Bajaj Finance Ltd Q2 2025 Earnings Call Transcript

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

Question: Chintan Joshi - Autonomous Research - Analyst : So, hi. Can you hear me?

Question: Chintan Joshi - Autonomous Research - Analyst : Yeah. Hi, thank you. So two questions, one on asset quality and one on NII. On asset quality, could you give us some more color on what gives you the confidence that slippages and credit costs may have peaked out here would be interesting to get some idea across different products and different trends that you are seeing both in your data and perhaps industry data that you observed.And then on net interest income, if you could please help us think about where NIMs might go over the next year with the rate cut likely, what would the timing benefit be in terms of NIM speaking, would be helpful. Thank you.

Question: Chintan Joshi - Autonomous Research - Analyst : Wouldn't that lead to RA pressure once the cycle peaks?

Question: Chintan Joshi - Autonomous Research - Analyst : That's fair. Just a clarification, Rajeev, you said 185 to 195 previously. I presume you meant 175 to 185.

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

Question: Dhaval Gada - DSP BlackRock Investment Managers Pvt Ltd - Analyst : Yeah. Thanks for the opportunity. Three questions. First is on the rural B2C business and also the business and professional loan, both of them are color-coated yellow. Just if you could give some perspective on when do we see normalization in both these segments. So that's the first question. The second one relates to cost to income. And just to the point that Rajeev highlighted earlier on further operating efficiency. So if you -- I mean, somewhere in COVID, I think our aspiration was 30%, 31% kind of OpEx to NII. Is that what one should expect in the medium term based on the business mix that you're targeting? So some perspective on how much more benefit can one see in the medium term? So that's the second one. And the final one is on RBI commentary that we are hearing around various segments relating to growth and asset quality pressure plus the regulatory perspective, around NBFC. I mean if you could just highlight how the company is looking at navigating these the current environment, yes. Those are 3 questions. Thanks.

Question: Dhaval Gada - DSP BlackRock Investment Managers Pvt Ltd - Analyst : Yeah. Just one small follow-up on the rural B2C. Do you think by the end of the year, we can see the business turn into green, which means next year, the growth will normalize or you think it is still --

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

Question: Piran Engineer - CLSA Ltd - Analyst : Yeah. Hi, team. Congrats on the good set of numbers. Just a few questions. Firstly, on the overall asset quality environment. What really -- so I know you mentioned that we've made underwriting tweaking and improving our collection infrastructure. But what would make the cycle prolonged as in the elevated credit cost cycle. For example, you mentioned 8% to 9% of your clients have 3-plus loans versus 13% earlier, but you could have other responsible lenders lend to these people, right? So just trying to get a sense of what's changing right now versus, say, three months back?

Question: Piran Engineer - CLSA Ltd - Analyst : Got it. And just secondly, on our fee income now I noticed that it's a little bit weak, considering the fact that the ban on those digital lending products was lifted and that itself as some INR60 crores a quarter. So if I kind of adjust for that, it does not look like we've seen any fee income growth. In fact, we've seen degrowth Q-o-Q. So anything you have to (multiple speakers) degrowth has because of, I mean, commerce season versus non-summer season. But last time, we didn't have those digital lending products, right, which are banned?

Question: Piran Engineer - CLSA Ltd - Analyst : Now we would have added. So I would have expected to be at least flat. So -- is this because of the RBI thing where collections are not doing for them and therefore, fee and OpEx both are proportionately lower.

Question: Piran Engineer - CLSA Ltd - Analyst : Yeah.

Question: Piran Engineer - CLSA Ltd - Analyst :

Question: Piran Engineer - CLSA Ltd - Analyst : Okay. Fair enough. And just on the NIM outlook, did I hear it correctly that NIM will be stable, assuming no rate cuts further. Or is it that cost of funds will be stable but yield could still decline because of portfolio mix?

Question: Piran Engineer - CLSA Ltd - Analyst : Got it. Okay, that's it from my end. Thank you and wish you all the best.

Question: Kunal Shah - Citigroup Inc - Analyst : So firstly, maybe in terms of the overall growth, given the environment wherein we are, we have kept on increasing the credit cost guidance as well. But still, we sound a bit upbeat on the growth despite Bajaj Auto business, maybe I think that's coming off plus you said like you are tightening a few of the standards. But I think that convention on the growth still seems to be like 27%, 28%. No doubt there is something which is contributing from the new business, but existing is also continuing. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 1:00PM, BJFN.NS - Q2 2025 Bajaj Finance Ltd Earnings Call So wouldn't it maybe -- maybe in terms of the approach, maybe in terms of the growth versus credit cost? Is there any change in the approach that we are looking or there is no need to change at this point in time.

Question: Kunal Shah - Citigroup Inc - Analyst : Sure. And secondly, in terms of urban B2C. So if you look at Stage 2, that still continues to be quite elevated, almost similar to where it was in the last quarter as well. And that -- and then we had seen this kind of increase out there as well of almost like 38-odd basis points in GNPA and maybe as you indicated, for SME lending, maybe moving from 1.4 to 1.6 made like getting to the amber. Do you see the risk of urban B2C also getting into amber given the collection efficiency and this kind of trend in Stage 2?

Question: Kunal Shah - Citigroup Inc - Analyst : Got it. And last question was that the option to create the management overlay for a this onetime gain? And would you have done that? Or maybe that was not there from the auditors, and that's the reason we incept guidance and still maybe not have created any buffer out there against this one-off? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 1:00PM, BJFN.NS - Q2 2025 Bajaj Finance Ltd Earnings Call

Question: Kunal Shah - Citigroup Inc - Analyst : Sure. Thanks and all the best.

Question: Viral Shah - IIFL Research - Analyst : Hi. Thank you for the opportunity. I mean I wanted to ask you were talking about the new businesses and then contributing to growth. But if I look at the distribution slide for tractor, I see that nearly on a sequential basis, the distribution has halved. So is there anything to read into it? Or what has happened over there?

Question: Viral Shah - IIFL Research - Analyst : Sorry, you can continue.

Question: Viral Shah - IIFL Research - Analyst : And secondly, if I look at the 2-wheeler and 3-wheeler business, right, you mentioned about the Bajaj Auto credit and that business. wanted to understand like, is there any series ROA or the profitability differential between, say, doing the long capital business versus the capital business? Just trying to understand if at all there can be any pressure.

Question: Viral Shah - IIFL Research - Analyst : No, I understand, and thank you for the detailed listing Rajeev perspective. And while you -- because you mentioned also the asset quality piece over there. If I look at your panels that you gave in terms of the portfolio quality, so in that, we have seen that in this quarter, sequentially, it has moved up, right? The Stage 1 has come down and even versus, say, if I compare it, I understand, even from a Y-o-Y basis, it's come down. Whereas over this period, I would expect that the non-captive business would have built up just in terms of the size of size -- (multiple speakers) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 1:00PM, BJFN.NS - Q2 2025 Bajaj Finance Ltd Earnings Call

Question: Viral Shah - IIFL Research - Analyst : My question was actually more on the asset quality. Like what was --

Question: Viral Shah - IIFL Research - Analyst : Got it. And Rajeev, if I may, one more question. If I look at the real B2C panel, right? Over there, if I look at sequentially, there seems to be some bit of improvement. And of course, you mentioned and you discussed that at length. My question was that given the way the cash flows are in the rural India and especially the asset quality pain that the MFI players are witnessing like I was actually a bit surprised to look at this. If you can just throw some more light on this.

Question: Viral Shah - IIFL Research - Analyst : Got it. Makes sense. And thank you so much. 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. OCTOBER 22, 2024 / 1:00PM, BJFN.NS - Q2 2025 Bajaj Finance Ltd Earnings Call

Question: Viral Shah - IIFL Research - Analyst : Yeah, understood. That I agree.

Question: Roshan Chutkey - ICICI Prudential Asset Management Company Ltd - Analyst : Yeah. Thanks for taking my question. Firstly, you mentioned this 13% number to be the live unsecured loans overlap. 33-plus 516 lines overlap number. That was the case a few years ago. What was it? I was not here, 13% between to 9%?

Question: Roshan Chutkey - ICICI Prudential Asset Management Company Ltd - Analyst : Right. And when I look at this amber color panel and your GNPA movement, if I -- the GNPA has increased across the board, like you said, but you chose to call out SME lending and rural B2C alone as Amber. Anything more to the water is not there in data.

Question: Roshan Chutkey - ICICI Prudential Asset Management Company Ltd - Analyst : Yeah. The other question I have here is last quarter, you said bounce rates are stable, but whatever has bounced is turning out to be very chronic.

Question: Roshan Chutkey - ICICI Prudential Asset Management Company Ltd - Analyst : All right. And just one last question. There (inaudible) case that has happened, right? So any comments on that?

Question: Roshan Chutkey - ICICI Prudential Asset Management Company Ltd - Analyst : Sure. That's all from my side. And all the very best.

Question: Umang Shah - Kotak Mahindra Asset Management Company Ltd - Analyst : Yeah. Hi, good evening. Thanks for taking my question. I have two questions. One is Rajeev, if you could -- I mean at the beginning of the call, you already mentioned that probably by the five years, you're sure long-range in, but just some color as to how should we look at the stand-alone Bajaj Finance entity reason maybe broadly in terms of growth and profitability and ROE given that Atul has already belted out about Bajaj Housing REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 1:00PM, BJFN.NS - Q2 2025 Bajaj Finance Ltd Earnings Call Finance on the Bajaj Housing earnings call, I mean that will give us some clarity on how should we look at the stand-alone entity maybe from a two to three year perspective?

Question: Umang Shah - Kotak Mahindra Asset Management Company Ltd - Analyst : Understood. Fair point. And just the second question is on clearly, we are getting a little mix sort of events or commentaries when it comes to consumption trends (technical difficulty)

Question: Umang Shah - Kotak Mahindra Asset Management Company Ltd - Analyst : Am I auidable?

Question: Umang Shah - Kotak Mahindra Asset Management Company Ltd - Analyst : (technical difficulty)

Question: Umang Shah - Kotak Mahindra Asset Management Company Ltd - Analyst : Yes, that's correct. On the festive demand? Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 1:00PM, BJFN.NS - Q2 2025 Bajaj Finance Ltd Earnings Call

Question: Umang Shah - Kotak Mahindra Asset Management Company Ltd - Analyst : Perfect. This is quit helpful. Thank you so much. And wish you good luck. Thanks.