Bajaj Finance Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Bajaj Finance Ltd (BAJFINANCE) Q2 FY24 Earnings Concall

• Financial And Portfolio Metrics
  • AUM grew by INR20,167 crores to INR290,264 crores, up 63% year-on-year.
  • Added 3.58 million new customers, now at just below 45 million total customers.
  • Net NPA remained steady at 31 bps.
  • ROA at 5.16%, expected to sustain around 5% exit basis.
• New Customer Acquisition And Growth
  • Added 7.42 million new customers in H1 FY24.
  • Targeting 13-14 million new customer additions in FY24.
  • Added 106 new locations, now at 3,934 locations.
  • In-app service requests now 35% of total requests.
• Product Portfolio Diversification
  • Now at 5.97 products per customer versus 5 in FY2021.
  • Strategy to cross-sell products to existing customer base.
• Rural Portfolio Health Analysis
  • Bajaj Finance conducted an internal analysis on the growth in personal loans and current loan balances from FY2020 to FY2023.
  • The analysis showed the number of personal loans grew from 4.5 crore to 10.7 crore from FY2020 to FY2023, with most growth in sub-50k and above 8 lakh loans.
  • However, sub-50k loans contributed only 13.5% to total loan AUM, indicating potential credit risk. Bajaj Finance has cut 8-14% of business in urban and rural areas for customers with more sub-50k loans.
• Capital Raise Utilization
  • Bajaj will ensure ROE goals are met despite capital raise. Regulatory requirement is to list housing finance business in 8 quarters.
• Movement In Asset Quality
  • Increase in stage 2 loans and decrease in stage 3 loans in some products this quarter is due to movement of loans from 89 DPD to 90+ DPD because of more days in Q2 2022.
  • This will normalize next quarter. The phenomenon is unique to Bajaj Finance because most loans are due on 2nd of month, leading to this DPD movement in specific quarters.
• Technology Investment
  • Strategic investment made in Pennant Technologies, a core lending platform provider for Bajaj Finance.
  • Partnership since 2016, now migrating fully to Pennant’s platforms. Robust platforms needed given Bajaj Finance’s scale.
  • Strategic for Bajaj Finance to enable Pennant’s growth from small to medium and large player.
  • Not just a financial investment, but a strategic one to build capabilities on both sides.
• Credit Quality
  • Tracking credit bureau data monthly shows moderation in unsecured loan growth rates.
  • New RBI guidelines expected to moderate loan counts further.
  • Continued monitoring and orchestrating different levers to control growth and risk.
• BHFL Growth and Funding
  • Infusion of further capital needed with target leverage ratio of 7x.
  • Committed to investing further in controlled growth of mortgage business.
  • Additional 10,000 crore fundraise planned to support growth.