Categories Concall Highlights, Earnings, Finance

Bajaj Finance Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from Bajaj Finance Ltd (BAJFINANCE) Q4 FY24 Earnings Concall

  • AUM Growth
    • FY24 delivered record AUM growth of INR 83,236 crores, 34% YoY.
    • Q4 AUM growth was INR 19,647 crores.
    • Growth driven by 36.2 million loans disbursed and 14.5 million new customers added in FY24.
    • BHFL (housing finance subsidiary) AUM grew 32% YoY.
  • Operating Metrics
    • Opex to total income ratio remained stable at 34% for last three quarters.
    • Net Interest Income grew 28% YoY.
    • NIM compression of 21 bps QoQ due to change in AUM composition.
    • Employee headcount optimized, reducing by 499 in Q4.
    • Attrition improved to 14.9% from 18.7% last year.
  • Asset Quality
    • Gross NPA at 0.85% and Net NPA at 0.37% – lowest ever.
    • Overall portfolio risk metrics stable except rural B2C business.
    • Rural B2C AUM growth slowed to 6% from 25% to contain risk.
    • Loan losses of 1.86% of average AUM in Q4.
    • Macro provision overlay of INR 300 crores in Q4.
  • Profitability
    • PAT grew 21% YoY to INR 3,825 crores in Q4.
    • FY24 PAT up 26% to INR 14,451 crores.
    • Q4 ROA at 4.54% and ROE at 20.48%.
    • Capital adequacy at 22.52%, Tier 1 at 21.51%.
  • Other Updates
    • Evaluating IPO for housing finance subsidiary BHFL.
    • Raised $725 million in ECBs to diversify borrowings.
    • Key Fact Statements implemented across all lending from Apr’24.
  • FY25 Outlook
    • Expect to add 12-14 million new customers similar to 14.5 million in FY24.
    • AUM growth projected at 26-28%, driven by new secured product launches.
    • NIM expected to moderate by 30-40 bps over next two quarters before stabilizing.
    • Opex to NIM ratio to improve by 20-40 bps from current levels.
    • Credit costs forecast within 175-185 bps range, similar to pre-COVID.
    • ROA to remain within long-term guidance of 4.6-4.8%.
    • ROE may see marginal decline due to capital raise.
    • GNPA and NNPA expected at 85-100 bps, lower than guidance.
    • Profitability growth rear-ended due to NIM moderation in H1.
  • Asset Mix and Quality
    • Unsecured book reduced by 2.2% as share of urban/rural B2C declined.
    • Rural B2C share down 140 bps as planned amid portfolio risks.
    • Commercial lending and two/three-wheeler books grew their share.
    • Increasing product granularity as per strategic objectives.
    • GNPA and NNPA remained range-bound qoq with minor movements.
    • Overall portfolio quality comfortable, moving towards pre-COVID metrics.
    • GNPAs/NNPAs still better than pre-COVID after adjusting for regulations.
  • International Listing Plans
    • Company will evaluate the prospect of listing via ADR/GDR route.
    • Currently no firm plans, but will assess and update based on evaluation.
    • Some leading Indian firms already listed internationally.
  • New Business Profitability
    • Targets INR 1,000 crore profit for gold loan and broking businesses.
    • Gold loans could reach this in 3-4 years if current trajectory continues.
    • Broking business (BFSL) expected to see three-digit profit growth this year.
    • But INR 1,000 crore profit is long-term target, taking time to build scale.
  • Credit Cost Guidance
    • 75-1.85% guidance factors in gradual secured mix shift.
    • Also incorporates accelerated write-off policies impacting 10-12 bps.
    • Write-offs to remain elevated as per disclosures on provisions.
    • Full benefit of secured mix to reflect only from FY26-27.
  • BHFL Outlook
    • NIM compression due to intense competition in mortgage lending.
    • But targets sustainable 13-15% ROE range for housing finance business.
    • Aims to create large, low-risk annuity franchise growing 25-27% annually.
  • New Product Offerings
    • Account aggregator is a fundamental shift, allowing better underwriting and monitoring.
    • Bajaj has 22% of India’s account aggregator consents on a monthly basis.
    • ONDC will improve customer engagement, with orders growing sharply y-o-y.
    • Social commerce and rewards program are medium-term bets to transform the business.
  • BHFL Listing Impact and Product Strategy
    • Post BHFL listing, long-range guidance to be provided for both entities separately.
    • Aim is to make subsidiaries more self-sufficient across key metrics.
    • But no plans for BFL and BHFL to directly compete in major product lines.
    • Developer finance used as strategic tool and return enhancer for home loans.
    • To be capped at 12-15% of AUM as guided.
    • LRD to be aggressive focus area alongside home loans for mandatory mix.
    • Competing well with banks for marquee LRD clients.
  • Rural Expansion Approach
    • Will accelerate rural B2C growth once risk metrics fully normalize.
    • New segments like gold/MFI similar models, but gradual expansion planned.
    • Not deviating from diversified product strategy despite challenges.

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