Bajaj Finance Ltd Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Chintan Joshi - Autonomous Research - Analyst : Hi, thank you. Can I ask one on all your NIMs and one on asset quality? On NIMs, you highlight the 10 basis points in compression this quarter coming from AUM composition. This follows about 20 basis points from the last quarter. How should we think about kind of NIM progression, because your AUM composition trends appear to be clear and following that, if I kind of think about it on a longer term view, three to five year view, should we kind of continue to expect somewhat new compression from this mix shift over time? That's on NIMs and I have one more.

Question: Chintan Joshi - Autonomous Research - Analyst : The other one is just on asset quality. You've given decent comments on collection efficiency. Should we take away that underlying you don't see any problems at all this is purely an election related issue? Or is there more to read, especially on things like you've highlighted two-wheeler, three-wheeler, those areas where there is a bit of elevation. Is that broadly election related? Thank you.

Question: Chintan Joshi - Autonomous Research - Analyst : On NIM, we should not a medium-term compression because of the mix shift becoming more -- OKAY, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2024 / 1:00PM, BJFN.NS - Q1 2025 Bajaj Finance Ltd Earnings Call

Question: Chintan Joshi - Autonomous Research - Analyst : If I just look at the last five years of scale builders versus profit maximizer, there is a differential in there five years' CAGR. That would kind of indicate that that that kind of differential may continue over the next five. That's why I'm asking that question already.

Question: Chintan Joshi - Autonomous Research - Analyst : Okay. Thank you.

Question: Piran Engineer - CLSA Limited - Analyst : Yeah, hi. Congrats on the quarter and thanks for taking my question. Just again on asset quality, firstly, if you can just quantify what is the impact on credit costs from the write-off policy change you had last year? So that's one. And secondly, it clearly gives us the confidence of improvement in the second half of the year in credit costs, and why hasn't urban B2C been as impact as rural B2C?

Question: Piran Engineer - CLSA Limited - Analyst : I thought you are accelerating it, right. You all were --

Question: Piran Engineer - CLSA Limited - Analyst : Okay.

Question: Piran Engineer - CLSA Limited - Analyst : Okay. And regarding --

Question: Piran Engineer - CLSA Limited - Analyst : No, That's fair. That's fair. No, just I mean, continuing on the question of the previous participant, whether this is transient or not really, because you are highlighting -- that you are still sticking to our 1.75% to 1.85% credit cost guidance. So just wanted to get a sense of what gives us the confidence of an improvement in the second half?

Question: Piran Engineer - CLSA Limited - Analyst : Okay. That answers it. Thank you so much and all the best. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2024 / 1:00PM, BJFN.NS - Q1 2025 Bajaj Finance Ltd Earnings Call

Question: Kunal Shah - Citigroup Inc - Analyst : Yeah, Hi. Sir, as you indicated, the May, because of this, we are pruning down a few of the segments, but any relation with respect to the growth guidance which we had given earlier at the 26% to 28%- odd. because maybe at the same point in time on credit cost also, you have indicated that there could be some marginal upward bias on that metric as well. So anything in mind in terms of toning down of the growth and the guidance out there?

Question: Kunal Shah - Citigroup Inc - Analyst : So there is no revision out there?

Question: Kunal Shah - Citigroup Inc - Analyst : Sure. And secondly, on the fee income side, so can we say that we are closer to the normalization of there, maybe post the lifting of the restrictions? or there is maybe still more to go in wherein we could see the gain traction on the overall of our fee income?

Question: Kunal Shah - Citigroup Inc - Analyst : And I'm not sure if you have alreayd highlighted in terms of the entire other income within the non-interest side, any reason for the sharp rise of this? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2024 / 1:00PM, BJFN.NS - Q1 2025 Bajaj Finance Ltd Earnings Call

Question: Kunal Shah - Citigroup Inc - Analyst :

Question: Kunal Shah - Citigroup Inc - Analyst : Okay. Thank you.

Question: Antariksha Banerjee - ICICI Prudential AMC Ltd - Analyst : Yeah, thanks. I am audible, right?

Question: Antariksha Banerjee - ICICI Prudential AMC Ltd - Analyst : Thanks for the explanation. I just wanted to clarify this point on credit costs in our collection efficiencies. What you're saying there is a quarter the bounces or the volume of loans into the next bucket were not as large, but basically the LDTs went up across segments, when you mean collection efficiency, it is the volume side of it, is that right understanding?

Question: Antariksha Banerjee - ICICI Prudential AMC Ltd - Analyst : Got it. And just related to this, we have been causing us some stress in rural B2C for some time. At the system level, there are various sizes around that OpEx. Are there markers that you can identify for the stress apart from this one quarter? Is it multiple loans for the customers who are more prone to these lower recoveries? Is there a special type of exposure, some regional. cohorts of age, anything that you have identified in terms of markers?

Question: Antariksha Banerjee - ICICI Prudential AMC Ltd - Analyst : Sure. But that is not the --

Question: Antariksha Banerjee - ICICI Prudential AMC Ltd - Analyst : Got it. Okay, thanks for that. Just one thing, Sandeep. What is this policy on the utilization of contingent provisions? Is it formula driven on the basis of something or is it subjective?

Question: Antariksha Banerjee - ICICI Prudential AMC Ltd - Analyst : Sure, got it. And just one small data point, is there any impact of this RBI regulation on penal interest versus penal charges in our other income?

Question: Antariksha Banerjee - ICICI Prudential AMC Ltd - Analyst : Sure, thank you.

Question: Dhaval Gada - DSP BlackRock Investment Managers Pvt. Ltd - Analyst : Yeah, hi. Thanks for the opportunity. just have one question on growth. So I mean if you could just talk a little bit about the new products, how the scale-up is taking place. And just in that same context, you know, medium term may not be '25, '26, but just directionally, the book mix as it progresses to your target level, how should one think about the sustainable credit cost, which I think last time you had explained that should we were 175 based on the revised RBI guideline and the write-off policy change that you talked about over there. So Just any comments around that would be useful.

Question: Dhaval Gada - DSP BlackRock Investment Managers Pvt. Ltd - Analyst : Understood. Thanks. Thanks, and all the best.

Question: Abhishek Murarka - HSBC Securities & Capital Markets - Analyst : Hi, everyone. Thanks for the opportunity. Sir, two questions. One on this is a rural B2C. Almost four or five quarters, we've been cautious in not been growing. So what needs to turn for us to get better, a rather more comfort to grow in this segment? What are the things you're looking out for? The second question is regarding this product per customer slide. Sir how do we read this? So if I see there's a bit of a plateauing out of the product per customer at 6.1, 6.2, your two year month onwar -- I mean 24-month onboard customers also grows to 6.2. So are we more or less had a peak at 6.1, 6.2, in terms of cross-sell and does that mean that now you need to spend much more on selling the next product or increasing customer acquisition costs? How do we read this? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2024 / 1:00PM, BJFN.NS - Q1 2025 Bajaj Finance Ltd Earnings Call

Question: Abhishek Murarka - HSBC Securities & Capital Markets - Analyst : No, fair. So I appreciate that. And just when does this readjustment come into the base for rural B2C to move into --

Question: Abhishek Murarka - HSBC Securities & Capital Markets - Analyst : Sure Thank you so much. Thanks and appreciate your answers. Thank you.

Question: Avinash Singh - Emkay Global Financial Services Ltd - Analyst : Hi, thanks for the opportunity. A couple of questions. Our loan segment, if we see of course is growing at a strong pace of sales is still moderate. But there has been a kind of a sequentially for the last three, four quarters. I mean strong growth yet a very marginal increase in (inaudible) to there as well. Now stage one would expect that typically the customer segment to prime and also what is going on there? (multiple speakers)

Question: Avinash Singh - Emkay Global Financial Services Ltd - Analyst : Yeah, I am talking of car loan segment. Your car loan segment, if you see last four, five quarters. Of course, it is small. It is growing very fast, but there has been sort of a percentage of Stage 2%, an increase happening last three, four, five quarters. So what is the sort of a trend there? Because your customer segment typically will more than price. So what is going on there? One. And on BHFL, I mean, do you think that I mean now with this developer finance and LRD also gaining size, will the growth differential between home loan and this be sufficient enough for you to maintain a kind of a balanced deal? Or will the growth going forward will converge and that will put pressure on your overall yield? Thanks.

Question: Avinash Singh - Emkay Global Financial Services Ltd - Analyst : Yes. It is delinquencies for last two, three quarters. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2024 / 1:00PM, BJFN.NS - Q1 2025 Bajaj Finance Ltd Earnings Call

Question: Avinash Singh - Emkay Global Financial Services Ltd - Analyst : (multiple speakers) No, I mean, with the developer finance and LRD book now getting a significantly sized and probably going forward, the growth of home loan converging with these two, do you see sort of pressure in the rgional segment? Or will these segments will continue to core home loan?

Question: Avinash Singh - Emkay Global Financial Services Ltd - Analyst : Okay. Got it, thanks.

Question: Subramanian Iyer - Morgan Stanley - Analyst : On behalf of Morgan Stanley, I thank Rajeev, Anup, Sandeep, Atul, and team for the time and insights. Rajeev, will you really want to make any closing remarks?

Question: Subramanian Iyer - Morgan Stanley - Analyst : Okay, wish you all the best and thanks --

Question: Subramanian Iyer - Morgan Stanley - Analyst : We can possibly take one more question, Rajeev -- if you have any number of questions.

Question: Anurag Mantry - Oxbow Capital Management + - Analyst : And just one question, coming back to the asset quality performance. Basically, (multiple speakers)

Question: Anurag Mantry - Oxbow Capital Management + - Analyst : What I was asking that are, you know, are they are any correlations or anything to read into rural B2C and maybe the (inaudible) because that's another segment where even the industry has already seen higher delinquencies. So if you can highlight, if there is any overlap to think about that would be useful. And secondly, on the collections front -- on the collections, I just wanted to understand if it has any implications for the way we're thinking about the OpEx growth for this year, given that we probably looking to spend more on collections potentially?

Question: Anurag Mantry - Oxbow Capital Management + - Analyst : Got it. Thank you so much.

Question: Bhavik Dave - Nippon India Mutual Fund - Analyst : I hope I'm audible. Just one question, sir, if you could just talk about the competitive intensity in the urban B2B and B2C segments, because the last one year, we've been talking about competitive intensity being quite high, in terms of personal loans wherein lot of large banks and you will REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 23, 2024 / 1:00PM, BJFN.NS - Q1 2025 Bajaj Finance Ltd Earnings Call see us you have got quite aggressive. How are things in there in terms of both the aggression, in the pricing, and the push towards this product, both on the B2B and B2C side?

Question: Bhavik Dave - Nippon India Mutual Fund - Analyst : Sure. And in terms on PL? Any thoughts in terms of competitors?

Question: Bhavik Dave - Nippon India Mutual Fund - Analyst : I was trying to understand, sir, you've mentioned that large bank that got really aggressive in terms of personal loans in urban, wherein the ticket sizes are going up, the rates were not being a commensurate. Has things change there, considering the RBI directive in terms of slowing down in terms of unsecured? Has things change there or you're still highly competitive?

Question: Bhavik Dave - Nippon India Mutual Fund - Analyst : Right. That's helpful. Thank you.