Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bajaj Finance Ltd (BOM:500034, Financial) reported a 29% year-on-year growth in Assets Under Management (AUM), indicating strong business expansion.
- The company added 4 million new customers in Q2, with an estimated total of 15 to 16 million new customers expected for FY25.
- Net Interest Income (NII) grew by 23% to INR8,828 crores, showing robust revenue generation.
- The company maintained a strong liquidity buffer of INR2,200 crores, ensuring financial stability.
- Bajaj Finance Ltd (BOM:500034) received an investment-grade rating from Moody's, enhancing its creditworthiness.
Negative Points
- Loan losses remained elevated, with gross loan loss and provisions at INR934 crores, impacting profitability.
- The cost of funds increased slightly to 7.97%, which could pressure margins if not managed effectively.
- Credit costs were a dampener for the quarter, with net loan loss to average assets expected to be between 2% and 2.5% for FY25.
- The company's deposit growth was slower than expected due to a competitive pricing environment.
- Stage 2 and Stage 3 assets saw a net increase of INR542 crores, indicating some deterioration in asset quality.
Q & A Highlights
Q: Can you provide more details on asset quality and net interest income (NII) trends?
A: Rajeev Jain, Managing Director, explained that bounce rates are lower, but flow rates are higher, indicating a cautious optimism about asset quality. They have added staff in deeper geographies to improve debt management. Sandeep Jain, CFO, noted that a 25 basis point drop in repo rate could improve NIM by 10-12 basis points, but they plan to use this to grow secured businesses rather than taking it through the P&L.
Q: What is the outlook for rural B2C and business and professional loans?
A: Rajeev Jain stated that rural B2C is expected to grow by 12-14% this year, with potential for 23-25% growth next year. Business and professional loans are being closely monitored due to elevated flow rates, but they remain optimistic about managing risks.
Q: How is Bajaj Finance navigating regulatory challenges and operating efficiencies?
A: Rajeev Jain emphasized ongoing investments in compliance and operational risk management. They are focusing on Gen AI to enhance operating efficiencies and expect to see continued improvements in cost-to-income ratios.
Q: What is the impact of Bajaj Auto Credit on the 2-wheeler and 3-wheeler business?
A: Rajeev Jain mentioned that the Bajaj Auto business is winding down, which will lower loan loss to average AUM. The non-Bajaj book has half the risk cost, and they expect to fully replace the AUM by March 2026.
Q: Can you comment on the festive demand and consumption trends?
A: Rajeev Jain reported a 20-22% growth in discretionary consumption during the festive season, with a 19-20% growth in value. This indicates strong demand in their point-of-sale businesses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
