Ladies and gentlemen, good day, welcome to Bajaj Finance Limited Q4 FY 2026 earnings conference call hosted by JM Financial 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. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ajit Kumar, Executive Director, JM Financial Limited. Thank you, and over to you, Mr. Kumar.
Thank you, Nirav. Good evening, everyone. This is Ajit Kumar from JM Financial. Welcome to Q4 FY 2026 earnings call of Bajaj Finance Limited. On behalf of JM Financial, I would like to thank Bajaj Finance management for giving us the opportunity to host them. To discuss the earnings, I am pleased to welcome Mr. Rajeev Jain, Vice Chairman and Managing Director, Mr. Sandeep Jain, Chief Operating Officer and Chief Financial Officer, and other senior members of the management team. I now invite Mr. Rajeev Jain for his opening remarks, post which we will open the floor for Q&A. Over to you, Rajeev.
Thank you, Ajit. Thank you, JM. Good evening or good morning, depending on the geography that you are in. Welcome to BFL Q4 earnings call. The investor deck for Q4 has been uploaded on our website. I hope you had an opportunity to go through the same. I will focus on key updates for Q4, year-on-year, and management assessment before I open the floor for Q&A. I expect to take between 20- 25 odd minutes. Let me just quickly jump to panel number four. Let me just clarify, and it is given in yellow there that these numbers are before one-time actions and a set of presentation changes.
Overall, I would say from a company standpoint, it was a pretty strong quarter across all key metrics of volume, new customer addition, AUM growth, credit cost, profit growth, return on assets and return on equity. During the quarter, the company crossed a milestone of INR 5 lakh crore AUM. It's a proud moment for us as a company, to end the quarter at approximately INR 510,000 crore. In Q4, AUM grew by 22.4% and PAT grew by 26.7%. In Q4, AUM grew by a record INR 25,500 odd crores. We booked 12.9 million loans and added 3.93 million new customers to the franchise. Overall, the customer franchise, as of FY 2026, March stood at 119.3 million customers.
Let me now go to panel five. It's a little busy slide. In this panel, I'll try and explain, there are a set of one-timers that are pertaining to Q4 FY 2025 and Q4 FY 2026. The principal objective of this panel is to provide a simplified reconciliation of core financial performance with that of reported numbers. That's the objective. Let me start first of all with Q4 FY 2025 last year. In Q4 last year, the company had recorded an additional ECL provision of INR 359 crores. Also in Q4 FY 2025, the company had recorded a tax benefit of INR 348 crores. That's Q4 last year.
In Q4 this year, the company has taken an additional ECL provision of INR 142 crores towards management and macroeconomic overlay. That's point number one. Two, the company has also revised disclosure of recoveries against written off loans. This was earlier presented under other operating income. It'll henceforth, effective Q4 FY 2026, will be reported under loan losses and provisions as a net number. This has no impact on PBT and PAT for the quarter, but changes the ratios. It principally leads to redefining two key metrics which are important for investors and for us as management, which is OpEx to NTI and loan loss to average AR.
As a result of this change, the OpEx to NTI is increasing from 33.2%, which is what it has come in, to 33.8% as a result of this reporting change. Loan loss to average AR is reducing from 1.75%- 1.65%. This is really how we will report going forward. As a company, you'll have to adjust the analysts will have to adjust the numbers to reflect this. Just to summarize once again, the, this panel principally is intended to help clearly depict the core profitability, which has seen a growth of 26% on PBT, as you can see, and 27% for PAT. Let's now jump.
I'll quickly cover the key points on panels 6, 7, and 8. I'll only cover the high points. As I already said, AUM crossed INR 5 lakh crore. The growth was pretty secular across all businesses. The gold loan portfolio continued to, you know, witness strong momentum. It grew by 115%. The business now contributes to 3.5% of overall AUM. We foresee gold loan portfolio to probably cross 5 odd % of total AUM by FY 2027. Other lines of businesses also continue to grow in a healthy manner. That's covered in panels 6- 7 later in the slides. MSME continued to see muted growth.
It grew by 6% only on account of a set of proactive risk actions that we have been taking since Q2 FY 2026. We expect that it should come back to double-digit growth, or the company growth momentum between Q2 and Q3 of FY 2027. Cost of funds improved by 4 basis points in Q4 and came in at 7.41%. NIM remained steady. Deposit book came in at INR 68,536 crores. It contributed to 16% of consolidated borrowings. OPEX to NTI, going back to the earlier point that I made, came in at 33.8% in Q4 as against 33.6%. These are new numbers.
Otherwise, it came in at 33.2 and an improvement of 10 basis points versus Q4 last year. There was a marginal increase sequentially, primarily due to, now I'm talking sequential, on account of cost of new labor code and accelerated gold loan branch expansion. AI implementation continues to accelerate across the length and the breadth of the company, and I'll cover that shortly. Full-time employees stood at 71,613 employees. We added just a tad below 1,800 employees in Q4. 50% of them were actually in gold loan and MFI.
Loan loss to average AUM, as you know, what investors have been used to, came in at 175 basis points or 1.75% as against 1.97% in same period last year or Q4 FY 2025. Stage two and Stage three assets, just to give you texture on credit quality, have sequentially reduced by INR 430 odd crores. We've seen continued improvement in this metric through FY 2026 over the last three quarters. The vintage credit performance, which does not show up in loan loss to average AUM across 3 MOB, 6 MOB, 9 MOB, continues to reflect significant improvement in credit quality and gives me reasonably high degree of optimism about credit cost outlook for FY 2027.
I'll also cover two key points which will further reflect our confidence on credit cost outlook for next fiscal, which I'll cover in a moment. GNPA, NNPA came in at 1.01 and NNPA came in at 41 basis points. Provision coverage ratio was at 60% as against 54% same time last year. The point that I made on credit quality, a reasonable amount of credit costs in the previous year came in from the MSME lines of business, which, as I said, we've already taken reduction, proactive reduction by close to 30%. That's why it grew by 6% in full year where the company grew by 22.5%.
It should be back in growth mode. I think in our assessment, the worst is behind us by June 2026. The captive two-wheeler and three-wheeler business, which now contributes to less than 1% of AUM, but even in Q4 accounted for 13% of GNPA and 5% of overall credit costs in Q4. This book will principally just wind down to less than INR 1,500 odd crores which is virtually nothing, by September 2026. It'll lead to further improvement in GNPA and should result in lower credit costs for FY 2027. Let me now just cover FinAI transformation. There are 5 panels.
They may seem heavy, but I want to spend just a moment to make a point that, and that's why we're providing a reasonable amount of coverage on FinAI transformation, that there's a principal difference between deploying use cases and transformation. Fundamentally, transformation is about reshaping the business model, and in general, covers all aspects of business. I just want to highlight that we are doing transformation, and we are not doing use case deployment. That's why we are presenting the expanse of the work company is doing on AI. That's just one point I want to leave.
We expect FY 2027 to be probably the busiest year from a FinAI transformation in terms of outcomes, inputs and outputs, as a firm and significant amount of time, effort, and energy of management team over the last 15, 18 months is going into it and should start to reflect in terms of the way consumer and employees experience us as a company in FY 2027. Just to give you some texture on the transformation work, I'm on panel 9. The company, I mean, the biggest part of AI is about whether you have the talent or not. We have 203 people in the firm who are dedicated as AI unit.
We are expanding that to 363 odd resources by June 2027. We continue to expand. These are the AI resourcing to ensure it can meet our aspirations and ambitions of becoming a FinAI firm. The step number one in FinAI transformation clearly is about data for AI. You know, 52 million voice-to-data conversion call happened. Around 2.3 million text-to-data conversion happened and leading to significantly better insights on engagements or conversations with customers. AI-generated digital banners and videos are enabling faster and cost-efficient marketing and discovery infrastructure. Almost 100% of our videos are now AI-generated. On customer engagement, 27 AI voice and text bots are now live, and all customer engagement is going into bot interface by June 2026.
By June 26, any communication across any channel by us as a firm, whether for sales, service, GMS, would have a Text bot in it. Across 32 different lines of businesses that we run, plus whole hosts of services. We send, as I've said in the past, 260 million pieces of communication on a monthly basis. All of them will have a bot embedded in it. On customer onboarding, AI-based data extraction, auto-filler application, product level scans, label scan, auto QC are increasingly reducing manual effort, improving controllership and straight-through processing. There are a whole host of numbers that I've given here. The idea is to all the way between panel 9, 10, and 13. There are numbers that you can see here.
As I said, the intent is to principally give you texture that how we are structurally going about process by process and asking a question, why can AI not be deployed in these processes rather than why it can be deployed. The most important dimension, I'm on panel 12, is we'll start to deploy agentic platforms on our from an architecture and roadmap standpoint. In FY 2027, we expect to deploy 800+ autonomous agents across operations, EMS, HR, technology and risk. That's really on AI. We can take more questions. I don't want to take more time talking about it. Let me just quickly go to full-year performance. That's panel 20.
At a core-to-core level, it is a strong year for the company, across all key metrics. I think, I am reasonably confident that we are getting back into a strong growth momentum across all key metrics as a firm. We crossed two milestones, as I said, INR 5 lakh crore AUM and 50 million new loans. The year so far has started off pretty well. It's likely for the first time. We've never done 5 million loans in a month. I mean, while the West Asia conflict is going on one hand, when we look at the consumer momentum on the ground, it's very likely we'll cross excess of 5 million-plus loans in the month. Our last peak was 4.6 odd million loans.
That was in festival period. Clearly, the company is continues to generate momentum. Overall, last year, we booked 52.5 million loans and added 17.5 million new customers on a full-year basis. AUM, I talked about, grew 22%. PAT grew 24%. ROA for OpEx to NTI, I talked about it, showed an improvement of 36 basis points despite rapid expansion of gold loan branches, reasonable expansion of MFI branches by the firm in last year. That's really on the full-year performance. You guys anyway track it, so I don't have to cover that. Let me cover what is important as to how do we see the outlook to be.
Just on the previous year gone by, the board of directors have dividend has been recommended to shareholders of INR 6 per equity share. That's a 600% dividend. It's broadly in line with the dividend last year. As we had outlined that part of the dilution that we do in BHFL will be shared with the shareholders. We've continued to in that spirit, continued to stay it in on course of that as well. That's really last year. Let me now go to important panel as to how do we see the management assessment to be from a next fiscal standpoint. As I said, the year so far seems to have started pretty well.
We are well on course to cross 5 million loans in a single month, as a firm. I'm on panel.
Twenty-eight.
No, no. Go to 27. Yeah. I'm on panel 28. Of course, I must just flag that the FY 2027 assessment is based on expectations of easing geopolitical tensions and macro stability. That's, I'm sure it's understood, but I thought it's important I make the point yet again, that it's contingent upon, you know, easing geopolitical tensions and macro stability. Subject to that, the first point is on transformation, making the business AI-ready. I've already talked about it. We will see significant acceleration and deployment of AI use cases across revenue, cost, customer engagement, underwriting, controllership, security, as a firm. In terms of customer franchise, we continue to be confident of adding 15 million-17 million new customers in FY 2027.
In terms of AUM, we're confident of a 22%-24% AUM growth aided by new businesses that we've launched in the last few years as they begin to scale. Even last year, they contributed 3% of the total growth. Rather 3.5% of total growth even in the previous fiscal. As we gain greater confidence, our share, market share in those businesses and their contribution to the business should grow. NIM, we expect marginal moderation. It's a little bit contingent on how interest rates play out, leading to caused by geopolitical tensions. On OpEx to NTI, we expect to see continued improvement from 25-40 basis points from current levels.
On credit costs, this is a new credit cost metric, which as I said, we just reported 165 basis points or 1.65% credit cost to AUM. The revised metric, we expect this to continue to trend down. The reasons I talked about earlier, which is winding down our two-wheeler portfolio and the MSME business, being out of the woods by June 26th. In terms of profitability, we are pretty optimistic about the profit growth. ROA came in, as of fourth quarter, at 4.6%. We continue to guide for a 4.4%-4.6%. Return on equity came in at 20%. In the current quarter, we continue to guide for 19%-20%.
GNPA and NPA, we expect them to remain range bound and well within our long-term guidance. Move. I think that's really all I have to cover. Just quickly on BHFL, company's already reported its performance. They had a good quarter on disbursements, AUM asset quality, OPEX and profit. Their disbursements and AUM growth remained strong at 23%. Their loan approvals are up a record 37%. OPEX to NTI continue to improve for them. Came in at 19.2% as against 21.8%. I'm sure Atul has shared what his long-term view on where he foresees OPEX to NTI to get to to be a preeminent mortgage company in this country.
PBT for them as of in Q4 grew by 20%, and PAT, excluding one-time reversal, grew by 20%. Asset quality continue to remain very, very healthy with GNPA and NPA at 27 and 11 basis points. BFSL, though small, continued to grow, delivered a 77% growth in AUM, and their profits were up 50%. They added 124,000 new customers in Q4 and delivered a ROE of 2.5%. That's really on BFL Q4, the management guidance, and its subsidiaries, the management guidance, for FY 2027. Just the last point which I did not cover, I should have covered on panel 60, the in terms of portfolio quality, across panel 60.
Seventy.
70 onwards, 70, 71, 72, and 73 continue to all be in green, are seeing sequential improvements across all portfolios. Only business loan, professional loans is yellow, which I've articulated twice over the last 20 minutes on how we see, how we foresee that this should turn. This will not turn green in a quarter. Because the denominator also has a role to play. As it starts to grow by Q2 or Q3, or we will start to see this turn to green. That's really the quarter gone by, year gone by, and our guidance for assessment, management assessment for next year. We are happy to take questions with management.
Thank you very much. We will now begin with 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhishek Murarka from HSBC. Please go ahead.
Hi, Rajeev. Hi, Sandeep.
Hi, Abhishek.
Thanks for taking my question. Hi. Just to get this whole guidance of credit costs very clear, if you don't mind, can I refer to the press release where you've given a summary of consolidated financial results?
Please.
Your number is gross loan provisions of INR 2,206 crores and then INR 260 crores of recoveries. The net loan provision is INR 1,866 crores. That 1,866 is works out to 165 basis points in Q4. Against that, you're guiding for 145-160 basis points next year, full year.
Yes.
Is that-
That's perfect.
the right understanding?
Yes. Yes.
That is perfect, right?
Yes. Yes.
Yeah. Just the annual number, INR 7,934, that works out to INR 175. On an annual basis, INR 175 goes down to INR 145-INR 160.
That's all.
That is-
Yes.
Look...
Yes.
Perfect. Okay. In this 145- 160, as you said, this takes into account the de-escalation of geopolitical issues. Here you have not accounted for any kind of adverse impact of these geopolitical issues, right?
No. No.
If anything comes up second half or something, then this may go up depending on how things play out.
Yes. The important point, however. You finish. You finish, Abhishek.
Yeah, no. That is very good. Please go ahead. Yeah. That was what I want.
I would just say the more important point or a meta point in this is we are entering the year on from, on credit costs with tailwinds. You know, headwind over headwind virtually would consume twice the fuel.
Right.
We are entering the year with tailwinds. We have Momentum, we can navigate even if the environment weakened. I think that's how I am looking at the business at this point in time.
I think what Rajeev Jain is trying to say is some level of conservatism in terms of doing the number crunching and giving a guidance of 145-160 has been done. We have to wait and see how situation evolves in that zone.
I'm also making a point that we have tailwinds on credit costs. Let's, you know, we don't have headwinds. That itself is a big help.
Thank you. Abhishek, I will request you to come back for a follow-up question. Ladies and gentlemen, a kind request, please limit yourself to one question per participant and rejoin the queue for a follow-up question. Next question is from the line of Shreya Shivani from Nomura. Please go ahead.
Thank you for the opportunity. My question is on the guidance, the long-term guidance of ROA probably inching towards 4.3%-4.7%. I mean, for FY 2027, I understand you've given the explanation on OpEx, and probably that'll be the bigger driver. If you can help us get into the details of this 4.3%-4.7% over the longer term that you have spoken about. For FY 2027, as per the, I mean, the basic maths that I was picking up, you may need a little bit more NIM expansion to achieve the ROA guidance for FY 2027. Is my understanding correct or not? Please let us know.
Sorry. Just repeat the last point.
For FY 2027 also, as per my math, you will need a NIM expansion also, or at least a NIM, stable flat NIM or an expanding NIM to achieve the ROA guidance for FY 2027.
Yeah. Okay. Got it. See, the answer is, this to the second part is no. Look, if you, if you go back to, if you go to our panel 35, which is a 19-year long snapshot, feels like it doesn't feel like that long, actually, 19 years. If you see, if you see since FY 2020. Forget FY 2021, but even if you take FY 2018, FY 2019, 4.2, 4.1. FY 2022, 4.2. I'm leaving four point. I mean, no. FY 2023, 5.3, 5.1, 4.6, 4.3. I think we continue to numbers speak for themselves. Now I'll add a dimension of ROE. ROE guidance of 20-22, last 6 years adjusted for COVID speaks for themselves.
During this period, as you can see from a balance sheet standpoint, the balance sheet moved from INR 115,000 crore to now INR 510,000 crore. Should give you confidence that we can continue to sustain the ROA at times by expanding margins, at times by reducing costs, at times by reducing credit costs. These are the 3 principal levers in terms either growth, 4 levers rather, growth, margin expansion.
Operating expense.
Operating expense and credit costs. Depending on how, what the environment is, what is the state of the business, we orchestrate these four to deliver an outcome of 4.3%-4.7% ROA and a 20%-22% ROE to investors on a long-term basis.
Yeah. Just to help you with the maths on 4.6, the guidance metric for the next year on ROA. There's a reason why Rajeev, when he presented the financial statement and numbers, he said, "Look at the core financial performance." If you look at core financial performance for last year, the ROA came in at 4.6. The guidance that we are giving for next year is 4.4-4.6. I don't think that there will be a need for NIM expansion in the next year to be able to deliver that. We have to ensure that we grow nicely, which is where the 20%-24% guidance has been given.
We have to ensure that we remain reasonably anchored on the operating performance of the company, which is OpEx to NT as a metric and loan loss to credit, loan loss to average AUM. As we deliver that, I think there is enough and more headroom available in the ROA profile of the company.
Thank you very much. Next question is from line of Kunal Shah from Citigroup. Please go ahead.
Yeah. So on the growth guidance, 22%-24% odd, apart from SME, which you appear maybe it's almost bottomed out, we have started to see the sequential growth and we will get into double digits. X of that. And the newer business is where do we see we would be able to grow at a pace faster than the overall AUM growth? And which segments do you still believe could continue to lag? Particularly on our core segments as well, if you can highlight that would be helpful. Yeah.
Kunal, the idea would be to maintain the portfolio mix. I think that's very, very dear to us. That gives us the right balance of risk and profitability. That's going to be the agenda for next year as well. Having said so, I think when we look at current year number of 22.4% of AUM growth, this is impacted by two things. One, the captive two-wheeler financing business has seen an attrition of 60%. That's almost INR 6,500 crore of attrition that we have recorded in the current year on account of winding down of captive business. That's one. Second, MSME, the growth used to be 25%, 28%, 30%, has been brought down to 6%.
These two business, one, the impact of captive dial down will be much, much lesser in the next year. MSME should start to come back into some growth momentum to double the number from second half onwards. These two things should provide tailwind on the overall growth number. Having said so, there are few businesses which are new in nature, like gold loan financing, tractors, CV, and so on and so forth. They may grow faster than rest of the business because of very, very low base. Of course, gold is not no longer a low base. It's INR 18,000 crore balance sheet.
Given that we are taking a growth stance in that business of doubling down on our branch presence in that business in the next year, we are reasonably hopeful that that should lead the overall growth profile of the company for the next year as well. Rajeev did make a point that the current contribution of gold loan is about 3.5% of the balance sheet. All goes well, this should start to look towards 5% kind of number in the next year as well. These are some of the business where we see there could be an additional growth potential. Having said so, we find secular growth opportunity across all businesses, and our market share in most of the businesses continues to remain small, allowing us significant headroom for growth perspective.
Just a last point I'll make, Kunal Shah, if you plot panel 63 of composition of our balance sheet over a period of even last 5 years, you will not see material movement at all, actually. You know, you'll see very little movement. Number 1, the base of each one of them is very large. I mean, there are moments like gold loans that come once in a while.
Secular
... you will see reasonable secular growth and a reasonably diversified portfolio.
Thank you. Next question is from the line of Piran Engineer from CLSA. Please go ahead.
Hi, team. Congrats on the really strong set of numbers. I'll try to squeeze in 2 questions, if you don't mind. Firstly, can you just share some portfolio cuts or what you're seeing in the environment that gives you the confidence to pick up on MSME growth? That's my first question. Second question is, you know, in new consumer products like car loans, gold loans, et cetera, what percentage of our business comes from existing customers and how many from new customers?
Yeah. Piran, if you recall in Q3, I made a point that I'm not necessarily a very big believer in macro. We are a micro business. You'll find it in transcript of last quarter. At a design level, MSME is a very, very large sector. You just have to pick what you can digest from a risk standpoint, and that's really what we're doing. Even at this point of time as we speak, based on our assessment, we pruned business by INR 100 odd crores. We used to do INR 1,800 crores. We brought it down to INR 1,400 crores. We've further taken cuts in the current month based on our understanding. As I mentioned, the guidance next year is based on stabilized, stable environment and geopolitical environment and macro stability.
We are very clear about from a micro standpoint, from a location, businesses, and underwriting as to what will deliver growth. I think that's just first part of your answer to your MSME point. It's a reasonable takeaway for us that our businesses we know, but that we have to always remember our business is micro, not macro. I think that's point one. The second point you had asked on?
Contribution of new existing customer for new business.
For new businesses, it's a metric that we drive. Let's say if you take two-wheeler as an example, okay? It's a new business, 3 years old. The open architecture two-wheeler business. Oh, sorry. ETB will perform significantly better than NTB. 50% of the two-wheeler customers that we bring to the table is an ETB customer. Between 43%-45% of new car financing customers that we bring to the table every month, that's an INR 450 odd crores of, INR 450-INR 500 crores of volumes you do every month comes from ETB.
As I'd shared as part of our annual investor, you know, outlook, the five-year outlook, that business by business, the 120 million franchise principally has very high wallet share on across each lines of business that we are in. I gave example of new car finance. New car finance and used car finance, 35% of all new car finance and used car finance as per bureau data principally comes from these 120 million customers. Okay. Personal loan, our market share is between 8.5% and 9%. At India level, the number is-
Forty
40%.
Forty-five.
40%-45% of personal loans takers in India come from our 120 million franchise. I can go on business by business. Risk and wallet and operating leverage, all three require us to focus on this metric across all our 32 lines of businesses. We track it very diligently and ensure that we deliver the mix that we have planned for.
Thank you. Next question is from the line of Kuntal Shah from OakLane Capital. Please go ahead.
Hi, team. Thanks for this opportunity and thanks for wonderful results. I have two questions. One is what kind of CapEx or investment we are going into AI infra? Can you sort of give some color and what kind of ROI and payback you are envisaging? Secondly is when it will start impacting the P&L via either cost saving or, you know?
Some kind of,
Yeah.
... faster turnaround or whatever the metrics you are tracking, if we just play with that.
Kuntal, yeah. Benefits, as I said, consumers and employees both should experience in the current year, what AI does for them. That's one part. As I said, SMS or bots being the simplest example, walking into 3,000 stores or we have sort of 2,700 across branch gold loan branches, customer service branches, and in stores. We will deploy close to 2,700 cameras, customer identification, reduce friction, which means faster turnaround, which means lower cost. I mean, better customer experience on one side and lower cost on the other. A AI call center agent is one-third of the cost straight. That's the, so we at a point in time had 5,000 outbound voice agents.
that number itself we have brought down, step number one, in terms of optimization. Two, 30% of them are now AI voice agents. That's one-third of the cost straight. line by line. In terms of overall CapEx, first question to Sandeep is do we publish CapEx or we don't?
We don't.
We don't. You know, otherwise it'll become a new added metric and we anyway publish hundreds of metrics. One more metric will get added, so please excuse us on that. We are not. Let me make a point. We are not pulling back any stops in investing whatever it takes in being front of the seat and center. The, I talked about the talent expansion. It's not easy to get AI talent. Principally, there's no concept of AI talent. These are existing machine learning folks who are actually being trained. They're training themselves, and we are helping them with use cases to convert into AI researchers or AI talent. That's really what we're doing. What they need is compute, which is not that easily available.
What they need is sponsorship, which is not that easily available. What they need is use cases, which is not that easily available. We are delivering those three to them. I think overall I would say, and I'll hand it over to Anurag for a moment. He's jumping to speak. That it is probably one of the most exciting part of the work that we're doing after a long, long time. I'll just now hand over to Anurag for him to expand on it.
Yeah. Kuntal, Rajeev covered a lot of use cases. I might just also say, we are parallelly investing deeply on the security and the compliance infrastructure as well. You're aware that RBI had released a free AI framework. We have consumed and we are in process of implementing the explainability, auditability and the transparency what the free AI report talks about. Parallelly, a lot of investments going into the security architecture as well, apart from building the new set of capabilities, what Rajeev talked about it.
You'll experience, Kuntal, as consumers, on the app very soon, AI summaries will start to appear because there is 120,000 Figmas that we have created over the last five years. They need summarization, if you simplify the conversation. Just give us 3, 4 months and you'll start to see very soon. We have 71,000 employees. So far we used to train using PPTs. I've spent 33 years working. They're all transitioning by end of May to Copilots. They'll all use Copilots for, which is NLP-based infrastructure to get trained. That's the level of transformation, process by process, that we are actually in the process of implementing. We are not planning. We are in the process of implementing.
Just as an added point, last year, we processed on peak of Diwali. On a single day, we processed like 600,000 loans, which without AI we were like 100,000 loans. We had capacity to process only 100,000 loans on a single day. You might see next Diwali, like we'll process close to 1 million loan accounts on a single day as against the numbers that I just mentioned. Yeah.
Thank you. Next question is from the line of Viral Shah from IIFL Capital. Please go ahead.
Yeah. Hi, Rajeev and Sandeep. Thanks for the opportunity. I have two questions more connected to each other. First thing is, when I look at your the PCR coverage across stage one and two especially, I think even versus the last quarter, you have further showed it up in this quarter. Correct me if I'm wrong, now this is basically at almost highest levels that we have seen in our history, barring the COVID periods. Do you, like over here, is there any cushion that has been built up and, through the course of next year you will see some of that unwinding? Basically, or does your PCR levels remain over here next year or does it reduce?
The connected question to this is the credit cost guidance, Rajeev, you mentioned basically of 1.45%-1.6%. Does this, the change versus 165-175 basis points in the last quarter you guided for FY 2027, is this purely because of the change in the presentation of the recoveries?
Oh, no. Oh, yeah. That's right. Yeah. Good. Yeah. Yeah. I think your assessment is correct versus 165-175 that Rajeev. Becomes 140. That becomes 140-170, because of 160 because of the change in the presentation. Your assessment is correct on that. As regard the ECL provisioning across stage one, stage two, stage three, this is the bottoms-up exercise that we do every year. We are moving from yearly exercise to quarterly exercise. These are bottoms-up calculation done by product, where we are ensuring that we remain true to the model. The idea is to focus on resiliency of the balance sheet and the provisioning coverage ratio. I have reason to believe the numbers should remain in this corridor.
We get opportunity, we will further up the NTA on provisioning coverage ratio to ensure that we are bulletproofing the balance sheet from any kind of potential crosses that potential impact that one could witness maybe three, five, seven, ten years down the line. Resiliency and bulletproofing of the balance sheet are the two most important parameter that we also look at when we do a complete remodeling of ECL. All the places where we can identify items for making more provisions to create cushioning, we do keep doing those activities.
Thank you. Next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Hi, Sandeep. Hi, Rajeev. two or three questions. The first one is, how do we split the OpEx into cost of acquisition and cost of collections? What would be these two as a proportion of the OpEx? Second is, in terms of risk management, how many people do we have on rolls for collection and how many feet on street of the collection agencies we have? Third is when I do a back calculation basis for growth and the ROA metric, just a rough calculation, the profit growth would be upwards of 35% versus a 22% AUM growth. Is that a fair assessment? We are looking at 35%, 40% kind of a growth levels in profit in 2027. Would be a
Well, I'll need AI for all the three questions, huh? They're all three different. But on a lighter vein, Sandeep. Yeah. On the OpEx side, I think the result sheet carries additional breakups in terms of expenditure that we incur. Of course, the sourcing cost, to the extent it is variable in nature, gets accounted as EIR in the interest income line. That's not separately identifiable. The recovery commission, and the cost that we incur for collecting money from the customers and doing DMS, debt management services, is shown as fees and commission expenditure separately in the result sheet. I won't repeat the number, those numbers are there for everyone to consume.
As regard the profit growth for the next year, 22%-24% growth in AUM should lead to a little better growth in profitability, because if we are supposed to deliver operating efficiency growth of 25%-40% that Rajeev Jain has talked about, if we see improvement in basis points, if we see improvement in loan loss to average year as a metric in the next year, even with a marginal moderation that we're talking about from NIM perspective, which is also documented as part of the assessment for next year, there is a possibility that the P&L growth may be faster for the next year than the balance sheet growth.
I don't think that I've done a maths internally which suggests a 35% number to me, but I'll be more than happy to be positively surprised if the number were to come. As Rajeev said, we'll probably need AI to be able to deliver that. We have tailwinds. I made the point earlier. I would just make a point, Shubhranshu, we have tailwinds. Subject to geopolitical stability, we should be in good place.
Thank you. Next question is from the line of Omkar from Sri Investments. Please go ahead.
In the investor meet, which you do every year, you have guided that it's not about the question of growth, but how quickly you can compound. Given the state of the current balance sheet size, you have guided for 22%-24% for the current financial year. Like, how does it, like, compare it with your overall long-term guidance of around, say, 17%-19%, 20% kind of growth?
I think the long-term guidance that we give at this point in time is between 22% and 24%, 25% kind of corridor. Based on the current performance that we have delivered and the momentum that we see across businesses, we are reasonably confident that 20%-24% should be achievable for next year. I think it's year by year, right? Long-term commitment continues to remain, to be anchored at 20%+ number, '22%, 23%, 24%.' For the next year, 22% and 24%, and then build on top of it in future. I'll just make a point that, look, for a INR 100,000 crore addition in balance sheet, the growth in total or market share growth in total credit, if you take the denominator as total credit in India.
Gross bank credit, plus NBFC credit minus bank lending to NBFC, that's net total credit in India. Okay? Our market share would have moved from 225 basis points to 250 basis points.
You know, if India total trade grew by 12%, we've grown by 22%. Okay, we should logically going to X. I would say, given our relative market share, not our absolute size. Given our relative market share, we should be, as a firm aspiring to grow 2x of what the system growth is, so that we can meet our ambition to be among the top five, six financial services lenders in this country over a period of next five to seven years' time. That's the way I would approach this, and we continue to approach it that way. Absolutely looks big, INR 100,000 crore addition. Market share growth, 25 basis points. I think there is. As I said earlier, the franchise has very large wallet share.
As we deliver on customer centricity that I talked about in our annual investor conference on our annual investor day. We are investing very deep on customer centricity. Overlay on that, AI transformation. Take customer centricity and AI transformation, the compounding should become easier, I would say. Actually, I would say it will become easier, rather than harder. The absolute size makes it look harder. As we take the customer centricity, which is focused on customer wallet and AI transformation, we're doing all this to make compounding easier. The principal compounding to me is what is the return on equity. I think we continue to hold at a INR 100 invested in us. Principal generates a 20%-22%, INR 22. Fixed deposits give you 7%, we are giving you 20%.
We are giving that for the last 10, 11 years. We believe that we can continue to compound shareholders' value in terms of return on equity for a long, long period of time.
Thank you. Next question is from the line of Bharat Shah from BCS Capital Ideas. Please go ahead.
Yeah. Hi, Rajeev and Sandeep.
Hello, Bharat.
Delighted. Hi. Delighted to see the good results. I just have one broad question. If we see the evolution of Bajaj Finance, if we see the period prior to COVID, I'll draw distinction for the period after COVID. Generally, out of the four levers, the growth of the assets, the margin, the cost intensity or cost diminution, and the credit cost. These four levers leading to ROE and in turn the levered leading to ROE. If I see prior to COVID, generally every element played like a good note in the overall symphony, therefore there was a rising crescendo. Typically, the yields and cost of the funds were managed to give typically a good or rising kind of NIM.
The growth has always been very focused and strongly delivered, vertical by vertical, each business segment by segment. Therefore, given good usage of technology, we delivered even the cost to metrics very efficiently over the period of time. Given our very strong discipline on credit cost management, that also played the perfect part to the symphony. Even if there was some one note out of the four notes which might be playing a little jarring note at a particular point, overall symphony in terms of return on asset and return on equity typically tended to be buoyant and in our favor.
Post COVID, that equation has been a little more middling type, where generally the final symphony outcome in form of ROE still is healthy by miles compared to any benchmark anyway. Compared to our own benchmark, the crescendo has not been rising, but kind of a, shall we say, undulating one up and down type. Do you think finally with the AI in play, with a lot of, a lot of, attenuating factors hopefully behind us, now are we really poised in a way where all the notes kind of combine together to produce a rising crescendo rather than kind of even or at times a falling crescendo that we saw? Instead of that, on a more long-term basis, we are slated for the rising crescendo.
Okay, your observation is correct. I think first point. Point number two, I think, pre-COVID to now, Bharat Bhai company is 4x. INR 115,000 crore, INR 140,000 crore balance sheet, 3.5x. We are INR 510,000 crore. That's point number two. Through this period, the ROA have grown. Through this period, if you take only two measures of ROA and ROE have remained, and I'm on panel 35. We were at FY 2019, 22.5%. We had just raised FY 2020, 20.2%. We have remained between 19% and 20%. That's point two. Now come to post-COVID. COVID was a big shock. Shock led to post.
As an operating manager, I'm speaking. Post-COVID, there was a massive boom. That boom we leveraged by principally expanding lines of businesses, expanding locations very rapidly, investing very deep in digital transformation. These three, expanding in the process, teams, high ROA, high ROE. If you pull ROE in FY 2023, went to a peak of 23.5%. You know, good times lead to what I would call, and I'm being as objective and fair, doing my performance assessment of last five and pre-COVID, lead to some level of what I would call, in boom cycles, you take a set of decisions which necessarily are should be more calibrated, is how I would respond.
I think in the last 18 months, you've calibrated those responses. Okay. To summarize the point, you should see us from here on in a reasonable cruise mode. Sandeep made a point in the passing. At a design level, I have made that point to various investors that at INR 510,000 crore, we are by far the largest. We are a very important player in terms of even overall credit in the country. It's our fiduciary responsibility to ensure we are highly resilient, can take any shocks. Sandeep made a point on bulletproofing the balance sheet. We will be a bulletproof business. While delivering as a firm a 20%-22% ROE and a 20%-24% balance sheet growth.
We think that we should be, from here on, a lot more cruise mode. That's really how I would summarize my response, Bharat bhai, to all the way to pre-COVID. I must tell you on a more, in a lighter vein, I have management team sitting here, senior members of the management team. I keep reminding them, "[Foreign language] FY 2020. I wanna go back to FY 2020 credit cost." They used to laugh at me. Now they are all delivering.
Agreed.
The 3 MOB, 6 MOB, 9 MOB lower than FY 2020. As I said, the balance sheet is 3.5x. I think it's about what we decide to do, rather than what happens. I think we will decide what we want to do. We will. Last point I'll make, we are from a what does resiliency and bulletproofing means that the profit growth principally should be higher than balance sheet growth. Every incremental dollar of the differential in terms of growth goes to strengthening the balance sheet because we're just living in continuous crisis. I mean, let me spend 1 moment. 1 year, 3 crises. We started the year. We all have short memory. We started last year with Indo-Pakistan war for 4 days.
We had tariff for 4, 5 months, we had February, March, full March, of Iran, U.S. war. How does one model that? We've continued to still be operating manager. We have to remain open for business. The best way is to just keep bulletproofing the business. It needs tremendous agility, I would say, for all firms. For all operating managers, tremendous agility because this is the environment that we are, we have to all become used to living in. Our management team here, we are committed to do that. I hope that gives you, and we can do a side conversation, longer one.
Thank you very much. Ladies and gentlemen, we will take that as the last question. I'll now hand the conference over to Mr. Ajit Kumar for closing comments.
Thank you, Rajeev, Sandeep, and Bajaj Finance team. Do you want to make any closing comment before you conclude?
No. Thank you is the only closing comment.
Thank you.
Thank you. Wish us luck. Wish the world luck. Thank you. Thank you all.
Thank you. Thank you very much. On behalf of JM Financial Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.