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.