Bajaj Finance Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Bajaj Finance Ltd (BAJFINANCE) Q1 FY23 Earnings Concall

Management Update:

• BAJFINANCE said it did 7.42 million loans, the highest ever done as a company.

Q&A Highlights:

• Bharat Shah from ASK Investment Managers asked that looking at asset quality, there’s dramatic improvement on GNPA, if it’s actual or due to write offs. Rajeev Jain CEO replied that write-offs is flattish other than the INR390 crore account. There is structurally significant improvement in asset quality.

• Bharat Shah from ASK Investment Managers also asked about investments in the people and technology. Rajeev Jain CEO replied that BAJFINANCE will go fully digital and it is committed to get it.

• Ashish Sharma from Enam Asset asked about the fee income, if there is any slowdown in card additions. Rajeev Jain CEO said the company has a deep partnership with RBL Bank and there will be ups and down. BAJFINANCE have also started the DBS partnership which is live, booking between 9,000-10,000 accounts. RBL has stated that they want to grow the card business.

• Ashish Sharma from Enam Asset enquired about the gold loan yields getting compressed and if this business still makes sense. Rajeev Jain CEO clarified that gold loan is an interesting business. BAJFINANCE is very satisfied with the return profile and there is opportunity to improve the profile going forward.

• Ashish Sharma from Enam Asset asked about the strong profitability of BHFL, if there is any one-offs. Rajeev Jain CEO answered that on a standalone basis there was a one-offs, but on a consolidated basis there is now. Sandeep Jain CFO added that as the interest rate goes up, the spread for next 2-3 quarter may look elevated.

• Piran Engineer of CLSA enquired, what percentage of BAJFINANCE bank borrowings would be repo linked vs. MCLR linked and if banks are moving back to MCLR loans as liquidity dries up. Sandeep Jain CFO said it is seeing significant shift happening in terms of mix of repo and MCLR incrementally.

• Piran Engineer of CLSA asked about headcount additions in 1Q23. Sandeep Jain CFO clarified that the company had 35,400 as of March 31 and is now at 37,873 consolidated headcount as on June 31, an addition of 2,400.

• Rahul Jain with Goldman Sachs asked if the margins will see undue pressure due to increasing cost of funds. Rajeev Jain CEO replied that not pressure for the next three odd quarters. There will be a gradual movement. BAJFINANCE has raised rates by 25-40 bp depending on the business. And as rates rise, it will be gradually passed on.

• Rahul Jain with Goldman Sachs also asked that on the mortgage business, how much is invested and what are the capital infusion requirements going forward. Rajeev Jain CEO answered that INR7,500 crores is the total investment and are well capitalized for INR100,000 crore.

• Saurabh from JPMorgan asked that on the Bajaj mall business, what sourcing BAJFINANCE is getting due to Bajaj mall. Rajeev Jain CEO replied that 645,000 loans came through Bajaj mall. And in value terms it’s about INR23,000 per loan, which is about INR1500 crores overall.