Ladies and gentlemen, good day and welcome to Bajaj Finance Limited Q4 FY23 earnings conference call hosted by JM Financial. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during this conference call, please signal an operator by pressing star then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sameer Bhise from JM Financial. Thank you, and over to you, sir.
Thank you, Nirav. Good evening, everyone, and welcome to the 4Q FY23 earnings conference call of Bajaj Finance Limited. First of all, I would like to thank the management of Bajaj Finance for giving us the opportunity to host this call.
From the management team, we have Mr. Rajeev Jain, Managing Director, Bajaj Finance; Mr. Sandeep Jain, Chief Financial Officer of Bajaj Finance; and the entire senior management team of Bajaj Finance and its subsidiary. Without much ado, I would want to hand over this floor to Mr. Rajeev Jain for his opening comments. Over to you, sir. Thank you.
Thank you, Sameer. Thank you, JM Financial, for hosting this. Very good evening to all of you. I have set up my colleagues here, a good evening from them as well. I'll essentially be taking you through very quickly over the next 15 minutes through the investor deck, which we've uploaded on the investor section of the website, and also filed with BSE and NSE.
Let's just quickly jump over to the investor deck. Let's jump over to panel number 4 quickly. Quarterly, I would say excellent quarter across all financial and portfolio metrics. We delivered INR 16 and a half thousand crores of core AUM growth. We added a tad below 3.1 million new customers to the franchise in Q4.
All products and services are now live on web and app platform, which is really what, the work that we've been at over the last two and a half years. App platform alone has 35.5 million net users. We had gross installs of 54 odd million last year, and as of 31st March, the net installs are 35.5 million.
We are amongst the largest, global largest in the fintech place in, on Google Play Store, amongst the top four, organic downloads, in the world. I think that's been the effort that's been made by the company to fully go digital. In terms of financial metrics, core AUM grew 29% to INR 2,47,000 crores. OpEx to NIM, last quarter came in, at 34.1, very close.
came in at 34.1. PAT, it's ever-high PAT of INR 3,158 crores, growth of 30% in Q4. ROE just a tad below 24% at 23.94%. Net and gross NPA, it's the lowest ever in the history of the company.
I mean, I mean, if you adjust this to 180 days past due and so on and so forth, I think these numbers are ever low numbers. Net NPA came in at 34 basis points, ending March 2023. Very quickly on full year, given that this is, it's a fourth quarter, excellent year overall across all financial and portfolio metrics. We delivered core AUM growth of INR 55,292 crores.
We had guided for INR 52,000-53,000 crores of AUM growth in the beginning of the year. We disbursed 29.6 million loans. We added 11.6 million new customers to the franchise. The highest ever customer addition that we've actually done ever as a company. As I earlier mentioned, fully live on app and web, 35 and a half million consumers on the app platform.
Overall in general, given the exit momentum of AUM growth, robust portfolio metrics, as you will see as I take you through in a highly scalable digital stack, we are pretty confident about growth and portfolio metrics for FY 2024. In terms of core AUM growth full year, I talked about 29%. OpEx to NIM full year came in at 35.1%.
PAT came in at INR 11,508 crore, a growth of 64%. ROE full year came in at 23.46%. Net NPA of course, as of March 31st, is at 34 basis points. Let's just quickly jump to some key points on panel 5.
Overall B2B disbursements were up 21%. You're seeing data coming through on how mobile phones are degrowing by 20%, how shipments are going down. Mind you out of B2B disbursements that we do, anywhere between 40%-45%, maybe a little more, are essentially digital products or mobile phones. In that environment growing 21%, I would say, demonstrates strength of the franchise and the distribution.
As you look at having entered the year, so far, April we are tracking reasonably strong. In terms of customer franchise, I talked about 3.09 million customers. We're reasonably confident we should be able to add 11-12 million new customers in FY24 as well. Depending on how the first half goes, we'll see if there is a upside to that.
Overall customer franchise stood at 69.14 million. Cross-sell franchise for the first time crossed 40 million at 40.56 million. We added 19 locations to and ended the year at 3,733 locations. Overall in the year we added 230 new locations. Most of our location footprint is front-loaded.
We are adding 150 odd new locations over 300 standalone gold loan branches in Q1 alone as we traverse through Q1. Our liquidity buffer pretty strong at just a tad below INR 12,000 crore. Move. Important point in panel 7, NII grew 28%. OPEX to NIM came in at 34.1. Q4 was 34.5, so continues its downward trajectory. We had articulated last quarter... No, sorry, last year was 34.5. Q3 was? I think it's 34.1.
Yeah.
Anyway. We continue to invest. Investing in social and rewards is two key platforms. Rewards will go live sometime in between Q3 and Q4. Social will go live sometime in Q1 FY25. Employee accounts stood at 43,147 people.
In terms of credit cost, fully normalized loan losses and provisions now came in at under INR 860 crores. We continue to hold management overlay of INR 960 odd crores. GNPA, as I said, came in at lowest ever at 94 basis points. Net NPA at 34 basis points. Move. Just go back, sorry.
All portfolios across 11 portfolios that we publish are all green, including our AUM auto finance portfolio, which is despite not being an ever high AUM. Peak AUM was INR 15,500 crore. It's still at tad below INR 13,000 crore. 93.28% of the portfolio is current. I've not seen that number in last 16 years.
Peak number used to be 89%-90% only. Move. In terms of profitability on panel 8, very quickly, capital adequacy remains quite strong. I've already talked. ROE I talked about. ROA in Q4 came in just at 3 basis points, if I'm not mistaken, below Q3. So Q3 was 5.43. Q4 has come in at 5.4%.
Capital adequacy pretty strong. Both BHFL and BFL remain very well capitalized from a tier one capital standpoint. Tier one capital for BFL was 23.2%. BHFL had a very good quarter overall. AUM is up 30%.
Just at INR 69,228 crores. Home loans grew 24%. You're all watching how there is this slowing growth in the home loan industry given the 2 years of rapid growth. Loan against property grew 4%. LRD grew 64%, and developer finance grew by 92% and a bit on a lower base. As you see below, that DF book is essentially 9% of the book.
DF book from a model standpoint in terms of portfolio composition, as I've said in the past, when we model our business on leading companies, principally will anchor around between 12% and 14%.
That's really where it'll quote unquote, "Get cap debt from a portfolio composition standpoint." 60% anyway has to be a home loan model as part of a principal business criteria as outlined by NHB. Overall approvals in Q4 grew by 21% for BHFL. Move. Very quickly, operating efficiencies. Net interest income for BHFL grew 40%. OpEx to NII stood at 26.5% versus a year ago of 32.5%.
GNPA, NNPA continues to they continue to play their role in ensuring from a sum of our strategy standpoint that we continue to deliver rock solid asset quality at 22 basis points at INR 70,000 crores, as you can see. Actually, 8 basis points is one of the lowest in the industry, if not the lowest in the industry.
Move. Panel 10, just single point for BHFL. Profit before tax grew 52%. Profit after tax grew by 53%. Profit to INR 302 crores in the quarter gone by. Bajaj Financial Securities, not a material subsidiary at this point in time. We continue to invest in building out the HNI broking business, continue to building out, launching new app features.
You know, we added 42,000 customers, overall franchise crossed half a million mark. Move. Let's quickly jump to on a full year basis very quickly, given its fourth quarter. I talked about on panel 12, core AUM up 29%.
New loans I talked about on a full year basis grew 20% to INR 29.6 million. Customer franchise also grew 20% to 69 million. Net interest income, I talked about, grew 32%. Move. The board of directors at the meeting that just concluded today have recommended a dividend of INR 30 per equity share and 1,500% dividend for FY 2023.
amounts to 17.65% of standalone profit for FY23 and is completely in line with the company's dividend distribution policy that's been outlined and approved. So, the company's recommended, or the board of directors have recommended, a dividend of 30 rupees per equity share of 1,500%.
Very quickly on to panel 15, an important point. I mean, we've gone. This is some of the omnipresence strategy update. App platform has fully gone digital across all products and services. It's going live in a staggered release manner. Some people may be able to see some of them, some people will not be able to see. It's just going live on Android and based on the staggered methodology.
Should fully happen by 30s of April, at 50%. 50% would be 30s of April, and by 15th of May should have gone live 100%. Web is equal to app. We are on track. Yeah, at a design level, what is visible in app will be visible in, will be visible fully in web by 29th of April.
We published a set of metrics last year from app platform standpoint, to demonstrate that how important and strategic it is for our business going digital is. The same thing from Q2 onwards, we will do for web as well. We'll publish a set of web metrics that we'll start to populate every quarter from Q2 onwards.
We will just wait for the platform to stabilize in Q1 and start to publish the metrics from Q2. Move. Going forward, all features that go live on app will also go live on web on the same day that it goes live on app. That was really the original objective as we outlined in December 2021 when we talked about app visible to web strategy.
Move. Payments. Lots of action in payments. A scalable UPI infrastructure has gone live on consumer app platform. It's scaling pretty well. Will improve, will help improve performance significantly, I would say. New features like contact number capability, UPI autopay functionality, is going live. iOS will go live in end of April as well. In Q1, lots of action continues to happen.
We continue to invest in the payments business. A new payment CLP refer and earn functionality, faster settlement for merchants, is going live. Checkout page for on PG providers will start to become visible. Bajaj Pay wallet will start to become visible on checkout page of leading payment gateway providers. QR deployment, I think we went live with merchant QR in November.
We started to accelerate QR deployment from December onwards. I think company has made massive strides on QR deployment. In the last quarter alone, we deployed 413,000 merchant QRs. We estimate based on various reports that India has 30 million, 31 million, 32 million overall merchant QRs.
We principally think anywhere between 2.1 million-2.5 million QRs, merchant QRs of Bajaj Pay we will deploy in FY 2024. We are accelerating the deployment of QR. That's really the goal of FY 2024 for us as a company. We'll also go live. We'll start to complete the stack further.
Bajaj Pay EDC machines will also go live in Q1 FY 2024 with features like merchant onboarding, merchant, you know, these are benchmarked metrics or features that will start to go live.
There's MVP 1 going live in June and MVP 2 going live in September. Between these two, we should have a reasonably well-benchmarked product. It'll start with existing distribution partners, and we'll go open architecture fully by September, October.
And we're quite excited about taking the entire stack, of payments, having worked on this for the last 2 years, to our merchant ecosystem of 133,000 merchants and, also to open architecture. Move.
Very quickly, these are some of the, metrics on 17, 18. Nothing... I mean, we're largely green on most of the metrics or panel 17. Move. 18, that you, that you can observe. Panel 19 is an important panel.
This is a panel that we started to publish on customer franchise key financial metrics because at the end of the day, the franchise is growing. Is it leading to AUM per customer franchise is growing or not, and is the PAT per franchise, per cross-sell franchise growing or not? We've delivered a record number, as you can see.
These are 7-year numbers right here from FY 2017 to FY 2023. From INR 1,670 per cross-sell franchise profit, we ended the year at INR 2,837. As you can see, 2017, 2018, 2019, they were normal years. Even 2020 was a normal year barring last ten.
Even on those 4 years, since then, we are principally looking at just a 70%-80% growth in profit per customer franchise, and AUM per customer franchise has remained pretty steady. We don't expect any change in this metric to happen.
We should continue to deliver better outcomes as we go from here. Let's quickly go, jump to panel 37. This is financials. 29% core assets under management growth. Total income grew 32%. Net interest income grew 28%.
Operating expenses grew 27%. Loan losses grew 22%. Profits grew 31%. We've started to now largely look at a normalized frame of 28%, 27%. Loan losses growing 22%, and profits growing 30%. On a full year basis, core assets grew 29%. NIM grew, total income grew 31%. NIM grew 32%. Loan losses de-grew 34%. As a result, profits grew 64%.
The ratios are here below. I've talked about on a full year basis, ROE came in at 5.31%. Operating expenses to Net Interest Income came in at 35.1%. ROE came in at 23.5%, as I mentioned earlier. Move. Let's quickly jump to cross-sell franchise, panel 48. 40.5 million customers.
you know, you can see below we started Q1 with 2.73 million customers, went to 2.61, went to 3.14. normally Q1 and Q3 are peak quarters. that's really how we observe over many years now, at least in the last 4 or 5 years. anyway, we were just a tad below Q3, which is normally a peak quarter, and came in at 3.1 million new customers added to the franchise in Q4.
gives us reasonable confidence that we can maintain a 11-12 million customer franchise growth. I mean, I do dream of a day when someday we'll have 100 million consumers, customers for us as a company sometime in the near term.
Let's quickly jump to panel 52. This is the AUM mix. Identical. That's one word for it. Two-wheeler, three-wheeler 5% a year ago, 5%. Urban sales finance 8%, 7%. Urban B2C 20%, 20%. Rural 2%, 2%. 8%, 8%. 13% is 14%.
Loan against security is just 7%, but that 2% as you that's where the difference between core and otherwise is, which had a residual number, is at 6%. Commercial lending is 7% and mortgage is 31%. We don't expect as I've said multiple times, we don't expect this product mix to change in any given manner. We think we can continue to comfortably grow while maintaining this mix plus minus 1 or 1.
Two will be a big number given our size of the balance sheet. 1% plus minus is possible. Just last panel in terms of provisioning coverage, panel 55. You know, overall GNPA, two-wheeler is now down to 4.79%.
Rest of the numbers are all in SME lending you see 1.24%. Rest are all below 1%. In terms of net NPA, two-wheeler, three-wheeler finance 2.40%, and rest are sub 25 basis points as you can see. That's how we came in at 94 basis points and 34 basis points from a year ago, which was 1.6%, and 68 basis points to 94 basis points and 34 basis points.
Overall in a pretty strong position from a portfolio quality standpoint. Just last panel on stage-wise GCL. I mean, as you can see here, there's as of 31st of March, we are around 64% PCR on Stage 3. On Stage 2 at 31% as you can see.
Stage 1 is at 80 basis points. Pretty well-positioned and strongly placed. That's really the quarter. On portfolio metrics, nothing to talk about. We are all at what I would call ever high numbers. Or ever best numbers that I've seen in a long, long time. That's the quarter gone by. Happy to take questions between me and the management team.
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 their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question.
Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Kunal Shah from Citigroup. Please go ahead.
Hi, Rajeev. Couple of questions. Firstly, with respect to this entire penal charges, this document which came in from RBI. What is the kind of impact in terms of how is the capitalization of penal charges happening, and how much could be, let's say, the proportion of penal interest versus penal charges for us?
Yeah. Kunal, first thing first, we don't capitalize charges into the loan account of the customer. We are largely unimpacted by the RBI regulation. Of course, it is in draft form at this point in time. We will await final guideline from RBI. That's one. Second, I think the bigger consideration that is coming out in the guideline is that is the charges being considered for profiteering.
Very clearly, the penal and bounce charges that we get from the customers are lower than the commission or recovery cost that we incur for collecting the EMI. This is not for profiteering.
The charges that we collect are basically to take care of the costs that we incur for collecting the installments. We also benchmark these fees and charges with regard to the industry on an ongoing basis and adjust them suitably if we find any.
Yeah.
areas of improvement or opportunity.
Okay. Right. Maybe it should not be liquidated by way of penal interest, that definitely is not there as far as this is concerned.
That's correct. Yes.
Okay. Overall, in terms of the penal charges within the other income, what could be the overall proportion of it? If you can quantify that.
Yeah, Kunal. We do disclose as part of the annual report, the breakup of fees and charges into service admin charges, distribution income, fees on value-add source. The service admin charges, a decent contribution of service and admin fees is from penal and bounce charges.
Okay. The service and admin, it should be largely the payment charges?
Yeah.
Okay.
A large portion of that would be penal and bounce charges, that's correct.
Sure. Okay.
mind you, as Rajeev was saying.
Yeah.
there is corresponding number in recovery commission that's sitting, in the.
In the expense line.
-expense line. That's the point he was earlier making. Both are published.
Yeah. Yes. True. Okay. Secondly, Rajeev, maybe compared to last time in terms of indicating with respect to competitive intensity as well as focus on margins vis-a-vis growth, we don't see that commentary in this time's decks. Anything which you are seeing at the ground level, or are we more confident in terms of say, growth going forward? How should we look at that?
India banking is now retail banking. Principally everybody is competing with everybody. What is there to talk about competitive intensity? That's why I removed it. Your observation is correct. I mean, you know, if wholesale is growing at 5%, the only thing that's growing is retail. I think that's one part.
Overall in general, when I'm looking at the bureau data, in terms of disbursements, overall consumer credit growth metrics are looking very, very strong, you know? As I said, India credit market is increasingly looking more and more retail. Those who are the franchise, those who understand risk, should.
Those who have the products to sell to consumers, and those who can keep them engaged through various digital channels should win. I think that's principally the orientation. The only point I would make, you know, when I look at the overall unsecured AUM, overall engine, we think our market share is between 7% and 8%.
The opportunity remains pretty large. Given the rapid growth of personal loan disbursement by a host of players, who've not seen a cycle, I worry a little bit about it. You know, because I never wanna forget that PL principally is a risk business, and it's not a balance sheet business. It is principally a risk business.
That's the only other additional observation point I would make. Growth is strong. Momentum is good, strong across product lines. India banking is mostly retail and unsecured is growing probably the fastest. I'm not talking credit cards here. I'm talking.
Yes.
unsecured PL here. I would just worry about. Because those who've seen cycles are probably would be more mature about it than others.
Okay.
You won't see that sentence anymore until the time, just in a lighter vein, until the time India, banking goes back to a more balanced mix of retail and wholesale.
Margin vis-a-vis growth in terms of balancing that out. We have a sustained rate.
You can see Q4, I mean, rates have been going up given our strong ALM that we've continued to manage as a company, you know, and a diversified balance sheet profile. If you look at full year, there was no impact of interest rate hikes on NIM in FY 2023.
I think that's a factual point now. Do we expect gradual moderation in margins in FY 2024? The answer is yes. It's, if you assume 1 more rate hike, we expect NIM moderation of 40 to 50 basis points on a full year basis. That's really what our. This is including 1 more rate hike.
Mind you, part of it will get mitigated if I took an overall P&L view, by peaking of OpEx metrics, best ever credit metrics, will partially mitigate that same as well. It should overall have low impact on ROA and ROE profile as we get into FY 2024 is really how we are seeing things to be.
Okay. Great. Great. Thanks and all the best. Yeah.
Thank you.
Thank you.
The next question is from the line of Dhaval from DSP Mutual Fund. Please go ahead.
Hi. Hi, Rajeev. Congrats on strong performance. I just had a couple of questions. First was relating to customer acquisition. I observed that, you know, since third quarter, we've seen significant pickup especially on physical acquisition because digital by and large has been steady around the 600,000 mark.
Just wanted to understand if we've made any major changes on the, you know, risk or any new product which is driving this acquisition engine. If you could just talk a little bit around that.
The outlook for next year, you know, just, I think you sort of constantly revised the guidance on customer acquisition as you got confidence on the, you know, both the large physical piece. How do you think about, you know, next couple of years, in terms of new customer addition? That was the first question that I have.
No, no, it's a very fair question. See, in the last 120 odd days, we've looked at capacity planning a lot more closely. Of course, geographic expansion happens as it happens because as we... Mind you, we've been running with, you know, through pandemic, it's been one action go forward, one action going back. I think, at a design level, that's really how last three years have been. In the last 120 days as things started to look up and a full normalization seemed to fully revert. Not I don't mean just in pandemic.
As we started to have greater control over the P&L, we looked at the capacity planning across our businesses, more so in sales finance part of our business, have significantly ramped up our staffing both at the stores and in terms of people who manage them. From all the way from 1 to 3,700 cities in India. That's starting to in the last 60, 75 days yield significant results.
Sorry to interrupt you, Dhaval. A request to all the participants, please restrict to 2 questions per participant. Dhaval, go ahead.
Yeah, sure. Okay, thanks.
That's really, you know. All goes well, Dhaval, we do see we should be able to dispense 35 odd million dollar, 35 odd million loans in FY 2024. You know. That would be a reasonable metric for us to. Which will be a 20% growth. It's not like, but we do see that number move.
Got it. The second question is around, you know, sort of NIM profitabilities.
I talked about it, earlier, Dhaval, that we do see some level of moderation. I made that point, right? I mean, see, we want to protect profitability because at the end of the day through COVID, that's one of the things that protected the company and all its constituents.
We expect NIM moderation of 40-50 basis points, as I said earlier. As I said, OpEx metrics have already peaked. OpEx to NIM is at 34.1. Should look anywhere between 33.7-34 on a full year basis next year. That's really what we are looking at. Credit metrics hold, they are looking strong. Net impact on ROA and ROE should be reasonably low.
Got it. you know.
I lost you. We're not able to hear.
Dhaval, sorry to interrupt you. Your voice is breaking.
Sorry. I was just saying, wish you all the very best for next year. Thank you.
Thank you. Thank you. Thank you.
Thank you. A reminder to all the participants, please restrict to two questions per participant. The next question is from the line of Mahrukh Adajania from Nomura. Please go ahead.
Yeah, hello. I just have 2 questions. The 1st one was that yesterday Bajaj Auto announced that they had applied for an NBFC license. Any impact on your business from that? That's the 1st question.
It's 5% of our balance sheet today. That's in, which is essentially captive. You're aware we started open architecture two-wheeler financing. This was announced not yesterday, this was actually announced a year odd ago. Bajaj Auto had also announced then that they're applying for an NBFC license.
I think they've applied for one, so that's also in public domain. As they get the license, they set it up, they'll decide how to go about, how much do they want to book the business here and so on and so forth. It's in a 24-month horizon, I would say we should expect no change, but we'll see. Second order, we're building our own open architecture two-wheeler financing business.
We expect we launch that business in June, July. We expect that business to be 250,000-300,000 two-wheeler loans, non-Bajaj Auto, in the current fiscal. We're now already clocking anywhere between 11,000-13,000 new accounts every month. It's a staggered rollout.
We for the first six months did not roll out in many cities. Having gained confidence, we are now accelerating the pace a little bit and foresee 250,000-300,000 open architecture accounts. That's, that's really how we see. Yeah. Sandeep, do you want to say something?
Thanks.
No, Sandeep had a point.
Mahrukh, I think, we move a significant volume for Bajaj Auto. I think we remain a large partner for them. We continue to work with them in that spirit. Post the RBI license, to run their own NFC, they can decide what they deem appropriate for their company. We continue to run the business.
Thanks a lot. My next question, you probably partly answered it, right? My next question is that most NBFCs and banks are bullish on demand for FY 2024, whereas a lot of market participants are a little worried about the high base and a possible slowdown. What is your view?
I mean, I can One, I think India seems well placed to grow at 6% and above. I mean, you know, I think that's point number one. As I said earlier, overall consumer credit growth seems quite strong.
I mean, if you look at some of the bureau data that we're tracking on a 3-year pattern standpoint, the numbers look very, very strong. As I said earlier, in some of those segments, it's my personal view, not a... When I see that level of growth, it worries me a little, but that's for each company to manage its own risk and play.
Our view would be if we could, you know, given our exit momentum, we principally think, given the best of our portfolio metrics, strong customer acquisition engine, a strong AUM growth, exit rates that we've delivered, and a scalable app and web digital stack, we should be able to grow anywhere between 20%-29% on a consolidated basis with a equally sharp focus on profitability, in FY 2024 as well.
Okay. Thanks a lot.
Thank you.
Thank you. Next question is from the line of Umang Shah from Kotak Mutual Fund. Please go ahead.
Yeah. Hi. Thanks for taking my question and, congratulations, Sujeev...
Umang, sorry to interrupt you, but we are losing your audio. May I request you to come in a better reception area, please?
Okay. Am I audible now?
We can hear you, but your voice is still breaking slightly.
I'll just repeat. 2 questions that I have. First is on the leadership transition. With Anup and Rakesh on board with on the board in their new roles, is there any change in terms of roles and responsibilities between yourself and the senior leadership team, if at all?
The answer is no. I mean, you know. Look, principally, the reason for appointment of the two senior colleagues of mine on the board, you know, as the company grows larger and works towards delivering its long-range strategy, we have to continue to give, you know, we must, as a company, continue to augment the bench.
As a result, the company onboarded both of them, who were deputy CEOs of the company, doing very large roles as board members. They bring vast business experience, and which should really help the company as it continues to grow from here on. That was the objective of their moving as board members, as executive directors.
Understood. Perfect. The second question that I have is on the asset mix. FY23, as you already spoke during your initial comments, AUM mix hasn't really changed much. Portfolio metrics are looking really great.
I think you also have closer to about 1,000 odd crores of management overlay, which is sitting on the balance sheet. In that case, given that you're talking about some NIM pressures, is it possible that we may see the tilt of the balance sheet shifting more in favor of riskier or unsecured assets, or we are targeting for maintaining similar sort of asset mix?
This is a mix. This is a mix, plus minus, as I said, 1%. It's also hard to change this mix. At INR 250,000 crore, I can't shift this mix unless and until. There's no unless and until. I can't shift the mix. We like this mix. I think it delivers, it delivers optimal outcomes from a risk management and scalability standpoint.
Plus minus 1% is really how it's likely to change. It's been not only just two years, I mean, if you go back even to 2020, the number was 32%-33%, let's say if we take mortgage as an example. These numbers are largely have been in the corridor, even 19/20, if I look at it. Not likely to change, Umang.
Understood. Perfect. Great. Thank you so much, and wish you good luck. Thanks.
Thank you.
Thank you. Next question is from the line of Saurabh Kumar from JP Morgan. Please go ahead.
Hi, sir. Two questions. One is how is your market share in, you know, subvention fee heading right now with the multiple finances? The second is in terms of credit filters, I mean, relative to your own history, where will you be? Will your credit filters now be below the 2018 levels? If you can give some color local on that. Thanks.
Yeah. No, both are fair questions. I mean, you know, at a design level, we are a market leader by a wide margin, you know that, so I don't have to tell you. Intend to remain so. The earlier point that I made to one of the questions that we have augmented our B2B infrastructure significantly, given we are seeing stability.
You are likely to see that market share grow, is really what our view is, given the investments in the last 90 days we made on staffing. The market share number, if you go by value, would be upwards of 50%. Okay? By value. Volume, volume, we make a set of choices because we have to deliver growth and profitability.
We make a set of choices, those choices we are very clear about, that they're made to ensure we make per unit economic profit. You know, if you don't make per unit economic profit, which meets your threshold, irrespective of whatever competition is doing, we will not do.
I still said we foresee that we should grow volume itself by 20% in the next fiscal. That's what our view on point of sale business is, Saurabh. On in terms of risk filters, at a design level, we were very tight over the last three years.
As I said earlier, you know that, I mean, we all now looking at pandemic in hindsight, you know, but benefit of hindsight is you're out of it also, right? I mean, we were very, very tight over the last 3 years. As you've seen data flow based on data by market, by line of business, we take decisions.
There is no answer that I have a loose stand or I have a risky stand or so. It's data determined. Whatever the data says is how we run our business, and we intend to continue to do so. You know, Sandeep was just telling me that so that people don't mistake, we used to say that our subvention market share was any...
It used to be 67%-68%. Our reasonable estimate is between 60%-65%. And I would say it's very likely in FY 2024 it'll go back to that level, definitely in terms of value. He's just saying so that the metric is not confused with. That was a value market share in terms of disbursement. The 50% number, upwards of 50% number that I talked about. This is subvention market share.
Okay. 60% go to 68%. Thank you.
Thank you.
Thank you. The next question is from the line of Bhuvaneshwar from Investor Capital. Please go ahead.
Yeah. Hello. Thank you for the opportunity. Just a data-keeping question. Sir, what would be the number of active customers as on March 23? Basically, the customers, who are currently, having active loan and.
We are banking 30 million customers currently.
Sorry?
We are banking 30 million customers currently every month.
INR 30 million.
Yes.
Okay. Okay.
We have 18, 19 million MAUs on the Digital Lab platform. The real banking number is real, and material.
Okay. Thank you.
Yes.
Thank you. The next question is from the line of Abhishek from HSBC. Please go ahead. Abhishek Murarka, could you unmute your line from your side and go ahead with your question, please? Due to no response, we move on to the next participant. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah. Hi. Thanks for the opportunity. A couple of questions. First, again, you have explained in details, but now considering that your customer franchise has reached almost closer to a third of the entire sort of, bureau, database count.
Now, from here onwards, I mean, you are still expecting a kind of a close to, 16%-17% of growth in the franchisee annually. I mean, do you expect, I mean, you to continue to sort of increase the penetration in the current, bureau database customers? You expect this, the, you know, the so-called loanable customer of the bureau database, it's safe to grow at a certain rate? That's number 1.
sound. The instruction states: "REMOVE filler sounds ("um," "uh," "ah") and false starts where the speaker begins a word or phrase, abandons it, and restarts". The original transcript: `Uh, second, uh, just, uh, in terms of your e-experience, uh, are you seeing some kind of a slowdown in mortgages, uh, in this kind of a high rate environment, uh, in, uh, the, uh, current going month? I mean, what are your sort of, uh, reading for... Early reading for FY twenty-four mortgage then? So these are my two questions. Thank you.
You know, in general, our experience is for the new customers that we bring on board between 60% and 65% have a bureau score of 750 and the rest 30%, 35% are new to credit. That's our, in general, multi-year track record.
That's our experience. That's empirical experience over the last many, many years. That has not changed even in FY23. I think there remains a lot of room, is the only point I would make. On home loan demand, Atul is right person to opine, but I'll just say that I think clearly higher interest rate and high inflation in general lead to slower mortgage demand. I think so there's no.
I'm only making a point that is known for the last many decades. It just flows through, at a cascading level, into the sectors. I think that's the only point I would make. We grew 24% in the quarter that went by on a full year basis grew 30%. Our size remains small. Atul can add.
Yeah. As far as home loan is concerned, what we have seen in last two quarters, towards in the affordable segment, affordable segment when we say, I don't mean affordable as per EWS definition, but let us say 50 lakh kind of a unit. We have seen a slowness in uptick because the, as the higher interest rates and the inflation, I think that's breaking into some part.
Overall demand still remains strong. Overall home sales remain strong. Inventory at a industry level I think is all-time low. In few markets it is even less than 12 months, which is there. The luxury demand in the upper, premium segment demand remains very strong. That's what we'll say.v In FY 2024, as of now, we don't see a major demand compression, if I have to say, my view or, the view, the way we are looking at the market.
I'll just add to what Atul said. Our overall size remains small. aggregate balance sheet is INR 77,000? INR 77,000 Crore aggregate, INR 69,500 there and another INR 7,000 residual balance sheet there. INR 78,000 crore. We have a lot of headroom to grow, even if the growth is slowing down.
Thank you. Thank you.
Thank you. The next question is from the line of Prakhar Sharma from Jefferies India. Please go ahead.
Thank you. Rajeev, just two questions. One from a slightly longer term perspective.
Can you give your name?
Prakash Sharma . Yeah, yeah. Sorry. Just wanted to check on 2 things. One is, on, you know, the upcoming announcements around one of the large corporates, you know, Reliance Group trying to foray into this company, into the segment.
I know hardly anything is known, but, you know, from your perspective, Rajeev, how do you prepare, you know, Bajaj Finance, for something which can be intense? We don't know, but things, you know, how do you prepare, within the information that you have? That is the first thing, and I'll have a small data question after that.
Yeah. You know, I wouldn't like to comment on competition. That's point number one I would make. India, you know, represents tremendous, very large opportunity for long-term growth in financial services. What is in my control is that I would work, instead work towards realizing our ambition of 100 million consumers, which is really the ambition that we have outlined, and take a disproportionate share of these 100 million consumers payments and financial services, products and services.
With a laser-sharp focus, I would say, on frictionless experience. That's really what I would do. Opportunity remains very large, and we compete. We compete today with those who've been in this business for decades and decades, and it's a highly competitive industry. That's really what I would say, Prakash.
Got it. Just one small clarification, if you can make on this, you know, margin trajectory and cost and, you know, maybe it's neutral at an aggregate level, but just to understand the margin lever more. This 30-40 basis point readjustment that we could see between FY23 and FY24, you know, is it contingent upon another rate hike or it would nevertheless happen and we would probably still have, you know, only a little bit impact on ROE, nothing more than that? If you can clarify that part.
Prakash, 40-50 basis point compression that Rajeev referred to, does factor in potential 1 increase by RBI. It does take into that consideration. That's point number one. Point number two is, again, Rajeev clarified that we don't expect a significant impact on the ROA and ROE for the company. I think OpEx to NIM, which is currently at over 35% for the current year, we are expecting it to be below 34% in the next FY 2024. That should give us some saving. Overall impact to ROA could be 5, 10, 15 basis point at max.
Perfect. Thank you so much.
Thank you.
Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yes. Thank you for taking my question. My first question is, in the last quarter, when we articulated our long-range strategy, few segments that we are kind of looking to enter, MFI, vehicle financing. I just wanted to understand, are these all going to be organic capabilities that we are going to build at Bajaj Finance or there could be some acquisitions along the way?
All organic, no inorganic. That's the answer. We like to build businesses rather than buy businesses. We've already outlined our ambition. Towards the ambition, products that of our customers' wallet that we don't offer, which we got to cover.
You know, I also said, however, in the last quarter's call that the new product launches contribution to AUM will not be material number for next three years. Let me make that point. Let me reinforce actually that point. The next three-year AUM is essentially going to come from the current set of products that, if you take a five-year view, which is really why we published a five-year strategy, the answer is yes.
In a 3-year horizon, we are not like to see material change in the product mix stack and the contribution of these products to the overall AUM. Next 3-year AUM will come from existing set of products, essentially.
Thank you, Rajeev. My last question is again on this personal loans or the unsecured personal loans. You did briefly touch upon that earlier, wherein you also highlighted that, given that we have a whole host of NBFCs who have entered this segment, NBFCs who have not seen many cycles in the past and who have entered this segment, how asset quality could really pan out for this product?
My question here is, Rajeev, I mean, from what I understand, we were at least among NBFCs, the clear leader, in this product segment, and probably we still are. Given that we have, I mean, I can think of so many NBFCs today who have entered this personal loans OG product segment, started offering all these flexi loans, which we have championed in the past. Are you seeing, I mean, the pie itself going up, or are they some of these NBFCs gaining market share from you in this segment?
When I was talking unsecured personal loan, I was not meaning NBFCs. Let me clarify. I was meaning the overall banking system because NBFCs are only 20% of the system. The 80% is banking system. I think that's. I was meaning the entire banking system. Banking being or the financial system, including PSU, private, public and NBFC. The order is, this is not the order. I mean all.
As I said, when I look at the numbers, I hope people have modeled their models to know these are fixed interest rate products, have a cycle, and tenure have only been going longer across the industry, what we can see. That's really what I was meaning. I was not meaning fintech.
I must reinforce that point. I was not meaning fintech. I was not meaning small loans. I was referring to 3 lakh plus average personal loan, which is... that's really what I was principally referring to because the small ticket personal loans deliver volumes.
They don't deliver disbursements, they don't deliver value. as I said, as Anup is saying that, is it risk adjusted or not? That's the point Anup is making. It's a fixed interest rate, long tenure, cycle not accounted for, frame is the only point I'm flagging, if I may say so.
Yeah. Fair enough. This is useful. Thank you very much, and wish you and your team all the best.
only 1 point. I mean, you know, the rightful thing to do would be to seek, if I may say so, as investor community, so that I'm not, is to look at bureau data. You know, I'm not speaking from personal assessment. I'm speaking from a from bureau data on a on a on a formal structure basis is the reason I'm making the point, so that it's. I would encourage you guys to engage them and seek information, whatever they are able to provide
Thank you so much.
Thank you. The next question is from the line of
Piran Engineer for CLSA India. Please go ahead.
Yeah, hi. Thanks for taking my question. Firstly, if I may just start off, given that you all are meaningful players in the credit card market, and revolver shares across the industry are down, just what are your thoughts on, you know, what will it take to improve? What are the levers to offset that as a credit card player?
I mean, you know, we essentially distribute on behalf of RBL and DBS. I see the RBI data on spends and revolve and so on and so forth. It clearly does seem that structurally revolve rate is down, and nobody has answered to spends are not down that much. Spends are up, but revolve is down.
There's something at work, and nobody seems to have the answer. We essentially are mere distributors, so we have only that much insight into the profile. Whatever I hear, I do clearly hear the revolve rates are down anywhere between 8%, 10%, 11%. You know, nobody knows the answer.
To offset that.
You can't offset that, right? I mean, you know, it's a, it'll build up. Having said that, I would just say to you that principally, the only logical reasoning that everybody is able to come to is that a lot of customers who would revolve and over long periods of time, and these cycles have been seen in the Western market when a crisis happens, the revolve rate drops dramatically. Over time, the new customers come in whose revolve rates are high, and it builds as part of the overall balance sheet to reflect a high revolve rate. That's really a cycle play.
Right.
Yeah. Sometime it's time that you'd wait for, it won't happen quickly, but would it sometime go back? The answer is yes. When? One will have to watch monthly data. So far it's not demonstrating is what it seems to me in general, that revolve rates are up in any given manner. From whatever I can read in public domain.
Okay, fair enough. My next question, you know, basically in the last con call, we discussed what sort of yield hikes have been taken in fixed rate products. You know, in the last 9 months it was about 50-70 basis points. Have we seen further rate hikes in fourth quarter and are we expecting in FY24?
The basic reason of asking this is that, you know, in the last 1 year, home loan players have passed on the entire cost of funds to their borrowers, whereas auto loans, personal loans, these guys who you would have thought would have been able to pass on, have not been able to pass on the entire increase in cost of funds, which is pretty counterintuitive. Just wanted to get your thoughts on that.
No, your point is absolutely correct. Logically should have happened. It goes back to the point on competitive intensity, right? People are gathering assets. Are they mispricing asset gathering is a question that will have to be answered someday. Is the conclusion that one would reach is what I would say, Piran. It's for each company to determine. Sorry.
Have we hiked after December?
No, we've not.
Like pre-December it was 60, 70 bits.
We've not hiked. We've not hiked since then, no.
Okay. Okay. If I just make Sreenivasan a yes or no question now with this removal of commission caps for insurers, you know, any meaningfully higher distribution income possibility for you?
Piran, difficult to answer. I think IRDAI has come out with regulation at this point in time. The insurance companies are expected to review it, see the performance of the intermediary, see how penetration is going up. Based on that, probably take a call in terms of what is rightful commission that they deem appropriate. I would say.
It's agent by agent.
Depending on the size, scale, and the unique feature, that a corporate agent can bring to the insurance company.
Performance of the portfolio.
I think IRDAI has reasonably liberalized it. They have given caps, and within that, the insurance company is expected to form a policy. We'll await that.
Got it. Great. Thanks for your answers. Wish you all the best.
Thank you. Ladies and gentlemen, that will be the last question for today. I now hand the conference over to Mr. Sameer Bhise for closing comments.
Thank you, Nirav. Thank you everyone for joining this call today. Thank you to Rajeev Jain and team for giving me the opportunity.
Thank you.
Thank you.
Thank you all. Thank you.
Thank you so much.
Very nice. Good evening.
Thank you very much. On behalf of JM Financial, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.