Ladies and gentlemen, good day, and welcome to the Bajaj Finance Q3 FY 'twenty Earnings Conference Call hosted by GM Financial Institutions 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 third quarter FY twenty results. To discuss the results, we have on the call mister Rajeev Jain, who's the managing director, mister Sandeep Jain, who's chief financial officer, mister Rasul Jain, CEO of Bajaj Housing Finance, mister Anuj Shahad, deputy chief executive officer, Bajaj Finance mister Deepak Bhagati, president, risk and collections and mister Ashish Panchal, president, rural business insurance and liabilities. May I request mister Adi 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.
Thank you, Varan. Good evening to all of you. I'll be referring to the investor presentation that we have uploaded on our website. I'll quickly jump to Panel four, which in a way summarizes the quarter that went by. Overall, I would say it is a good quarter despite a slowing demand environment, an episodic provision on a broker account and overall higher credit costs.
We continue to remain focused on portfolio granularity across products and locations in Q3 as well. Overall, Determinant assets sustained its momentum due to continued momentum on operating efficiencies. OpEx driven came down further. On a year on year basis, it came down to 33.9 versus a year ago at 34.9%. Return on equity was higher despite large capital raise that you've done, primarily on account of lower corporate tax rate and also, of course, strong profit momentum.
AUM came in at INR 145,000 crores. Now OpEx to NIM, as I said earlier, down to below 34%. Loan loss to hurdle assets is only a red flag fundamentally from 45 basis points a year ago. It came in at 61. Even if you lock off the episodic provision on the broker account, it came in at 55 basis points.
So that's technically 20% higher than a year ago. PAT came in strong. Core PBT growth was 33%. PAT growth on account of corporate tax cut is at 52% at INR1600 crores. ROE, despite the capital raise, came steady at looking at 23.5% on an annualized basis.
Very quickly on the next panel, it's a key question that's in general being asked, how are things looking on the ground, what's the demand environment looking like. I thought I'll just give you some texture on how we are seeing things virtually as of January 26. January 26 structurally is an important day for our consumption businesses. So what you can see here, I mean, we have dropped thousands of AdWords as part of our digital marketing process on on Google across lending and consumption categories, being electronics, mobile furniture and apparel, clearly showed a significant demand slowdown in Q3. This is intent to purchase.
This is not purchases. This is intent to purchase. Intent to purchase itself was down significantly on a year on year basis in in q two to q two and in q three as well. However, since December, we're seeing some degree of uptick, which continued in January, which has continued in January so far. Republic Day sale, which is a which is a big day of for most retailers, especially in electronics and mobile, it was reasonably strong.
If this if and it's lot more structural. It's spread across metro, mini metro, urban, rural. We've seen a structural pattern at this point in time in consumption categories in the last thirty, forty days. If it was to persist, maybe the process of repair of consumer confidence and consumption pattern has started, but I think we'll have a definitive view on that in the next sixty odd days. That's really on the what our sense on demand is in the last thirty days since these numbers have progressed.
Very quickly, I'll try and cover the next three panels, which essentially summarize most of how the quarter went by. As such, I've talked about the regional granularity. The highlight in point number two on Panel six was that Sales Finance business to the point conversation and slowdown grew only by 7%. Rest of the businesses grew quite well. Labs grew by 5%.
Loans and securities lending grew by 5%, mainly on account of us winding down most of our broker exposures as a result of the event that happened, which is in public domain. New customer acquisition, we despite the 40,000,000 client chat, the company continued to acquire 2,000,000 customers in the quarter. We added 2,500,000 new customers in Q3 as well. Overall, now we have twenty three point five million forty point three eight best overall franchise and 23,500,000 customers who we want to give money to across various products. Existing customers contributed 68% of the loan.
They remain between 6870% in the first nine months of the year. We continue to have a growth stand, added 182 new locations. We further accelerated the strategy given the capital raise and tax cut that we got, and we're opening 200 new, locations. These are I just want to, just make one point. The location is defined as it's a new city.
It's not a location. So if I'm opening a another office in Bombay, it's not it's not a location. Location is defined as addition of a city or a town in India. That's really how we count location as. Liquidity, pretty strong.
ECB is now 4%. Sequentially, cost of funds are going down. It would have been further down. It's not for the overhang that sat in the balance sheet on account of the capital raise that we did. CP book is as a result of that, CP book is virtually down to now INR 2,000 crore, and it had impact on overall cost of funds in for forty five, fifty days of Q3.
Consolidated cash before on ZAR seven were close to INR 11,500 crores, very well placed on liquidity, have excess liquidity and not enough to lend, I would say. We we converted 535,000,000. We also, we've gone to RBI to raise $650,000,000 of additional ECB approval, which you received. So, under automatic route, we can rate $7.50. We had 175.
That's 100 and 100 and 175 left, which we will raise, and we had raised a request for additional $6.50, which we have received. Fixed deposit books, so the library side of the book continue to, get diversified. ECD has come in. Fixed deposit book has crossed the 20,000 crore mark. It's a 76 percent growth.
67% of the book is retail, pure retail with average deposit of 3 lakhs and average tenure of thirty four, thirty five months. We continue to work towards growing this business, this part of our balance sheet. We launched SGP to further retailize our retail deposit program. Operating efficiencies, NIM was strong. Fees and commission continue to be strong.
Operating expenses came down to 34% versus 35% in a year ago. Credit cost, I talked about it. Overall, we've taken 85 crores exposure on the broker account. We've also taken another 15 crores on account of of a coffee conglomerate. So overall, we've taken a 100 crores accelerated exposure provision in Q3.
Gross NPE net NPA came in flat. Gross NPA came in flat. Sequentially, net NPA was up five basis points, mainly on account of the corporate and long rate account. Otherwise, it would have been flat. Only business that turned red, it was yellow for the first two quarters.
It turned red in Q3, was our auto finance business. That's we have taken corrective actions, and we hope that in two quarters, we should start to see improvement in the portfolio metrics. Profitability in capital, we've talked about capital adequacy is well governed now for next two years. We virtually added the capital into Q3. ECL provision is now at 101 basis points.
Brihad Housing Finance continues to grow well. We delivered a profit of INR 131 crores in We have financial security and style of business and we are real and close. What I will do quickly is to take you to the credit slides for a moment and and then open it up for questions. I'm jumping straight to panel 36, which gives my lines of businesses our credit quality metrics. Gross NP and NNB and auto finance business is up 25 basis points, twenty, twenty six basis points from a year ago and 12 basis points from a quarter ago.
Sales finance has has is up six basis points from a year ago and has improved 18 basis point 16 basis points from a quarter ago. Consumer do b to c businesses have have improved from a year ago and improved from a quarter ago. Rural b to b businesses have improved have remained flat from a year ago and improved from a quarter ago. Same for B2C. SME have improved from a year ago and improved from a quarter ago.
Commercial lending businesses a year ago were all standard. We are at 60 basis points at this point in time. Mortgages are flat from a year ago and have deteriorated at 16 basis points from a quarter ago, mainly contributed by the coffee day coffee conglomerate account. Next, Manny gives you some texture on on NPU moments. The the slippages were largely adjusted between q two and q three, adjusted for the coffee conglomerate account.
They were actually down from March to June and June to September and September to December. Write offs were in line with the with the policy. Write off on sale of we sold a portfolio on a cash basis and realized INR 18 crores, as you can see in the panel. ECL is just an outcome from Panel 37. So that's really and very quickly on 39, digital products, we had flagged it as a yellow in two quarters ago.
Its position has overall improved from two quarters ago. We should see the business get into green sometime by end of fourth quarter. Lifestyle has improved, but not that much. But as I've articulated earlier, if you can if you follow through the previous chart, the portfolio is actually very small, but it is what it is. So salary customers in general, I would make a point, continues to be steady.
Self employed customers in general continues to be double. Whether it's a small exposure, a loan exposure, a consumption exposure, any kind of self employed or a lab exposure, self employed customer continues to be highly stretched. Salaried customer, in general, continues to be reasonably steady so far. The next two panels are so home loan is pretty steady. Salaried personal loans, very steady, business and professional loans marginally worse off on a year on year basis, around 40 basis points, No.
No. It's probably mainly Island Of Earth and and and Tangerine, otherwise, That's the quarter in in a quick summary. We're happy to take questions.
Sure. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, then press star and 2.
Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question is assembled. The first question is from the line of Tawar Ghera from BSP Mutual Fund. Please go ahead.
Yeah. Hi. Congrats on a good set of numbers. Four questions. First is on yeah.
I'll try to keep it short. The first one was on the consumer B2B sales finance business. So that book has remained flattish over the last three quarters. Could you comment a little bit on the competitive pressure? And if that's the key reason for the growth impact?
And how are we tackling that? The second one was the zero bucket for the PL cross sell that's been trending higher and is now highest since 2015. What's the threshold after which it turns into yellow or where we tighten credit filters? So that is the second one. The third is on the auto finance business.
That has turned red this quarter and was yellow over the past couple of quarters. But we've seen very strong growth, and our share in Bajaj has only increased from that point. So just the thought process and how we look at this business. And lastly, on Panel 30, the growth rate in the cross sell franchise has been moderating in both absolute and percentage term. So is that in line with how we should think about or in line with our expectation?
Or that's like a one off and should sort of catch up in the coming quarters?
Yeah. So look, on B2B, this entire competitive pressure, we tracked one side for the last two and a half, three years. What is my share of manufacturer's prevention? That number has remained absolutely steady. Okay?
So take the noise out. Let's talk money. What is the share of manufacturer's prevention tool that has remained across electronics, mobile, very, very steady. That's point number one. Point number two, we offer this product in 2000 cities in India.
The nearest competitor offer within I mean, you can ask them. You know? So it's and the penetration rates are pretty steady across. So whether you go to in Bombay where 30% of the sales move to us or you go to and take the largest dealer, 30% of the sales move through us. But for the 30%, what is that 30% is the key question.
When we look at the search data for electronics and mobile on a on a year in year basis, Let me just give you a texture on mobile. Right? And that mobile data is out. The last year, the overall mobile phone sales grew by 3%. A year ago, in October, November, December 18, the growth year on year growth for intents, okay, searches were 19%, 8%, 4%.
I'm talking '18. Okay? Mhmm. Which is October 18, November 18, December 18. This year, it was 9%, minus 6%, and 2%.
If I take April to August, that number on an average is minus 8%. Okay? It's a it's now the single largest category in terms of numbers. And the the searches are 130,000,000 searches on average, between 120 to 130,000,000 searches. So they are very representative of what is the consumer mood in terms of buying this product.
If I take consumer electronics, let's say a phone or sorry. A refrigerator and so on and so forth. Last year, this category in October, November, December, average was 51% growth in searches. This year, it is minus 6% in searches. Okay?
On an average, there were there were fifth between twelve and fifteen million searches in a month average in last year. This year, it is nine and a half, 10,000,000 searches. So clearly, our share is very steady. Our share of manufacturers, our share of retailer sales, These sales have to grow, and we remain very well positioned to, so if Republic deals good, we as I said earlier, we were there to seize it. So that's point number one.
Point number two on PLCS, clearly, look, across businesses, the and other than salaried PL, more businesses are up. Okay? They're up structurally by 20 to between 25, 30%. Okay. The the the key point then is then it's a broader so two break this into two parts.
That means it's structural in nature. Okay? If it is one portfolio, you act on it. If it is if it is take your CV. This is very steady.
It is a green. Right? Let's just take for a moment, CV. Okay? It is green.
Even CV has moved from 60 to 90, significantly below our threshold of nowhere near where our product profitability models are, but it's still up. But still 99 has gone to 98.6. I mean, you know, you get the dip. Right? I mean so that's that's one part.
Coming back to PLCS, clearly, margins are very strong. This is a cross sell product. A fourteen, fifteen basis points is material, and important, but doesn't change the trajectory of the business. But third order point, let me make a point. We have reigned away from this business between 17% of the business in the last five, six months.
This is a thirty six month loan. Takes nine to eleven months to flow through to the PMF in this metric. So if we, let's say, acted within April and June, the impact of it will play between April and June. That's really the time that this takes to to play out on this panel. So that's point number two.
Point number three, if we have turned it red, I've said in the past, this is the only business that is captive. There is some consideration. It's small, but some consideration of captive player. The business is a highly profitable business, sustainably generates equal ROEs to, the company ROEs, and we are we are we we are taking corrective action to bring it back. This business has gone to a 86%, 87% level in December 16 as well.
And that is that is actually the worst time that you saw. In general, I also made a point, Nava, to many people that what we are seeing is very close to the DMON environment Across most lines of businesses, you know, if you knock off even, the episodic account of the broker account, we will look like 170 to 180 basis points of credit cost in the current year. In that year, we were at 155 basis points. If you adjust ECL to it, we would look like 167 to 168 basis points. So it's it's it's much like a ECL, sorry, a December 16 kind of number.
We should see, improvement. But, I do want to anchor that there is a small measure of captive, orientation in it. Third is cost in franchise. There is there is there is a little bit of noise in number, but let me first rule out, make a different point. We remain committed to add between seven to 8,000,000 new customers to the franchise every year.
Even in an environment which is extremely slow, we still added two and a half. Okay? So that's point number one. Point number two, as you if you have the panel in front of you in panel 30, we were running a golden record project in the company. That and that meant that 780,000 customers who earlier based on a dedupe methodology were actually sitting all the way from 920,000 customers on top in forty one three eight to 780,000 below have actually been cleaned out in the current quarter.
So that's that's a mechanics point, but seven to 8,000,000 customers a year, we will continue to, add to the franchise for a foreseeable period. Does that answer your all your questions?
Yeah. Just one follow-up. Just that's related to, the first question, on b two b sales. So who if HDFC Bank is gaining, then, and if we are maintaining, then is it like the market is getting consolidated and and therefore it's not our last share share loan? Is that the summary of the entire last few month in the marketplace?
Because, look, to me, the more I don't know who's getting who's losing. I am looking at what is my share of the coverage. Understood. I mean, I because I have to rely on data to know whether I'm winning or losing. And I can track the data of 26 of manufacturers in India.
I can't track the data of 50,000 merchants in India. I mean, and if at all I can track, that'll be market intelligence. Whereas 26 manufacturers are b to b participants from whom I can exactly know, and we have very deep and strategic relationship with them, it's easier for me to manage that and have been more credible about it than what's the market intelligence.
Understood. Thanks thanks, and all the best. Thank you.
Thank you. The next question is from the line of Nagara Chandrasekar from Laminar Capital.
I had a follow-up on the previous participant asking questions on auto finance. You mentioned that you somewhat like a captive financier, so there's some small consideration there. So where exactly do we play here? And let's say, for commercial three window loan, would we only be financing larger, higher Cibiscus fleets? Or would we also finance customers that other NBFCs turn away and would therefore come to us for financing?
We have a dominant share being a captive, and given that banks and nonbanks continue to pull back and push forward, and we have seen that consistently over the last thirteen years, especially in this part of our business, and the captive orientation. We have a dominant share of the the sales that happens from this point of sale, whether it is two wheeler or it is three wheeler or to some extent in commercial vehicle. What you see here is a consolidated picture, and that's really how you represented it. So dominant share at the point of sale, we have a steady play, and and we play across all three, tubular, tubular, commercial meeting. Is that
Got got it. What what proportion of our book would be each of these products, and what would our average for a median yields need for this product?
Would be around five and a half percent. Three, three and a half percent would be three miller. Commercial rating will be very, very small, plus 20 basis points. It's very small. Don't don't do much at all.
Got it. And what would our average yields be for this this book?
Average yields are quite high. They are in line with what the industry number would be, anywhere between 23% to 24%.
Alright. Thank you so much. Thank you.
Thank you. The next question is from the line of Bhavin Shah from Samitra Capital. Please go ahead.
Yes. Thanks. I have a couple of questions. You mentioned you look to add another 7,000,000, 8,000,000 customers every year. Could you give us some sense of what is the overall available customer available market for you in terms of customers?
And, you know, is it can you benchmark it based on per capita income or exactly how? And the second question I have is basically on Karvi, that it is pretty obvious to an average investor that you know, money that, you know, Karwiyar lent from you, I mean, the the security was not theirs. I think it's pretty obvious. And given such a fantastic landing track record that you have, how did you make such a mistake? Thanks.
First
question was on Yeah. So look, working with our retailer ecosystem because as I said earlier, 30% of the sales is in cash. Oh, sorry. It's in lending. That means 70% of sales is in cash.
Working with retail ecosystem over last few years, working with public data ecosystem, what is available, we've been aggregating data on customers to on prospects in India to reduce friction for them and to help them, become our customers, by preapproving them. At this point in time, we are willing to lend to, in our assessment, between 55 to 60,000,000 people because we are willing to give money to. Over and above the 40,000,000 customers that I have given money to. Of them this year, and it's a metric that we track this year, we've originated two we will originate 2,000,000 of these. Last year, from this base came 1,300,000.
This year, we get between two and two point one million. They are lower risk. They are happier because the friction is lesser, and that is, that has been a strategy for the last four, five years because it's a it takes tremendous amount of effort to, originate, organize, and stimulate this larger base. So headroom remains quite long. So that's first part.
Can we industry on broker financing is around 22,000 crore. If you read and I am let if if I am really measured in my response, please bear with me even though the matter is subjugated at this point in time. So, the only point I would make, every, every loan loss represents an opportunity to, learn. The learning is following if you ask me. Justification is 22,000 crore industry, the entire industry run this way.
Regulator allowed it. Mistake or learning for us, regulators started to say in June, debit credit is not allowed. Right thing to do. Let me make a point. The practice which is going on for the last twenty years, given that these broking companies are dealing with hundreds of thousands of customers should have been given more time.
To be fair to regulator, they they first said thirty June, then they said thirty first August, then they said thirtieth September, then they said thirty first October. Probably in not probably. In hindsight, on thirty first October, we should have either squared off our all our positions, or, you know, of the shares. That's the single point learning
if
you ask me because we we are very focused in this business on operational risk, very focused on credit risk. We missed, if I may say so, at one level. The regulatory is damaged. And we thought we have no regulatory risk. So that's the learning.
We have, as you're aware, taken a place card 85 crore, provision. We are working with the company, and we will draw a line, under this. I've said it's part of our investor deck by March 20, either way. Thank you, sir. But I think
my question is slightly different. Know, Bajaj Finance is in a forefront of a lot of things. And, you know, areas where regulator probably hasn't even understood the business lines. And this was a clear case of misappropriation of client funds by Karvi. And, you know, it was pretty obvious to, know, you anyone in this industry that Karvi doesn't have this kind of money to I mean, this kind of stock holding on their own book.
So you're I mean, I appreciate what you're saying, but, you know, it seems like, you know, the real the issue here has been that, you know, the credit assessment was wrong, not not not correct.
As I said, know and then I'm not defending at all. Credit assessment, as you're that's why I said, the the learning to be taken is that regulatory risk we should have acted on. On on the point on origination, as I said, the entire industry of 22,000 crore exposure to the banking system runs this way even today so that I am I'm clear with my on my on my stance. The entire working capital exposure by various banks, even today, run this way. So, I would as I said, I would I could talk through more, but I just on this, I've been advised that I didn't want it to be measured in my response given that the matter is subjugated at this point in time.
Thank you, sir.
Thank you. But having said that, on a one on one basis, you would like to get in touch with us. We'll be happy to do a conversation with you.
Okay. Thanks.
Thank you. The next question is from the line of Kundar Shah from Oakland Capital. Please go ahead.
Hey. Good evening, Rajiv. Thanks for the opportunity. An excellent set of disclosure, I think, so nothing in the industry when comes close to it in terms of disclosure. So my questions are as follows.
On the PCR coverage, the same line of business auto finance is seeing fluctuating PCR from 63 to 55% range in last year's corridor. Can you explain that? Why? And secondly, what is the status on ILFS entangling? And in Kabi's case, though the overnight regulatory requirement forced the conversion of secured lenders into unsecured and unsecured trade creditors into secured ones, You have access to SEBI.
They were they were all regulated entities. So what was regulator doing while this thing was happening is the question. And and why why why this sudden change of stance is something perplexing. And thirdly, on payment are payment banks allowed to issue credit cards? And if, yes, do you see an opportunity where up to 1 lakh rupees you can issue credit cards and then seamlessly migrate the customer to EMI or wallet and be in that part of the business where currently, because of the silos, you are not allowed to do so.
So one is the AF Puntal. Second is, third is payment bank. Second was? ILFS and Tangelin.
And what are you gonna do about ILFS, Tangelin, and Carvy? All the three headline accounts, which is giving rise to the worry. See, our disclosure standards are best. We don't have any complaints, Raji, but these are public names.
Yeah. Yeah. I'm just
asking you a specific question. I believe in our ILFS and CC Tanglin's case, it's over collateralized. So you expect money to come through. It's just the mismatch of selling or disposal versus that.
Yeah.
And in Karmi's case, this is a legal question specifically. They were regulated by exchanges. They were regulated by SEBI. What was happening in that and how suddenly the secured lenders became unsecured and unsecured investors became secured.
Yeah. So, Puntal, just on AF and Sandeep just just help me. Fundamentally, in the AF business, when we repossess an asset, In general, over the last thirteen years, our experience is we realized between 35% to 40% of the 41. Value 40 to 45% of the value of the asset. Okay?
Irrespective, actually, of whether it's an entry level buy or a premium buy. So the numbers, over between, it is the function of what is the because the stock and what is the sale. That that's the so that's why the numbers remain a little a little volatile in a corridor of 55 to 60%. Set payments bank, simple I'll take the third one and then the second one, are not allowed to lend. The payments bank are virtually only debit bank.
There's no credit, so it's not allowed at all. Logically, I would have I don't know then how did somebody take a payment bank and believe that they can, build a business. That but that's for those who, opted to build to apply for a payment bank and become one. The second question, RNFS, we are working closely with the management. The RFP was issued to sell the buildings.
We have received eight to 10 bids. We've given time till, sorry, till till early February to open the bill, and the process is on. We have a 60 crore provision on the account. We have 30 crores line in the escrow as well. And the account is significantly overcollateralized.
Even at the rate the bill received, we should be money. Having said that, in the last ten days, the entire if you're if you're tracking what on Aleth, sorry. If you're finally affiliated the NCAT What is this? Management adviser. There is there is there is some legal noise there.
We're tracking that closely. This is all I would say. Tanglin, from whatever we hear from in public domain and working with the company, we do believe strongly that the account could get, where we are, could get resolved in the next thirty days. We have taken a, place card provision in the current quarter just as a matter of prudence rather than anything else. Karvi, we will draw a line, I've said in the in the investor deck.
You've taken 85,000,000 exposure, we will draw it. Either way, we we have, the company has demonstrated its intent to to pay us back and has given us a security. The value of the security is a function of who the buyer is. They're looking to sell. We understand the company.
Either way, we think next sixty days are critical on the account. And we would have drawn a line under it by March 31. Does that answer the three questions? Yeah. Thanks, Rajiv.
And keep
up this good disclosure. I think so is the best way to earn the investors' trust, and I think there's nothing else that comes close. Thank you. No. None of your competitors.
Thanks.
Thank you.
Thank you. The next question is from the line of Manav Gupta from Birlas and Life Insurance. Please go ahead.
Yeah. Hi. Good evening, sir. Contacting you on a
good set of numbers. Most of my questions have been answered. Just just one question if you could answer. Also, we continuously keep on hearing and seeing some of the large competitors that get very aggressive in the consumer B2C space. If you could highlight how the competitive intensity has been and you know, how we're seeing this phase over the next nine to twelve months, that would be very helpful.
I don't want to be arrogant. But I would summarize it as more noise and substance.
Okay. Well, if if you could just give some qualitative comments on, you know, how how you see this going going forward, that will that will be really helpful.
Look. Fundamentally, if you can deliver to the customer frictionless purchase experience at
the point of
sale is one part of the puzzle. Second is, can you manage a 25,000,000 customers being banked in a given month is the second part of the puzzle from a risk standpoint. And can you collect from 10% to bounce in a given month, at at 100 rupees, cost is the third part of the puzzle. If you can get all the three puzzles together, you can deliver the business. It's a damn hard thing.
I'm not saying it because you managed to we we do this. One has to make very tough choices because at the end of the day, the purpose of an enterprise is to generate profitability. This business is a multiyear game and quite hard to crack. And so it's true for many of our many of the financial services business. If I take an example on the other hand, where we've taken as long to start to generate profitability and create scale is a hold on part of the business.
To me, three m words team, the easy business. And I, today, appreciate and respect that how hard it is. That doesn't mean I have we become a large competitor. But we will be at it, and we have finally cracked it, and we will we are scaling the business. Same.
So what I am to the whole loan business, I look at it as lots of competitors are to us in the in the point of sale business. Nothing wrong wrong or right about it. It's just a matter of time, maturity, and commitment to building the business. Does that philosophical sound or sound odd? No.
That that answers my question, sir. Thank you so
much. Thank
you. The next question is from the line of Nirmal Bari from Sameksha Capital. Please go ahead.
Thank you, sir, for taking my question. My first question is on the provisions. So if we look at the the decks that you had provided and we look at the thirty days thirty days plus delinquency figure, that has increased across the bucket except for lifestyle. Sorry. Except for digital products.
And and and home loans. Yeah. Yeah. So The the the mutual fund is correct.
And do we expect the provisions to increase further because the probability of default that we would assign as the loan goes over plus thirty days to plus sixty days would increase in the coming quarter.
I so are we seeing stability in flows? Yes. Have we seen, reduction in flows? No. Okay?
But have they stabilized in the last two months? Yes. So that's one part. Credit cost from here should not increase, in, is what our view is. We probably most likely peak.
I'm not taking into account the one offs. Okay? This is adjusted for one offs on a flow basis. Let's say, out of 145,000 crore, 140,000 crore balance sheet, on a flow basis, we we we are even these costs in my mind are elevated. They should not increase, but as they peaked so as it peaked yet, but have we started to see improvement?
No. So I think one more quarter, we'll have greater clarity as to what is the horizon for next year. Whether we will remain at 180 basis points next year or will we go back to 160 basis points next year, I think one more quarter will most likely settle the settle this in our heads. And we will we will then provide that outlook to you as we come with fourth quarter data.
Okay. Thanks. And the second question was, would it be possible to give a breakup of the fees income that we are earning from, I think, between credit cards, between our own credit cards, our own loan products, and insurance or something of
that sort. On a lighter vein, as I as I used to tell people portfolio It's bilateral in nature. Both are public companies. And we have a good strategic, deep partnership with them.
Okay. Okay. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Kunar Sharma from Perfect Research Value Fund. Please go ahead.
Hello, sir. Hello?
Can you Little louder. I'm not able to hear you.
Good evening, sir. I have a couple of questions. Listing them together. Yeah. Number one, is there any client stickiness we have?
Because if the client getting a loan at a lower cost from another bank or MDHC, then we'll see. Next, what competition do you see from bank with with lower cost of funds? We just stepping up on digital and IT spending or tie tying up with fintech players to reach the urban. On the next on the next. With banks like Quota sounding alarm bell bells on economic condition and slowing down loan book growth to 7%, we continue to grow robustly.
Can you please share our thought process behind it? Thank you.
I'll just repeat the question. One is on what is the growth outlook and what is the view more than so what is the growth view? You had a question on what is the client's stickiness? That is the first question. What is the bank of the project.
Yeah. What is the bank's Shine of the tying up with fintech. What is the view? Okay. See, client stickiness, we have 20,000,000 store card customer.
In general, the process is really frictionless. Client will belong to those who reduce friction for them. One, second is price. Lower the price of the product or lower the involvement of the buying decision and lower the friction, he will go after those who are reducing friction. Okay?
So that's are of the 20,000,000 franchise, 12,000,000 lined up making a sorry. Out of 20,000,000, we will do 24,000,000 loans. 15,000,000 will end up doing the transaction with us. We will end up doing in this year 26, 27,000,000 loans. Out of 27,000,000, 68% of the loans are existing customers.
18,000,000 loans will come from this 20,000,000 franchise. So in a way now it's not one on one relationship, but, but in general, it should tell you the health of the franchise and the stickiness of the franchise. That's million is million So that's one part. I can give you data on how our NPS scores are high and so on and so forth, but I keep telling people that the value of the two NPS is whether the customer is willing to do business with you. If he's willing to do business with you, then then that's all that's the best NPS that we can get.
On third question on growth view, look, we remain a very small part of the overall total credit in India. Total credit in India, we are 100 and B and C, 140 basis points of profit growth in India ending March 20. We economy can go to four and a half, go to five, five and a half as long as as long as the business that I'm pushing through the door is remains distinctly above my product profitability models. We are here for business. Is really what our view is as a company.
So relatively low size, there is 99.980.6% of the banking system available or total rate available for us to grow. So that's one part. Second, as long as the businesses are significantly above our product profitability model by each line of business, we remain growth oriented. I must make a third order point and given the questions on credit cost going up. Let's look at the scenario of first nine months.
The balance sheet growth started from 41%, went to 38, has come down to 35. That means through the door momentum has slowed. During this period, credit costs have gone up, but overall ROA, we've continued to deliver on. So the business model is getting stress tested for a slowing growth and higher credit cost, and we're still delivering, higher or superior or better, or same, return ratios. I think that should give reasonable amount of confidence to investors that we we can orchestrate between NIMs, OpEx, and credit costs and ensure and volume growth to deliver a balanced business.
I think it's an extremely important point, that I thought I should make. On the second point, banks signed up with Fintech Fintech So we have stopped. I keep getting the same SMSes that are floating around. What did Internet companies deliver? I mean, turnover is lower than profits.
I mean, sorry. Loss is higher than turnover. I think it's a good business to be in. One day, I would like to run a business like that. So there will be a no view on that.
Does that answer your question? Yes. Okay. Okay. Thank you.
Thank you. The next question is from the line of Ashish Jarma from Inam Asset Management. Please go ahead.
Yeah. Hi. Thanks for the opportunity. And first of all, congratulations on a good number, Rajiv. Two questions.
One, on the fee income you partially answered. I mean, we don't need the breakup, but is is the is the, I mean, traction in all the four segments, or is distribution income being being the key driver? Just one comment on that. And second would be on Bajaj Housing Finance Limited. This is just on the, I mean, normalized ROA.
I mean, q three was very strong from an ROA perspective. I mean, even if you could guide on the nine based on the nine months number, I mean, can we sustain these kind of ROAs for BHFL? That will be the two questions, sir.
Akhil is here, but I'll just say that we're committed to deliver it between 13 and between 13 and a half and 15% ROE on a fully scaled business as a company. That's all it will do. I've said that in the past. And, Azul and his team are fully aligned to the fact that we're building a sum of parts on that the mortgage business role is to deliver lower risk, lower ROE, but a very, a tremendous amount of solidity, stability, and steadiness to the overall business model. So and that means coming in at between 13 and a half and 15, we should be able to deliver that in the next fiscal as well.
So that's the second part. First part, fee income, part of it, Ashish, if you look through the numbers closely, has a degree of linearity. If the volumes have been actually you know, the the the slowing environment meant slowing balance sheet growth meant fee and other income on a relative basis was slower. As the as the overall demand comes back, you will see on a percentage basis, we are pretty steady. On a focus basis, very steady.
Volume linearity has a role to play.
Okay. Okay. Just clarifying on on the BHFL part, you mentioned 13 to 15% ROE. But from an ROE perspective, are we already on on a normalized profit capability, or do we see some No.
It's a young business. We'll have to
give it time. We'll wait. Okay. You know, we'll I think next full year should be a will be the third year of the business. We should see greater normalization on the business in next.
Perfect. Thanks. That will be all, Rajiv. All the best for
the next quarter. Thank you.
Thank you very much. We'll take that as the last question. I would now like to hand the conference back to mister Karan Singh for closing comments.
Yeah. On behalf of GM Financial, I 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 good bye.
Thank you all. Thank you.
Thank you.
Thank you very much. On behalf of JF Financial, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.