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.