risk, we won't even do that at the design level.
Sure. Okay. Got it. Got it. Thank you.
Thanks a lot, and all the best.
Thank you.
Thank you very much. Ladies and gentlemen, due to time constraint, that was the last question for today. I will now hand the conference over to mister Karan Singh for closing comments.
On behalf of JM Financial, would like to thank mister Rajiv Jain and the senior management team of Bajaj Finance and all the participants for joining us on the call today. Thank you, and goodbye.
Thank you very much. On behalf of JM Financial Institutions Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your
lines.
Thank you.