BAJAJ FINANCE : Q4 CONFERENCE CALL TRANSCRIPT

"Bajaj Finance Limited

Q4 FY '23 Earnings Conference Call"

April 26, 2023

MANAGEMENT: MR. RAJEEV JAIN - MANAGING DIRECTOR - BAJAJ

FINANCE LIMITED

MR. SANDEEP JAIN - CHIEF FINANCIAL OFFICER -

BAJAJ FINANCE LIMITED

MODERATOR: MR. SAMEER BHISE - JM FINANCIAL LIMITED

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Bajaj Finance Limited

April 26, 2023

Moderator:	Ladies and gentlemen, good day, and welcome to Bajaj Finance Limited Q4 FY '23 Earnings
	Conference Call, hosted by JM Financial. As a reminder all participant lines will be in the listen-
	only mode and there will be an opportunity for you to ask questions after the presentation
	concludes. Should you need assistance during the conference call, please signal an operator by
	pressing star, then zero on your touchtone phone. Please note that this conference is being
	recorded.
	I now hand the conference over to Mr. Sameer Bhise from JM Financial. Thank you, and over
	to you, sir.
Sameer Bhise:	Thank you, Neerav. Good evening, everyone, and welcome to the 4Q FY '23 Earnings
	Conference Call of Bajaj Finance Limited. First of all, I would like to thank the management of
	Bajaj Finance for giving us the opportunity to host this call. From the management team, we
	have Mr. Rajeev Jain, Managing Director, Bajaj Finance, Mr. Sandeep Jain, Chief Financial
	Officer of Bajaj Finance, and the entire senior management team of Bajaj Finance and its
	subsidiary.
	Without much ado, I would want to hand over this floor to Mr. Rajeev Jain for his opening
	comments. Over to you, sir. Thank you.
Rajeev Jain:	Thank you Sameer. Thank you JM for hosting this. Very good evening to all of you. I have a set
	of my colleagues here. A good evening from them as well. I'll essentially be taking you through
	very quickly over the next 15 minutes through the investor deck, which we've uploaded on the
	Investor section of the website and also filed with BSE and NSE.
	So let's just quickly jump over to the investor deck. Let's jump over to Panel number 4 quickly.
	Quarterly, I would say, excellent quarter across all financial and portfolio metrics. We delivered
	INR16,500 crores of core AUM growth. We added a tad below 3.1 million new customers to the
	franchise in Q4. All products and services are now live on web and app platform, which is really
	what the work that we've been at over the last 2.5 years.
	App platform alone has 35.5 million net users. We had gross installs of 54-odd million last year.
	And as of 31 March, the net installs are 35.5 million. We are amongst the largest -- global largest
	in the finance place on Google Play store among the top 4 organic downloads in the world. So I
	think that's been the effort that's been made by the company to fully go digital. In terms of
	financial metrics, core AUM grew 29% to INR2,47,000 crores, opex-to-NIM last quarter came
	in at 34.1%, very close, again came in at 34.1%. PAT, it's ever high PAT of INR3,158 crores,
	growth of 30% in Q4.
	ROE just a tad below 24% at 23.94%. Gross NPA, it's the lowest ever in the history of the
	company. I mean, and if you adjust this to 180 days past due and so on and so forth, I think these
	numbers are ever low numbers. Net NPA came in at 34 basis points ending March '23. Very
	quickly on full year, given that it is the fourth quarter, excellent year overall across all financial
	and portfolio metrics. We delivered core AUM growth of INR55,292 crores. We have guided

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Bajaj Finance Limited

April 26, 2023

for INR52,000 crores to INR53,000 crores of AUM growth in the beginning of the year. Now we disbursed 29.6 million loans. We added 11.6 million new customers to the franchise, the highest ever customer addition that we've actually done ever as a company. As earlier mentioned, fully live on app and web, 35.5 million consumers on the app platform.

Overall, in general, given the exit momentum of AUM growth, robust portfolio metrics, as you will see, as I take you through and a highly scalable digital stack, we are pretty confident about growth and portfolio metrics for FY '24. In terms of core AUM growth, full year, I talked about 29%, opex-to-NIM full year came in at 35.1%. PAT came in at INR11,508 crores, a growth 64%. ROE full year came in at 23.46%; and net NPA, of course, as of March 31, is at 34 basis points.

Let's just quickly jump to some key points on Panel 5. Overall, B2B disbursements were up 21%. You're seeing data coming through on how mobile phones are de-growing by 20%, how shipments are going down and mind you out of B2B disbursements that we do anywhere between 40% and 45%, maybe a little more are essentially digital products or mobile phones. In that environment, growing 21%, I would say, demonstrates strength of the franchise and the distribution. So far, as you look at having entered the year, so far, April, we are tracking reasonably strong.

In terms of customer franchise, I talked about 3.09 million customers. We're reasonably confident we should be able to add 11 million to 12 million new customers in FY '24 as well. Depending on how the first half goes, we'll see if there is an upside to that. Overall customer franchise stood at 69.14 million. Cross-sell franchise for the first time crossed 40 million at 40.56 million. We added 19 locations to -- and ended the year at 3,733 locations. Overall, in the year, we added 230 new locations. We are adding -- most of my location footprint is front loaded. So we are adding 150-odd new locations and over 300 stand-alone gold loan branches in Q1 alone as we traverse through Q1. The liquidity buffer pretty strong at just a tad below INR12,000 crores.

Important point on Panel 7, NII grew 28%. Opex-to-NIM came in at 34.1%, Q4 FY'22 was 34.5%. So continues its downward trajectory. We had articulated last year was 34.5%. We continue to invest, investing in social and rewards as two key platforms. Rewards will go live sometime between Q3 and Q4. Social will go live sometime in Q1 FY '25. Employee head count stood at 43,147. In terms of credit cost, fully normalized loan losses and provisions now in terms of -- came in at under INR860 crores. We continue to hold management overlay of INR960-odd crores. GNPA, as I said, came in at lowest ever at 94 basis points, net NPA 34 basis points.

All portfolios, across 11 portfolios that we publish are all green, including our auto finance portfolio, which is -- despite not being an ever-high AUM, peak AUM was INR15,500 crores. It's still a tad below INR13,000 crores, 93.28% of the portfolio is current. I have not seen that number in the last 16 years. Peak number used to be 89%, 90% only.

In terms of profitability on Panel 8 very quickly, capital adequacy remains quite strong. ROE I talked about. ROA in Q4 came in just 3 basis points, if I'm not mistaken, below Q3. So Q3 was 5.43%, Q4 has come in at 5.4%. Capital adequacy pretty strong, both BHFL and BFL remain

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Bajaj Finance Limited

April 26, 2023

very well capitalized from a Tier 1 capital standpoint. Tier 1 capital was -- for BFL was 23.2%. BHFL had a very good quarter. Overall, AUM is up 30%, just at INR69,228 crores. Home loans grew 24%. You're all watching how there is a slowing growth in the home loan industry, given the two years of rapid growth, the loan against property grew 4%, LRD grew 64% and developer finance grew by 92% albeit on a lower base.

And as you see below, the DF book is essentially 9% of the book. DF book from a model standpoint in terms of portfolio composition as I've said in the past, when we model our business on leading companies, principally we'll anchor around between 12% and 14%. That's really where it will quote unquote get capped at from a portfolio composition standpoint and 60% anyway has to be a home loan model as part of our principal business criteria as outlined by NHB. Overall approvals in Q4 grew by 21% for BHFL.

Very quickly, operating efficiencies. Net interest income for BHFL grew 40%. Opex-to-NII stood at 26.5% versus a year ago of 32.5%. GNPA, NNPA, they continue to play their role in ensuring from a sum of parts strategy standpoint that we continue to deliver rock-solid asset quality at 22 basis points at INR70,000 crores, as you can see. Actually, an 8 basis points is one of the lowest in the industry, if not the lowest in the industry.

Panel 10, just single point, for BHFL, profit before tax grew 52%, profit after tax grew by 53% to INR302 crores in the quarter gone by. Bajaj Financial Securities, not a material subsidiary at this point in time. We continue to invest in building out the HNI Broking business, continue to building out, launching new app features, we added 42,000 customers and overall franchise crossed 0.5 million mark.

Let's quickly jump to -- on a full year basis very quickly given it is fourth quarter. I talked about on Panel 12, core AUM up 29%. New loans I talked about, on a full year basis, grew 20% to

29.6 million. Customer franchise also grew 20% to 69 million. Net interest income, I talked about, grew 32%. The Board of Directors at the meeting that just concluded today have recommended a dividend of INR30 per equity share and 1,500% dividend for FY '23 amounts to 17.65% of standalone profit for FY '23 and is completely in line with the company's dividend distribution policy that's been outlined and improved. So the company has recommended, Board of Directors have recommended a dividend of INR30 per equity share of 1,500%.

Very quickly on to Panel 15, an important point. I mean, we've gone -- this is some of the omnipresence strategy update. App platform has fully gone digital across all products and services. It's going live in a staggered release manner. Some people may be able to see some of them, some will not be able to see. It's just going live on Android and based on the staggered methodology should fully happen by 30th of April at 50%. 50% would be live by 30th of April and by 15th of May, should have gone live 100%. Web=App, we are on track. At a design level, what is visible in app, will be visible fully in web by 29th of April.

We published a set of metrics last year from App platform standpoint to demonstrate that how important and strategic it is for our business going digital. The same thing from Q2 onwards, we will do for Web as well. We'll publish a set of Web metrics that we'll start to populate every quarter from Q2 onwards, we will just wait for the platform to stabilize in Q1 and start to publish

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Bajaj Finance Limited

April 26, 2023

the metrics from Q2. Going forward, all features that go live on app will also go live on web on the same day that it goes in app. That was really the original objective as we outlined in December '21, when we talked about App=Web strategy.

Payments, lots of action in payments, scalable UPI infrastructure has gone live on consumer app platform. It's scaling pretty well. Will help improve performance significantly, I would say, new features like Contact Mapper capability, UPI Autopay functionality is going live. iOS will go live in end of April as well. In Q1, lots of action continues to happen. We continue to invest in the payments business, a new payment CLP, refer and earn functionality, faster settlement for merchants is going live. Checkout page on PG providers will start to become visible. Bajaj Pay Wallet will start to become visible on checkout page of leading payment gateway providers.

QR deployment, I think we went live with merchant QR in November. We started to accelerate QR deployment from December onwards. I think company has made massive strides on QR deployment. In the last quarter alone, we deployed 413,000 merchant QR. We estimate based on various reports that India has 31 - 32 million overall merchant QR. We principally think anywhere between 2.1 million to 2.5 million merchant QR of Bajaj Pay we will deploy in FY '24. So we are accelerating the deployment of QR. That's really the goal of FY '24 for us as a company. We'll start to complete the stack further. The Bajaj Pay EDC machines will also go live in Q1 FY '24 with features like merchant onboarding. These are benchmark metrics or features that will start to go live.

There's MVP1 going live in June and MVP2 going live in September. Between these two, we should have a reasonably well benchmarked products. It'll start with existing distribution partners and will go open architecture fully by September, October. And we're quite excited about taking the entire stack of payments having worked on this for the last two years to our merchant ecosystem of 133,000 merchants and also to open architecture.

Very quickly, these are some of the metrics on 17, 18, nothing -- I mean, we're largely green on most of the metrics over Panel 17, 18 that you can observe. Panel 19 is an important panel. This is a panel that we started to publish on customer franchise, key financial metrics because at the end of the day, the franchise is growing, is it leading to AUM per customer franchise is growing or not. And is the PAT per cross-sell franchise growing or not. We've delivered a record number. As you can see, these are seven-year numbers right here from FY '17 to FY '23 from INR1,670 per cross-sell franchise profit, we ended the year at INR2,837.

As you can see, '17, '18, '19, they were normal years. Even '20 was a normal year, barring last end, even on those four years, since then, we are principally looking at just a 70%, 80% growth in profit per customer franchise. And AUM per customer franchise has remained pretty steady. We don't expect any change in this metric to happen. We should continue to deliver better outcomes as we go from here.

Let's quickly jump to Panel 37. This is financials, 29% core assets under management growth, total income grew 32%. Net interest income grew 28%. Operating expenses grew 27%. Loan losses grew 22% and profits grew 31%. So we've started to now largely look at a normalized frame of 28%, 27% -- loan losses growing 22% and profits growing 30%. On a full year basis,

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