Ladies and gentlemen, good day, and welcome to the Bajaj Finance Limited Q4 FY 'twenty 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 Mr. Karan Singh from JM Financial.
Thank you, and over to you, sir.
Thank you. Good evening, everybody, and welcome to Bajaj Finance's earnings call to discuss fourth quarter FY twenty 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 Rathul Jain, CEO, Bajaj Housing Finance mister Anoop Sahar, deputy chief executive officer of Bajaj Finance and mister Deepak Bhagati, chief risk officer. May I request mister Rajiv Jain to take us through the financial highlights, subsequent to which we can open the floor for q and a session. Over to you, sir.
Thank you, Karan. Good evening to all of you. First of all, our apologies for doing this call so late in the day. We just finished our board meeting and updates to the board. I'll be referring to the presentation that we uploaded on the investor section of our our website.
We've provided a reasonably comprehensive update to the investing community, and I'll be referring to that. I'll try and run three, four slides very quickly. It's a long presentation. I don't intend to do that. It's overall 69 odd pages.
I'll just run through the executive summary and two other slides downstream talking about the Morata and moratorium to our base and so on and so forth and
then open it up for questions.
Quickly jumping to Slide number four on our presentation. In our assessment, clearly, Q4 was a quite a promising quarter aided by various fiscal measures that Government of India had actually taken and good monsoon. Economy in our assessment across the businesses that we cover, in our assessment is clearly on the mend in Q4, but COVID really changed everything from March 22 leading to a full lockdown. Company did lose seven to eight productive days in March from virtually March 22 onwards. Despite all of that, we had very good 81 and overall the quarter was a pretty good quarter.
Assets grew, new loans grew, customer acquisition grew and overall franchise grew. If you look at Q4, balance sheet ended with 27% as you articulated with The Street on April 6 call that I'd done, adjusted for eight days, otherwise the growth would have been something like 31% in Q4. OpEx to NIM, it's a denominator and numerator metrics, so not really relevant from a number standpoint. Loan loss to average AUF, 139 basis points, includes a INR $14.19 crore onetime provision costs that are actually sitting here, which I'll cover in the next few panels. Despite the INR $14.90 INR 19 crores of impact that you've taken on a onetime basis, overall PAT came in at INR $9.48 crores, a degrowth of 19%.
If you take into account the 1,419 crores one timer, growth otherwise would have been 38%. Sorry? Only COVID-nineteen. Yes. ROE came in at 2.9% as a result of onetime impact.
On a full year basis, balance sheet is of course INR147000 crores. OpEx to NIM has come in at 33%. Loan loss to average assets is 3.1% and PAT of INR 5,264 crores, a growth of 32% and ROE despite INR $14.19 crores onetime impact is coming in at 20.2%. What is relevant and important at this point in time to everybody is what is the view from a COVID-nineteen standpoint. Panel five, clearly unprecedented times.
We are focused on we articulated on April 6, capital preservation, balance sheet protection and operating expenses management. That's really what we are fundamentally up to. Tailwinds that we have is very healthy capital adequacy, very strong liquidity position. As a result of the onetime impact, if you have taken off INR $3.92 crores on two large stressed accounts, we are entering next fiscal with virtually similar gross NPA and NPA that we actually entered with, giving us tailwind. We have access to retail deposits.
Balance sheet is now close to INR 21,000 crores on retail deposits. Continue to deal with mass affluent clients other than our two Wheeler portfolio, very diversified mix and so on and so forth. In general, the limited point that I would make, given the tailwinds and the headwinds of COVID-nineteen. We are very confident of navigating the challenges posed by COVID. Let's just go through very quickly as to what we are up to and what gives us that confidence.
Panel six, clearly, this will give you texture on what has happened in the last we are virtually in 2019, which is fifty days into the quarter and sixty days into COVID. Clearly, we've taken a cautious stance on and have tightened underwriting standards and LTV norms across businesses. We had no business in our B2B business in April, given lockdown. In from late April and early May onwards, green or orange locations have started to resume business. We are currently open we have 2,134 locations that we are present in.
We are 1,600 locations that are actually open, fifteen eighty three to actually be precise. We are now originating between 22,000 to 25,000 applications in these fifteen eighty three locations on a given day. No lending in auto finance, similar to B2B. B2C, which is our personal loan cross sell or our unsecured businesses, which we gave you to not lend, In April and in May, we will gradually reopen first in green and orange from June onwards and pick it up from there. Similar for our SME businesses, B2B rural has also resumed operations.
We do believe that rural will be the fastest to recover. One of the businesses that we've been building, which we'll not talk too much about is gold loan business. We do expect to see increased demand in this business and we've organized ourselves in the last sixty days to be able to seize that. Mortgage business for us, which is 31%, 32% of the balance sheet is essentially in top 30 cities and mostly in red zones, so we'll take longer to recover. Commercial lending is in is virtually in pause except for lending to existing customers.
LAS remains open. We're willing to lend, but demand is very low given the volatility. So that's really on where we are in the last fifty days from a from a open for business standpoint. If we jump quickly to liquidity, we ended as of fifteenth May at twenty thou virtually tad below 21,000 crore. Additionally, we have SLR investments of 3,300 crore.
Virtually, have said 19% of our overall borrowing is technically in cash and cash equivalent at this point in time. Given the environment, given the risk aversion in general, I would say that for at least for the first half of the year, we'll continue to run on a high liquidity mode. We have stress tested our liquidity model very, very deeply, and we remain very comfortable to support growth as it comes back and the reputable obligations that we have as a company for a long foreseeable period of time. We continue to remain open for business to accept deposits. Even during the period of lockdown, we originated sizable value of retail deposits.
We're also repivoting the deposits business and anchoring it more towards corporate. Retail corporate mix is now 67.33%. It's likely to probably gravitate towards 75%, 25% or 80.2%. OpEx, really where we have significant control and company has moved with agility to manage its OpEx to retrofit it for the given the environment. We do believe we have significant modularity across our lines of businesses.
Company has done what lots of companies have done, frozen all incremental and replacement hiring till September 2020. We do have a modular compensation structure, which creates which helps the company in times like this. So you will see reasonable reduction in salary costs, which is in general the largest line item for most financial services companies, have frozen you can you can see advertising promotion, travel, training, and so on and so forth. In general, it's our assessment at this point in time based on the actions that we've taken on our fixed OpEx. We've knocked off anywhere between 22% to 24% of our fixed OpEx in the last sixty days for us as a company.
Rightfully, we've also suspended on new branch expansion. Lastly and more importantly, while do we believe we do believe India will come back, you got to prepare for anything. Nobody prepared for COVID. The company has fundamentally initiated despite the actions that we've taken. We do believe there's an opportunity to reimagine our cost structure.
There's an opportunity in this challenging time to see how business could be done differently as we get out of COVID-nineteen. So we've introduced in the company a zero based budgeting model across businesses and functions. And hopefully, we will see a reimagined way to do business in the next nine to twelve months' time. Credit cost, the most important area of attention. Clearly, first point I must make, and we have covered that, that there is as of February, where were we?
You know, that's as important a question as post COVID where we are. Did we get into this with with with trouble in hand or did we get into this with with a clean slate? Clearly, it was a clean slate as you can see from the data that we have actually published that on a year on year basis as of February, other than our two wheeler business and a lifestyle business, we were same or better off across our out of the 13 lines of businesses, only two were yellow or red and rest 11 were green. The second line is important and it's got demonstrated by our Q4 results that despite that company has very strong pre provision profitability to navigate through the potential risk emerging from COVID-nineteen. I think that's an important point that do we have sufficient profitability to sustain shocks.
And COVID is, if anything, but a once in a one hundred year shock. Clearly, we started to prepare for COVID-nineteen. We took, as you can see, fourteen nineteen crores. There were three elements to this. One was an annual ECL recalibration, that INR 129 crore.
Second was INR 900 crore of general code contingency provision, and we decided to charge off the two large identified stress accounts that were that have been outlined to investors, we decided to charge them off, totaling to $14.19 crores. Twenty second point is important. There are questions on what is the overall provision available. On standard asset provision, as a company, we have 160 basis points of total standard assets provision available. So INR 147,000 crores, we have 160 basis points of provision available.
That's INR 2,352 crores of total standard asset provisioning that is available with the company. Twenty third point is important. 27% of consolidated AUM as of April 30 is under moratorium at this point in time. Of this, 27%, 68%, or let's say round up to 70% have no recent bound history. No recent bound history being defined as in Jan, February, March, they did not default, and default being bound not as default.
People ask us, have you done scenario planning? Answer is yes. Scenario planning takes into account all the lines that you see written here. Clearly, the focus of or the modeling is essentially focused on the moratorium portfolio. The entire exercise, risk managers across the world would be doing on, wherever whichever country is given moratorium and includes India would be on clients who've given moratorium.
What is the likelihood of those moratorium clients slipping into default? You know, and those who don't slip into default in moratorium are obviously, in general, adjusted for the second order impact of the economy should continue to hold their performance in line or better. Panel nine, clearly, you know, we've given bounce data. Bounce is up to two and a half, two and a half to 2.7 x, has to be collected from. We've used the last sixty days to significantly augment, expand, you know, our collections capacity model so that as markets start to open, whether it's green, orange, or red, or what we are increasingly calling internally deep red, We are ready to rapidly move and engage our clients to be able to collect efficiently and effectively.
And we are not waiting for it to open. We are adding, if I may give you a statistics here, close to 2,800 officers in the company are being added to this activity to do this. Gross NPA and NPA, a 161 basis points, 65 basis points, sequentially flat year on year, virtually flat. The line that you see here is we chose as this is data is as of March, not to give moratorium from an accounting standpoint to those customers who had high likelihood of default. If I've taken it for apple to apple that into account and given moratorium to all the clients, we would have published a number of 138 basis points gross NPA and 51 basis points net NPA.
We've chosen to take into account those who have a high likelihood of default to for 161 basis to 65 basis points. Overall profitability contracted 19%, as you're aware, adjusted for INR900 crores, it would have been up 38%. We are looking at our margin profile across our lines of businesses. We do suspect and expect a more benign competitive environment. But of course, it will be subject to competitive intensity as to how quickly it has come back.
Our entire focus at this point in time is on mining our base. New to Majaj customer, new to bank customer has always been riskier than existing customer. We are using the franchise to do more with him, whether it's a health card, health insurance or various other products that we feel comfortable. So the focus will remain for the foreseeable future on ETB or existing to Bajaj rather than new to Bajaj. Capital position remained strong.
Book value came in at $5.38. Just panel 10. That's now let me just jump you now straight to panel 50. This is our provisioning coverage data. Very quickly.
This is by lines of businesses. You see on a gross NPA basis, clearly, we had from a management assurance provided Red On, which was our auto finance two wheeler financing business, gross NPA and NPAT year on year jumped by 130 basis points. Otherwise, you see a 30 basis 28 basis point moment in sales finance, 22 basis points moment in b to c businesses and so on and so forth. Rural improved. Rural B2C was flat.
Commercial lending, because of the charge off of the account, dropped from 64 to virtually zero. Mortgages dropped as well. So that's really the gross NPA, net NPA, 154 on a year on year to 161, sequentially flat. Net NPA year on year, just a movement of two basis points. And this also includes, as you see below, a set of changes as required by RBI.
And as you can see below, this on an apple to apple basis meant gross NPA, which is coming in at 161, otherwise would have been 155 basis points, technically flat. And net NPA actually would have been down from 63 to actually 60 basis points. Let me now jump you to Panel 58, which is really my portfolio, we've actually provided you you data on on balances, amount of AUM under moratorium, percentage of AUM in the moratorium, and so on and so forth. It's a little busy slide, but out of 143,000, 38 and a half thousand crore, which is 27% of total AUM is in Morad at this point in time as of April 30. On an average, their default rate was our bounce.
It was 12%. As you can see, April, it jumped to three x. Fortunately, it does seem that whatever had to move moved, you're not see we've not seen much movement, more worsening from thereon. It's a 100 basis points worsening. 68% of these clients have never defaulted.
So if the economy was to come back and and things were to get normalized in two to three months' time, it is possible that lot lower hits may have to be taken on this portfolio. At this point in time, we have a two thirty three basis points coverage on the Morad portfolio. Largest impacted in this is clearly the mass business, the first row that you see, which is our two wheeler business. If I it's 9% of the portfolio, but a substantially larger portion of our more ad book. Know, adjusted for this, in the rest of our businesses where we fundamentally deal with mass affluent client, the overall moratorium would be around sub-twenty 2% actually.
But there is no such thing as X on a consolidated basis, 27% and this is profile of by lines of businesses. That's really all while there is more data on how overall leverage of clients is looking. Under normal circumstances, there may be interest in that if we were in non COVID situation. But in the interest of transparency, we decided to still provide this data. We provide this annually.
We publish this data to ensure there is continuity on an annual basis. But I guess, given the environment, there is low interest on it. These are the slides I thought I wanted to cover. We can refer to more such slides based on questions. That's really from us very quickly, and happy to take questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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 will wait for a moment while the question queue assembles. A reminder to the participants, please limit your questions to one per participant. Should you have any follow-up request to rejoin the queue, please. The first question is from the line of Daval Gada from DSP Mutual Fund. Please go ahead.
Hi, Rajiv. Two questions. First is on on slide 58. I was very surprised to see the sort of bounce rate in the consumer b to c business given the sort of consistency and these are all Proxel customers essentially. So, I mean, first, your comments around this portfolio and it would it be the most riskiest portfolio amongst all the all the other portfolios in terms of just the effort required to collect this amount?
So one. And the second question that I had was on the rural business. So, I mean, just your thoughts of how much sort of opportunity is it in the current environment given you mentioned that gold loan is something that you're picking up? So some comments around the rural business on the growth front and on the b to c business on the asset quality.
Look. You see this panel, the so called riskiest to so called safest, everything is up four, four and a half, three and a half, three x. Look at the mortgage business. Right? We deal only with salaried customers.
A four and a half percent average amount is up four x. You know, I think it's I'm giving you a reference point. There is fundamentally no outlier on this panel from wherever the client was. Let me tell you the safest one mortgage is the safest portfolio. Doctors is one of the safest lines of businesses.
Up four x again, three and a half x, four x. See, it and it doesn't happen that March 5, you bank a portfolio, and it has a bounce rate of x. And on April 5, the same customer you bank, he's at four x. So clearly, this is not credit at work. Okay?
Right. Credit situation does not and that too when March had fundamentally passed. We went into March virtually on twenty fifth or twenty sixth of the month. You know, most people had earned whatever they had to earn. There is more than credit at work.
So and if it you provided full disclosure here, you tell me which line is not up two and a half to three x. None. So riskier or non riskier is a is a a matter of judgment. We'd rather go by data rather than matter of judgment. I must just make one point, which is an important point I would continue to make.
They are all adjusted, each one of their profitability models take into account significant amount of you know, leave significant room for from a profitability standpoint from wherever they are. Would mortgage have lowest? The answer is yes. Would b two c business have highest? The answer is yes.
So it's adjusted for risk and cycles. That's really how each one of these business tag. So that's part one. Part two, look, growth, we are focused on restarting at this point in time. That's our core focus.
You know, locking it down is very easy. We just put a lockdown. You come back sixty days later, you got to dust everything off. You got to clean the house. The that's really our focus at this point in time.
We're just dusting everything up, dealing with different states, different nuances, different branches, and so on and so forth. We wanna get the company to work quickly. Growth is not our, on our on our immediate priority at this point in time. But are we a growth company? Yes.
Would we like to grow come back to growth mode sooner rather than later? The answer is yes. But not at the cost of being in haste. And gold loan will will move as well.
Understood. Thanks, and thanks for the additional disclosures. Thank you. Thank you.
Thank you. The next question is from the line of Kuntal Shah from Oakland Capital. Please go ahead.
Hi. Good evening, Rajiv.
Good evening,
sir. Again, congratulations for some exemplary data disclosure, which we don't see from any of the financial players. My question is, we have one sixty bps standard provision and 90 bps extra provision on as per ECA. Can you compare what is the requirement for RBI, Indus, and IGAP for banks and for NBFC, and how do we stand vis a vis this? And secondly, we had 275 crore exposure to ILFS and three hundred and ten to Carvey.
You have written a 508 87 crore, but you have lot of security against them. So you could have chosen to provide more for COVID and less for this, but you have chosen to do exactly opposite. So can you throw some logic while you are in a rush to clean up the balance sheet far faster than than is required to do so?
This is Sandeep Jain here. On your point relating to general provisioning, it's on 160 plus 90 basis point. It's 160 basis point of provisioning that we are carrying, totaling up to approximately INR 2,300 crores that we are carrying at this point in time, including INR 900 crores that we have created for COVID-nineteen specifically. In terms of if you look at RBI has mandated from the current year to also disclose in the balance sheet the comparison if the company was supposed to follow the IGAP or the prudential norms of RBI from provisioning point of view, the provisioning would have looked compared to ECL. And that is further part of the annual report.
You will see that company continues to provide significantly higher, I would say multiples of what one would have provided on the prudential norms. To your question regarding writing off INR $5.37 crores of amount, one, this amount does not represent the total amount because some portion of the amount was already provided for between last year that we did for ILFS and in the current year, q three that we provided for for Karvi. So this this amount that you are seeing in the P and L as a hit is a net amount for the quarter.
No. No. I'm saying overall, have written off $5.87 crores cumulatively over quarters. But you still have the assets under your collateral, there you expect some recovery. Right?
Kunthar, so two things. Island affairs, technically, twenty one months eighteen months into twenty eighteen, nineteen months into the entire debacle. Legally, we are not seeing any outcomes. We're not seeing any sale. We're not seeing any outcomes.
So as prudence or demand, as management, we have a responsibility to justify to our auditors and to our shareholders that how long will we wait. Do we have two extra security cover on the asset? The answer is yes. Okay? Do we expect recovery?
The answer is yes. But time value of recovery is as important as recovery. So that's first part. The second, which is a broker account, do we expect significant recovery? Likely is yes.
Given the state of things, given that the account had actually technically given that the security for the regulatory action that happened and account is unsecured, technically, despite the 10% that we own of a subsidiary company of theirs, the imprudence, we took the decision to provision and charge it off. Any recovery that comes in on both the accounts will fundamentally augment our COVID buffers, if required. If they are not required, they'll get passed through to the p and l or for lower risk in future.
Sandeep, how much is our provision in excess of the banks mandated provision?
Hello?
Hello?
Mister Shah, sorry to interrupt.
Okay.
Sir, for any follow-up, request you to rejoin the queue, please.
Kuntal, I I I just responded. It's not a straight answer. Answer will be 40 basis points, which will be inaccurate. And that's why, as Sandeep is saying, it's now required by RBI, and there'll be full disclosure on that because risk weights and so on and asset classification, etcetera, come into the play for determining the standard asset provisioning part. Yeah.
Thanks. Thanks. All the best. Thank you. A reminder to the participants, please limit your questions to one per participant.
The next question is from the line of Nitin Jain from ARC Capital. Please go ahead.
Hello, sir. I have only two quick questions. If you could disclose the deposit number as of the April or better still May 15. And the second question is, in your q three presentation, you had mentioned about the systematic deposit plan, but I don't find it in the q four presentation. So has the company dropped that, or what will be the can you give some color on that?
Thank you.
So deposits no. This is he's asking as of May 15. Just we won't have it handy at this point in time. Maybe we can source it before the call ends. Maybe we can we can give you data as of fifteen May.
Yes. Correct. We don't have
it handy.
The second order point, SGP, I will drop this answer is no. It's a new product. We're building that out. We are quite excited about the product given what SIP has done. We think SGP could fundamentally do that.
There was one large technology capability that was coming in that would have made the product a lot more attractive. As a result of the lockdown, that got pushed out to June 1. So we haven't dropped it, and we hope to build a very large business out of this.
Okay. Thank you.
So if you could give me the deposit number
of point. Second order point, without knowing the details as of today as to where we are in deposit, if you go if you refer to page number seven, we've actually specifically said that we're reducing our reliance on corporate deposits. As you can see so absolute balance sheet, it's likely may go down by design, not by anything else. We're largely we're renewing only at much lower deposit rates on the corporate side of the balance sheet. Retail, also we have dropped rates effective May 5, but that's a strategic part of the balance sheet and that we intend to continue to invest and grow.
Thank you. The next question is from the line of Paragjariwala from Vital Capital. Please go ahead.
Yeah. Rashee, during the previous call, you have highlighted the three scenarios and the limiting fees in the credit cost and the profitability and the growth metrics. Now we are in I mean, the most of the states lockdown has been extended till May. Anything you can, you know, guide further on this would be very helpful. That's my first question.
Secondly, in in in this overall environment, what happens to fees? Because what I see is that, you know, last two years, we have done excellent on fees, and, you know, fees has very high correlation with incremental disbursement. Thank you.
Yeah. So, clearly, you know, if you refer to panel eight, we are fundamentally saying, am I are we have we created multiple scenarios and their impact and the impact of credit cost as a result of COVID nineteen? The answer is yes. Are they are they wide and deep from a scenario planning standpoint? The answer is yes.
Do they take into account, you know, phasing behavior of Morad, collection capacity management? We are waiting to see what RVI has to do on whether there is extension of Morad or is there forbearance that comes in or there is none. We it's difficult to predict at this point in time. And the broader point, which is the how does the economy respond as it opens? So quite honestly, do we have a model?
Yes. Is that model constantly being repopulated as a result of our experience on an ongoing basis based on these points that I made? The answer is yes. Now let me come to the number point. What is the view on on the number?
I'll make a different point that can I give you a number based on what I'm saying to you? The answer is yes. What will be the possible variance in the number is difficult to state. The I will repeat the point that I'm making, which is linked in a way to your fee point that our pre provision profitability as a company remains very strong. We can sustain shocks, and COVID is a once in a generation or a once in a hundred year shock.
All scenarios are saying that we will continue to remain solid if if that does provide some degree of comfort. Did we say as part of scenario three that you're likely to see credit cost go by 80 to 90%? Referring to my April 6 call. Are we holding mostly there in line based on April and May experience plus minus 10%? The answer is yes.
Can that change for better? Possible. Can that change for worse? Possible. You know, you'll have to just bear with us and with everybody.
We know only as much as we know.
Sure. Sure. Thank you, Eric. Thank you.
He remains question. He remains a important driver. I mentioned it specifically, health card, health insurance, mining the franchise is the only way we'll navigate this storm better.
Thank you. The next question is from the line of VP Rajesh from Banyan Capital. Please go ahead.
Yes. Hi. My question is regarding the recent announcement by the finance minister about suspending IBC process. So could you comment on the impact of that on our book?
No impact on our book. We have none no clients on under IBC, especially after I mean, will there be an impact like ILNFS kind of account? The answer is likely yes, and this is exactly my point that given that we are in loops on on legal, we might as well charge it and move on. Otherwise, no impact. Post charge off of these two accounts, no impact.
Okay. Thank you. Thank you.
The next question is from the line of Barag Shah from ASK Investment Managers. Please go ahead.
Rajiv, I think if and then the disclosure, I must congratulate your team and yourselves for this. My in this design, usually, attempt is to sell things under the cover, but I think here the explore disclosure level is actually exceeded expectations. Just one part. On the earlier question of the fee income, I can't fully comprehend. How do you plan to ensure that the fee income remains robust?
Can you please deal with that again?
So so I'll give you an example, Veraba. Let me let me make a point. What I wrote as health card, let's say, example. You know, we have 20,000,000 EMI card customers as a company. That's that's a number that we disclose.
We were over the last eighteen months, have been investing in a life care financing business. We are present in top 30 multi specialty hospital chains across top 20 cities in India. Now we think life care financing is a very large opportunity. We were building that as a client, you can have multiple cards. You could have a store card where the limit is different.
Whereas if you went into these multi specialty hospitals, your limit is different. And he needs that limit, to be, to be different. We realized in June, we our technology infrastructure did not allow for a multicarding infrastructure. In January, that went live. Let me provide disclosure.
Between April and May, we have to our client, we have sold 300,000, health cards as a company. Client gets much higher limit to be used only in those multi specialty hospitals or in for a set of elective procedures and pays 700 rupees. You know, this is an example that I'm giving you of of cross sell or mining our franchise by creating opportunities for our and products for our customers. There is a lot more work that we're doing, but by I mean, I must just say that from a confidentiality standpoint, I would have to stop with this example. As we deliver more, we will talk more.
I just want to say we remain focused on it.
Thank you. Thank
you. The next question is from the line of Prashant Kothari from Big Tech. Please go ahead.
Yeah. Just one question from my side. Actually, I I looked at this article from Economic Times suggesting that a place like RBL Bank, SBI Card, all of them are seeing better prepayment rates in May compared to April, but your data is not suggesting that improvement kind of sequentially. Why do you think that is the case if if if this is the right data? Is it that the customers start treating banks versus nonbanks differently?
Even like the moral hazard creeping in for nonbanks.
So two things. You know, we should not compare company disclosure with press disclosures. They are two different things, principally. Let a company disclose, and then I would agree. And it's not about let the bank disclose.
Let me make that point first. When they disclose, then I would compare. Whatever they have disclosed, as you can see on a overall moratorium basis, are in line in most cases given that most banks have very large corporate balance sheet. Despite that, we are looking only in line. Logically, if Bajaj Mahanj is not in moratorium for hundred and hundred or 70,000 of its assets of of its assets sitting in banking system and so on and so forth.
So let's just compare presentation to presentation and disclosure to disclosure are in press. That's one point. Second order, however, when we look at data, we bank 18,000,000 customers in a month. I look at it. You name the bank.
We have very large statistical sample by each bank from the what you would call the best bank to what you would call the worst bank. Numbers stack up 2.5 to 2.7 time across. They stack up very secularly and linearly. You know, it's all I would just say to you.
Thank you. The next question is from the line of Ashish Sharma from Inam AMC. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Again, question on the credit cost, Rajiv. This is as you clarified that we are looking at 80 to 90% increase, That would be adjusting for the the one offs we have provided in FY twenty.
Right? That would be the right way to interpret?
In one off, I would take the 900. I would not take the three ninety two, Ashish, because something can there are blind spots and corners that message, right, which I may not be aware of. There as a result of COVID nineteen, their situation can change. So just at a just at a design level, I would not take three 90. It is a normal course of business.
We gave money to the client those clients. They did go into difficulty, and as a result, I made a wrong credit decision. 900 is COVID. Rest is what I would call business as usual. And I'm not trying to manage expectations and numbers.
Something like three ninety two or 150 or 75 can happen as a result of normal credit decision.
Sure. And just on on the moratorium data, would could you have would you have done some analysis in terms of split between salaried and self employed, or is is the the the moratorium similar in in both the segments?
Structurally, same. So do salary bounce less? Answer is yes. Are they two and a half to three x? Yes.
Is the self employed bounce more? Answer is yes. Structurally, are they two and a half to three x? From there, answer is yes. Look.
It's we have cut it by bureau. We have cut it by salary. We have cut it by self employed. Have cut it by locations. You know, you do know after thirteen years that we are data driven.
We have reasonably sophisticated analytical infrastructure. Information is available on the fly. It's it's pretty secular and linear. There are no for an for our size of franchise, we are unable to find any hidden corners.
Perfect. And just lastly, Rajiv, on
Mister Sharma, sir, for any follow-up request, should you rejoin the queue, please?
Sure. I'll I'll do that. Thank you.
The next question is from the line of Ashita Gaurud from Oceendyle. Please go ahead.
Hello?
Yeah. Yeah. Please go
ahead. Yeah.
Yeah. So given the current data and two months of whatever feedback you have got from your customers and the segment across which we are present, how do you think lending as a habit and the reduced, let's say, salary levels and earning capacity is going to impact the disbursement growth which we are looking for, let's say, the next three to four quarters? Because borrowing as a as a product itself can go behavioral change. So in that aspect, what are your thoughts as we speak?
Behavioral change needs much longer than the event that has happened. Any behavioral change. Right? The only behavioral change right now, I'm wondering, especially in Pune, is are people ready to go go to work now? That's the biggest behavioral change I'm asking myself.
You know? And it's as much in seriousness as in lighter weight. I I must make that point. It's damn tough for a call, I must say, coming back to the question. I think we will have greater clarity by July or August.
You know? We will need to plan to do the reimbursement. Sorry. Sorry. Go ahead.
So
what kind of an impact it would have on the disbursement levels which you would be planning to do in the next three to four quarters?
You know, the right thing we are already partially foolish based on the question that somebody asked me on credit cost. I'll be more foolish if I said in a in where I am sitting as to what do we see disbursement growth outlook to be. Our current focus fundamentally is to ensure we restart our 2,134 branches. Number one, we augment our collections infrastructure. Number two, we in the interest of balance sheet protection and capital preservation, on managing risk, right, and managing growth.
And as we navigate through this, we will worry about divestment growth.
Appreciate it.
Thank you.
Thank you. The next question is from the line of Praful from PingPoint Asset Management. Please go ahead.
Hi. Thanks for the opportunity. Have just one question. In case the morale is extended from three to six months, you know, how do you do you think the probability of recovery goes down in that event? And any thoughts or plans if this is coming through?
Thank you. Quite honestly, and I find it a little foolish to make the point after twenty seven years of working in financial services industry that one don't that I don't know. You know, behavioral risk, we had articulated in April 6 call as well is tough for call. We will only know it as we as we get the ability to be able to reach customers, sit face to face, and see their response. The truth is if you look at the moratorium data that is in b to b business, the bounce rate was nine and a half percent.
97% of them paid us. That is our experience for the last two years. Before that, 95. Before that, 93. Before that, 91.
That's our experience for the last thirteen years. Now first thing is to open. Do we have the people who can sit in front of them and be able to engage and understand, collect, number one, and then understand, number two? Answer is yes. We will only know that as we as we as we get the flexibility to be able to get to work.
Behaviorally, it's tough for a
it's tough to call.
You know? We'll have to see. Thank you. I suspect I must just make a point that the moral hazard will not just emerge on a as a single decision making pillar. The second order point of the impact of the of the economy on him or her will also have a bearing on this.
You know? So it'll be a combination rather than just pure moral hazard point that I have not paid you for two. I got two more, which is four. I won't pay you. I think it's not gonna be as simple as that.
It is it is a multivariate rather than a univariate conversation that pure morale makes a customer tip. It'll be two, three combinations. Thank you. All the best.
Thank you. The next question is from the line of Samir Kulkarni from Auto Securities. Please go ahead.
Sir, congrats on the much of your numbers in different enrollment. Can you please highlight the key strategic initiatives you are taking to take BFL to the next level in post code COVID. Yeah.
It's a fair question from an investor standpoint. As operating manager, we are right now all hands on deck to manage the current environment. Do we have a strategic framework as a company which we do very rigorously and in a disciplined manner every November? The answer is yes. Do we continue to remain anchored on that?
The answer is yes. Were we significantly expanding our hiring in technology, analytics, geography expansion, the answer is yes. However, at this point of time, we have put that on a little bit of backbench. Intention is to manage balance sheet, preserve capital, manage OpEx. We are building this business with a ten year view.
We've done it for last thirteen. We are building this with next ten year view. So a plus minus five, six months don't trouble me at all and doesn't trouble the management and the shareholders at all. We have to do what is the right thing at this point in time, which is to preserve capital and protect the balance sheet. Hopefully, I do hope that in six months time when we are in more peace times, we can share greater color on what do we intend to do in next three, not ten.
Okay. Thank you. Thank you. Thank you for the lead. The next question is from the line of Gurupri Tarora from Aviva India.
Please go ahead.
Yeah. Hi. Two quick questions. What is the thought behind reducing TCR in the auto finance book, especially when the NPS have risen substantially? And are we looking at changing the contours of doing this business?
I mean, our our share of the group business, I mean, is is more than 50% now. So what is our thoughts on that? Second, majority of our liabilities is on fixed rate, and we are carrying excess liquidity on the balance sheet also. So how imperative it is for us to pass it on or refinance or basically, I mean, if you could guide us towards the future cost of funds? Thank you.
Sandeep? On the auto finance piece, the provision coverage ratio, of course, the number is still strong, 54%, given the fact that we have a strong reposition mechanism in two wheeler, three wheeler business. However, yeah, however, in case of two wheeler and three wheeler, what we have done is cases which were in higher delinquency, we have chosen to write off quickly rather than carrying it longer. There is a change in the accounting policy that we have done in the current quarter, which had a small impact on the on the on the p and l, but has ensured that we are not carrying the baggage of customers who are in long overdue in the balance sheet. So there is that reason why the provisioning cover ratio has come down marginally.
Okay. Okay.
Fine. Clearly, there's a drag. Right? But, thankfully, our liquidity model has been very strong, and we have very little TP borrowing. Look.
The the since Island FS, the it's a different world for nonbanks. Clearly, things had improved, and then you see what, again, COVID does to the risk aversion. We if you look at our cost of funds for the quarter, it came in at if you did apple for apple, the number would look like 8.76%. Just give me one second. 8.76% with liquidity drag.
If I knocked off the liquidity drag, it would look like 8.35. So clearly, RBCs of the fact that we're carrying a drag. But as far as we are concerned, preservation of the balance sheet, maintaining sufficient liquidity until we feel comfortable as Alco and as a company that we are in on safe ground remains the biggest priority.
You know?
Now if, clearly, as you've as you've articulated since quarter two, the portfolio has been marked as red. You continue to see deterioration. We have see we have tightened the underwriting norms in that business in the last two quarters. You should, in the next two quarters, start to see improvement in the portfolio. So actions have been taken.
Do we tend to remain captive? The answer is yes. Does it remain over cycles a reasonably profitable business? The answer is yes. Is the is the loss rate sustainable from a product profitability modeling standpoint?
The answer is yes.
But, sir, I can
answer if you have done that.
Oh, thank you. The next question is from the line of Mayank Bukherjeewala from Franklin Templeton. Please go ahead.
Yeah. Hi. Thanks for taking my question. I had a
couple of questions. The first one was more specific on the collections. Now bounce rates have gone up two, three x, and as the book comes out of moratorium, we'll again need more effort in terms of collections on that. So the question is, could you give more color on how you're ramping up the collection part of the business, one? Second, what part of a business runs on a third part collection party collection capability?
Are we increasing that part of the business as well? And how does your OpEx, that sort of guidance tie up with the need to actually ramp up collection capabilities in the near term?
So let me take the last part first, adjusted for that. So that line is going up dramatically. Rest of the lines, that means, are going down more. So the point that I made as part of my opening remarks takes into account this going up. And this has so and this has two lines.
One is the one is the staff who works in the company to manage that. That is the number of 2,800 people that I met to you. The second order point is there'll be few thousand people who are being added in the last fifty days. We don't collect ourselves other than our SME business where we collect numbers of small clients have to be dealt with by the company rather than by outsourced staff. We in the rest of the company, we do not collect on our own.
We work with agency infrastructure that in general, more often than not, given our size and scale, works only for us. It's largely proprietary to us, but outsource fully. They have been ramped up. So the entire collections model works grounds up rather than top down. How many people default by each by each zone?
A zone just just to give texture, if you're in Bombay, a Bombay, as far as we are concerned, as a as a as a company is divided into 48 different codes, has that's more than the PIN code Bombay has. That's really how they are they are they are cut. Based on that, we look at each code as how many default, how many bounce customers. Based on that, we determine staffing for that zone, and then the model builds up. Are we ready as the country opens up or as green zones are opening or orange zones are opening?
Are we ready in terms of where we ought to have been on May 20? The answer is yes. You know? So that's some color to to collections.
You got it. Got it. Thanks.
Just just add one more question. Sorry.
Sorry to interrupt, sir. But for any follow-up, request to rejoin the queue, please.
Sure. Thank you.
Thank you. The next question is from the line of Anand Lada from ATFC Mutual Fund. Please go ahead.
Hello. Am I audible?
You are.
Just two questions from my side. What's your average cost of deposit? And our average borrowing cost is somewhere closer to 8.3. And what when we interact with most of the players, we've seen only good quality in the FCs are getting money at a very significant good lower price. So how do you expect your cost of deposit or cost of fund to move for you for next one year?
Second, when you when the customer has taken moratorium, have you interacted with customer? What could be the reason for the moratorium? Is it the there's a fear factor? Is it the factor that it is available which we have taken despite the fact that moratorium has a cost? Are we connect reconnecting with our customer just to
see if they can pay a part payments when
the burden comes down for them? Yeah.
So are we tracking dispositions by millions of customers that we collect from? The answer is yes. Clearly, let things open up. The anxiety is the largest part. As I said in my opening remarks, you know, other than COVID and the resulting lockdown.
Nothing changed for a client. Salaries customer got a salary. Self employed customer has that had that much money. Clearly, it's the in it's the anxiety of unknown that changed. I can still understand April deteriorating May deteriorating April, and that deterioration is not significant.
I could have still understood if the impact if the April was 30%, let's say, hypothetically, and May was two x, then I would have said fundamentally that it's a result of deteriorating financial situation of the customer. I cannot say that today. That between March 5, it was 9%, and it became 25% on April 5. There is nothing else but anxiety at work. And these 9%, as I said earlier, 97% of these 9% used to pay.
You know, I just wanna repeat that statistics just for just for information purposes. So that's that's on that's really what the disposition at this point in time is coming to. Cost of funds will go down as our CP book. If you see in the presentation that we show that the CP book used to be 10%, it should be nine to 10% of our book. Today, it is less than 2,000 crore.
In the last five, seven days, we raised some CP borrowing because when I get logically, if my three months inflows are at, in a normal course, 20,000 crore, logically, I should have 18 to 20,000 crores of CP book. I have less than 2,000 crore. You know? So that color, if it goes back to the normal time, if you see March 18, okay, it was eight per 6%, 43, 31, 12. That's in panel 40.
During this period, CP oh, yeah. This is stand further in wait. And retail deposits are moved from 12 to 21. So clearly, CP book has to move given the nature of the balance sheet. That's really how one of the ways you will see our borrowing cost go around.
Even banks have got MCLR, so the
borrowing cost should decline faster. MCLR is beginning to play rapidly. Answer is yes. It should. But, Anand, I must make just one important point.
Are we structurally seeing incremental borrowings go down? The answer is yes. Bank cost of borrowings are beginning repriced? The answer is yes. Drag is eating most of it at this point in time.
And that's a management call rather than a market view. You know? So when we feel comfortable, you will start to see a rapid drop in our cost of funds.
Thank you. That's the message. Thank you. The next question is from the line of Roshan Chutki from ICICI Prudential Mutual Fund. Please go ahead.
Yeah. Thanks so much for taking the question. Firstly, what is the tenor of this ECB borrowings and the full rate for the other thing?
Sorry. Sorry. Sorry.
The the tenor of the the borrowings and the full rate, I'm just paying for that.
Tenor of? ECB borrowing. ECB borrowing. As you can see, it's 4% of the overall borrowing. I think the total number is around 5,200, 5,300 odd crores.
Okay. Yes.
It's a three year program, fully hedged, both for principal and for interest. Timing is an important dimension in in when you borrowed. Last time we borrowed, which was a large we borrowed 100,000,000 in April. And prior to that, the balance 600,000,000 was raised. The if I recall the previous number, fully loaded, everything all in Sub eight.
Was sub 8%. This 100,000,000 came in at?
We raised $75,000,000 and 75,000,000.
Okay. At Seven point. At 7.5, 7.6%. You know?
Okay. Alright. And and after the collection infrastructure, right, I mean, now at these collection agencies that we employ, which are completely I mean, are proprietary agencies, are you seeing any signs of people losing their their jobs at the agency end? Or are we taking are you ensuring the staffing requirements are adequate? I mean, how are we handling that situation?
We have ensured that we got to keep the fire fire on despite the fact that overall efficiency levels because of inability to collect from clients have remained low. As I said earlier, in general, lots of these agencies work exclusively for us. We've ensured that we provide adequate support during this time to keep businesses going. And that should help us as we get as overall economy opens up.
Sure. And similar question, mister Morris. Was
So sorry to interrupt, sir. For any follow-up request to rejoin the queue, please.
Please. I'll do that. Yeah. Thanks.
Thank you. The next question is from the line of Katov Shah from Millennium Millennium Partners. Please go ahead.
For allowing me the question. One question is I just wanted to understand the mechanics of the moratorium interest that you account for from customers who have taken loan under subvention. What would be the interest rate that you would charge for them for the two months, three months moratorium?
Interest rate is same. Interest rate that was contracted by the as as part of the suspension pricing with the manufacturer. So if you were at, let's say, anywhere between 2122%, and that does get published to the customer in his statement of account, that is really what is charged.
Okay. Okay. Fair enough. And, sir, any texture on where rural business could be in the next six six months, twelve months,
or is it too early?
You know, yeah, it's too early is all I would say. Do we believe it'll come back the fastest? Yes. To what degree, tougher call. I must just add only one point.
The way we classify rural for the investors is different from the way we look at internally. In general, our experience from a data standpoint is that one twenty plus markets in India in general represent very similar behavior across most metrics. So we so the company has looks at even urban business as a prime business, as a growth business and as a in growth business looks at further prime and further growth. That's really how and there is emerging. To us, one twenty plus market represent very similar outcomes.
Do they have the highest likelihood of coming back quickly? The answer is yes. Same way, and I must make a point, top 15 cities in India continue to be 40% of India from a consumption power standpoint. You know? So both must be remembered.
Yes. Sure. Thank you. Thank you
so The next question is from the line of Hiren Wade from AltaMI Capital. Please go ahead.
Hey. Hi, Raji.
Hi, Hiren.
On good numbers given the circumstances and also, you know, top notch disclosure standards. My question is just, you know, wherever you've opened your branches, what's been the experience? Do you see you will see a initial spike because of pent up demand?
Experience is that every market is today structurally run by the district collector or district magistrate. That's the only experience, Jiraine. And circulars so that's all I would say. Do we see some spike when we open the market? Yes.
But they don't represent, you know, demand. Is there suddenly a demand for more dishwasher? The answer is yes. You know, are people looking for more iPads? Answer is yes.
But what structural as a view, if customer comes confidence comes back, demand will come back. I go back to my first panel where we said economy was on the mend. We were clearly seeing it. You know, the worst was q q three, October, November. Things had turned the corner from December.
And you are seeing that in IAP data, in various other data points that were emerging for January, February. We are sixty days into it. Longer we take, longer will be the time for economy to come back. But no such expression, if I give you a specific response on a pent up demand. Confidence Right.
Right. And so my second question is, know you you mentioned, and I think probably that's the right thing to do, which is to focus on risk management and balance sheet more than growth. But, again,
I mean, you know, there are various
projections about where the GDP growth could be this year in terms of whether it's negative one, two, four, five, 10. I don't know. I mean, it's it's at you know, everybody has their guess. But a more fundamental question is that given your current size and penetration, do you think that you will still be able to grow you know, given all the other everything else being equal even if the GDP contracts, which means will you, in your assessment, be able to gain market share in the true sense of the term because your balance sheet's still relatively compared to large retail lenders like an HDFC bank or whatever is far smaller.
Are we 133 basis points of total trade in India? That response remains yes. Do we remain pre March 22, a growth oriented company? The answer is yes. Are we organized to capture opportunity?
The answer is yes. From a capital, liquidity, talent,
shareholders,
low gross NP and net NP. But the most important I must make point I must make, Irene, is I think it is true that unless and until we are everybody's we are missing it completely, that things will be slower for a while. What is going to make a big difference is, do you have the franchise to do something with? If you have a franchise and you have a cultural orientation to be able to do work with the franchise, we should do relatively better. I think is the way I'm seeing it from a short term standpoint.
Medium term, we are a growth company, and we would like to continue to grow our share of total credit in India.
Okay. Thanks, Rajiv, and all the best.
Yeah. Just two data points. I think somebody asked a question on deposits. We have seen 200 crores of increment in retail deposit in the month of April and thousand crores of maturities and pre maturities on the corporate side of the deposit book. Secondly, in terms of ECB borrowing that we have taken in the month of April of 75,000,000, that came in at 7.2% fully loaded.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to mister Karan Singh for closing comments.
Yeah. On behalf of GM Financial, I would like to
thank mister Rajiv Jay and the senior management of Bajaj Finance and all the participants for joining us on the call today. Thank you, and stay safe.
Thank you. Thank you.
Good night. Sorry for doing this call so late. Thank you so much. And my apologies for the interruption by moderator. He was doing his job in the string taking it to one question.
Myself and Sandeep, we are happy to engage one on one where wherever required. Thank you. Good night.
Thank you. Ladies and gentlemen, on behalf of GM Financial, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.