Thank you, Morgan Stanley team, for hosting us. Very good evening to all of you, or good morning depending on the geography you're in.

Welcome to the BFL Q2 earnings call. The investor deck for Q2 has been uploaded on our website.

I hope you had a chance to go through the same. I'll quickly focus on key updates for the quarter and our management assessment before Q&A.

I expect to take between 15 to 20-odd minutes. Let's quickly get jump to panel four for in terms of the quarter gone by.

Overall, I would say it was an excellent quarter with strong performance across all key metrics of AUM, new customer addition, credit cost, profit growth, ROA, and ROE. AUM, as you can see, grew by 26.5% to ₹5,84,628 24 crores, delivering net AUM addition of close to ₹38,000 crores in a quarter.

PBT grew by 29% to ₹8,537 crores in Q2. This is before the macroeconomic provision that we've created of another 320

₹337 crores

to grew by 34% to ₹8,874 crores. PAT grew by 29% to ₹6,367 crores.

Before prudent before macro overlay provision, it grew by 34% to ₹6,619 crores. In Q2, company booked 13.5 million, just a tad below 13.5 million new loans, and added 4.5 million new customers.

Overall customer franchise stood at 100 just a tad below 129 million customers. ROA for the quarter came in at 4.6%, and ROE came in at 20.6%.

OpEx to total income was at 33%, and net NPA came in at 42 basis points. Overall, I would say pretty good quarter for the firm and first half for the firm.

In general, AUM growth was pretty secular. I'll quickly go through I've jumped actually to panel 52.

If you see, the growth is pretty secular. Urban consumer finance grew by 43%, rural consumer finance by 63%.

MFI, though on a low base, grew 54. CV and tractor, on a low base, grew 89.

LAS grew 42. Captive book, as you're aware, as I've been talking for the last two quarters, continues to wind down, and would create significant tailwinds for us in terms of credit costs as as we move forward, is now down to just ₹2,400-odd crores.

MSME grew by 3%. It should now start to grow actually, we should start to see as we get into second half a double-digit kind of growth momentum in the in the business.

Gold loan portfolio continue to grow. It's now 4.1% of balance sheet.

It was just a tad above ₹24,000 crores in Q2 as of Q2. We added 320-odd gold loan branches during the quarter.

Total network is now crossed 2,000 branches, is at 2,022 branches, and we remain, quite clear about ending the year with close to 2,800-odd gold loan standalone gold loan branches. Rest of the business, as you can see, grew in the corridor of 20% to 30%.

Overall, pretty secular growth across all lines of business. In a way, on a if I if I look at a gross loan growth because captive book is dialing down, you should add another ₹1,000-odd crores, that's virtually 37.5 ₹38,000 crores ₹39,000 crores of of book growth that we are principally talking about.

These are fascinating numbers even for me, I would say. I didn't I didn't imagine we'll be growing quarterly between ₹38,000 and ₹39,000 crores on a run rate basis because that's been the case for the last two quarters now.

I'll go back to panel five, six, and seven to quickly give you highlights on on of the quarter. New loans grew 11% to 13.5 million.

There's some level of noise in year-on-year number because last year season was earlier, this year season is later. We're well on track to deliver between 60 to 62 million new loans in FY27.

We added, as I said, 4.2 million 4.42 million new customers during the quarter. We are clear about adding between 18, 19 million 18, 19, 20 million customers between 18 to 20 million customers in to the franchise in FY27.

Overall franchise, I talked about, stood at 129 million, and cross-sell franchise stood at 82 million. Liquidity buffer remained strong at just a tad below ₹20,000 crore.

Cost of funds came down sequentially by 9 basis points, and came in at 7.31%. Deposit book is 14%.

We've increased rates in Q2, and hopefully we'll see some momentum here as we move forward. OpEx to total income improved to 33%, and despite continued investments that we're making in gold loan branches, MFI branches, and technology transformation.

We remain pretty comfortably placed to deliver a 20 to 40 basis points improvement in FY27 on OpEx to NTI. Now on credit quality, loan loss to average AUF improved to 1.56% from 1.88% last year.

As a measure of prudence, we recognized a, as I said, a macroeconomic overlay of ₹337 crores. Excluding this provision, the loan losses and provisions actually declined year-on-year by 12%, and loan loss to average AUF, in the process, would look to be like 1.32%.

You may see here that the stage two and stage three assets actually increased by ₹1,601 crores. It actually includes a ₹1,047 crore increase in stage two in the gold loan business due to the short-tenor schemes that we're actually launched when the new RBI guidelines came came out.

That has had an impact. We have since August stopped doing short-tenor schemes as a firm.

We don't see any credit cost impact as a result of it. Already out of the ₹1,099 crores, which is which contributed which is close to ₹1,100 crores came from gold loan in stage two, ₹550 crores have already been has been resolved and has flown back to stage one.

It's a transient movement for a quarter is is really what we see it to be, and don't see any impact on credit cost or even otherwise on in terms of auction, and so on and so forth. Vintage credit performance across our 3 MOB, 6 MOB, 9 MOB continues to reflect significant and sustained improvement in the portfolio, and we're reasonably comfortable with the credit cost outlook for FY27.

Of course, this we remain in a VUCA world, we'll we'll take quarter at a time. GNPA and NNPA, of course, if first quarter is first half is to go by, we remain pretty comfortably placed on credit quality at this point in time for FY27.

PCR remained pretty strong at 60%, GNPA and NNPA came in at 1.06% and 42 basis points. ROA, ROE, I talked about, 4.6% and 20.6%.

Let me just cover now on capital raise because that's something that that we announced recently. On October 1, as you're aware, the board approved, subject to shareholder approval, ₹11,700 crores of QIP and preferential warrants by Bajaj Finserv to the tune of ₹5,800 crores, in accordance, of course, with subject to approvals and by the shareholders.

The board's decision of raising additional capital is principally driven by mainly growth story of of India and of the company and and its subsidiaries. That's the reason why we are raising capital.

We are very also clear that without having to dilute in any given manner the sustainability of the medium-term goals of ROA and ROE that we've actually outlined to shareholders. It's pretty much for growth that we're looking to raise capital as we move forward.

Quickly, maybe now cover panel 9 to 11. I won't cover too much, but we continue to double down on FinAI transformation.

We now have scaled our AI unit to 328-odd people, given the breadth and the depth of the work that we're doing. The facial facial recognition camera technology is now deployed in close to 535 stores and 1,163 service branches.

We're getting a lot of learnings from these deployments. AI bots are now handling 75% of our DIY customer service volumes.

Disbursements, you can see the numbers, grew year-on-year 111%. As we deepen our understanding of enterprise AI and deploy it, we get experience, we get learnings.

We're becoming we're becoming more and more effective both in terms of cost and in terms of experience of the customer and of the employee. Overall, company has now 129-odd agents and 65 agentic applications.

We're well on track to deliver 118-odd agentic application and 600-odd agents for the year. I won't cover panel 13 and 14.

Just the only point I'll cover on panel 13, 14 is that we've are launched our first customer risk model from a risk management standpoint. We'll book 500,000 accounts in our B2B business, look at its 3 MOB performance, and based on that, start to evaluate that for other lines of businesses.

It's in a testing phase. Overall, as from a modeling standpoint, it does show a 15, 20% improvement in terms of our risk outcomes.

Let's see how the models perform in reality, and based on that, then we'll start to take a view. We are working on our B2C model as well at this point in time, subject to the 3 MOB performance.

We would launch our B2B B2C model as well if the performance by January for our B2B business holds based on our estimate assessment at this point in time. Quickly BHFL, on subsidiaries, panel 14, good quarter for them as well.

Their disbursements and AUM grew 25%. Sambhav loans, which are affordable loans, crossed ₹500 crores in monthly disbursements.

OpEx to NTI continues to improve. They continue to make progress in terms of on a year-on-year basis, it improved from 19.7% to 19.1%.

Their PAT grew by 18% despite a very, very intense competitive environment that they continue to face. ROE improved as a result of improving leverage to 12.7% from 12.2%, and their asset quality remained pretty healthy.

BFSL had a good quarter. PAT grew 36%, it added 121,000 customers.

To summarize and then open it up for questions, overall, I would just say that the first half principally demonstrates the strength and scalability of our business model at this scale to grow 26% is is I would say good growth to be in, underlying credit while maintaining credit costs at, as I've said, that probably it's likely that in the four years, this is likely to be one of the lowest years on on credit cost. We are we're well on track for that.

FinAI is moving rapidly from individual deployments to enterprise-wide transformation both for employees and for consumers as we move forward. That's really from me.

Just last point on portfolio quality, which is panel 59 to 62. We principally remain green on all business metrics.

You may see a gold loan variation there, but I've already explained the point, and as I said, 55-odd percent has already got resolved, it's a transient point. With that, I'm happy to take questions.

Hi, team. Thanks for taking my questions and congrats on the quarter.

Just I might slip in two questions because they're short to answer. Firstly, on gold loans, why aren't you all offering short-term gold loans?

Isn't that easier from an LTV perspective because you're discounting only say three months or six months of interest versus 12 months?

Go ahead with the second one, Piran.

The second one is historically, two-wheeler customers, you all have been uncomfortable cross-selling other loans to. They were never part of the cross-sell franchise.

Given the fact that your open-market two-wheeler customers have significantly better asset quality performance, do you consider them to be part of the cross-sell franchise?

No, fair. Gold loan, Sandeep, you want to answer?

Thanks, Piran. The exact issue what we faced in Q2, and that's the reason why stage two has gone up to about ₹1,100 crores in gold loan business is on account of short-tenor schemes.

See, for a customer to come every three months to the branch for making full payment slash payment of interest, coming for rollover becomes very, very cumbersome, and accidentally customer gets into delinquency. Once the customer gets into delinquency, the only way the customer can resolve the case is by making the full payment of principal and interest, which is not necessarily the most appropriate thing for the customer.

As a result, I think what is more appropriate, and we are working on that as Bajaj Finance, is to offer a longer scheme, let's say of 12 months that we were offering always, but to sort of customers who want to pay regular interest, give them option of making monthly and quarterly interest payment as well as additional option. This will solve both the issues.

One is customer can make frequent payment of interest and reduce obligation. At the same time, need not have to come to branches again and again for rollover of the loans.

On two-wheeler, answer is yes, Piran. On two-wheeler, answer is yes as because we are clear we want to run open architecture two-wheeler at 30, 35% of full credit cost.

As but the customer segment principally doesn't change. The in principally, the answer is yes.

Pool is likely to be low. That's how I would answer it.

Sorry, you had a follow-through on Q1 question one, I think?

Yeah. The only follow-through was what percentage of the gold loan customers would take bullet loans versus say quarterly or monthly installment loans?

Because I would presume bulk of them would be bullet.

Piran, today you're right. The bulk of them, 99% of them are today bullet under bullet repayment.

They can continue to take bullet, but take 9 months or 12 months. They can always come and prepay earlier, prior because there's no friction.

There's no foreclosure cost.

It's

better not to push the customer into delinquency and then auction, and so on and so forth. The wiser thing to do is to give them a longer tenor and has the flexibility to repay rather than anything else.

That's at least our assessment and learning, and we'll principally stick to that.

Hi. Thank you.

I've got three, four, actually. I'm just trying to prioritize.

Let's go with asset quality. In MSME, you've seen GNPA continue to deteriorate.

What sub-book is driving that? Also broadly, GNPA going up 10 basis points in the quarter.

Which areas, you've talked about gold, but any other areas that we should be thinking of in terms of where stress might be building? Related to that, broadly, how should we think about consumer debt-to-asset kind of capacity?

In which areas do you think consumer leverage is still low enough that you could comfortably lend? Because it does feel that, coming out of the last cycle, consumer leverage was high.

It slowed down a bit, but, like you highlighted in the last quarter, not a lot. Just wondering how you think about this philosophically.

No, the first point is on asset quality. On MSME specifically, we're seeing it's nothing as for growth.

There's no denominator growth, you should actually see this number as a peaking number. That's so it's a pure mathematics and nothing else.

That's how I would answer the MSME. Flat growth, you're likely to see GNPA, NNPA go up.

When we look at the 3 MOB, 6 MOB, 9 MOB, we are looking at numbers principally closer to 2019, which is really I have articulated many times. Better than that, as Siddharth is saying.

We're seeing better than that actually. We are very comfortable with the MSME 3 MOB, 6 MOB, 9 MOB and even 12 MOB book because we started to make changes in the nature of origination from last July onwards.

I think that's just on just point number one on to your first point. On your second point, we don't see at this juncture any blind spots.

It was a learning. We realized in August sometime that while in April, we launched based on the set of changes that came in from a regulatory standpoint, and the entire industry launched 3 months, we also launched 3 months.

It's a learning we've taken and changed track quickly. It's not been an easy one.

I must make that point to you because industry still continues to do 3 months. We are clear, we don't want to push the customer into default stroke delinquency.

The regulations and the guidelines are very clear. If you flow into default, you have to pay fully, otherwise you don't come back into regularization, and so on and so forth.

There are other unintended consequences for a non-monoline company that I then cannot lend to that customer if he flows into delinquency for any other product as well. We don't want to be in that space.

Consumer leverage remains a consumer-by-consumer play rather than a generic point. As you are aware, we continue to see consumer debt to GDP grow a little slower, but continues to move forward.

We are in public domain over the last three years that 3PL is a single univariate metric that continues to trouble us. We have brought that down from 14% to 7% in terms of origination.

My mandate to the team is to bring that down to 3.5 in the 6 months' time. That's really where we are principally headed.

Despite, as I said, I'm looking at ultra-low credit metrics. Because we have seen that a customer who has multiple pieces of points of leverage, that has a higher probability, tendency to flow into default.

We will keep bringing down the 2PL, 3PL number business by business further. Further means by half or we'll halve it by March again.

By Feb.

As Siddharth is saying, by Feb. That's really what our proactive stance is it's bottoms up customer by customer and leverage as a central dimension of our risk assessment process.

Th-

That's fair. On the GNPA, the 10 basis point increase, it's in a number of areas that's adding up to it.

Now, clearly, you're you're target's metric is 1.4. I don't want to make a big deal out of it, but there are a number of areas showing increase.

That's why I asked a general question on that GNPA.

Yeah. No, that's fair.

Look,

Chintan, I think the right metric to from a comparison perspective, as we as we do compare between Q1, Q2, Q3, and Q4, is to look at stage two and stage three together, which is actually improved from 1.9% to 188 basis point excluding gold loan, is what we have also communicated in the presentation. The movement in the GNPA it goes up in quarter two mainly on account of number of days being higher in Q2 compared to Q1, which means that one additional month of GNPA flows in quarter one quarter two,

Always.

always. That has been the case always.

If you look at past record also, that's how the numbers would show up. This is mainly on account of number number of days.

Nothing to do with portfolio quality or anything built up in the balance sheet.

Fourth quarter is the lowest.

Yeah.

Because number of days are lesser.

90 days, yeah. Due to Feb, yes, yeah.

Thank you. Thank you for that.

Hi, team. Thanks for the call.

My specific question is what are the reasons you see this overlay? How does it related to earlier overlays, or a permanent change in the ECL model, basically, because how do we think about frequency and size of such discrete overlays going forward versus embedding them in ECL model assessments?

How do we visualize?

This is over and above ECL model, Kuntal. Point number one.

That's why it's overlay. I think that's just first point to clarify, which means it remains available to the management to use.

I think that's just first point from a clarification standpoint. I'll let Sandeep respond to

No, is it a policy to have overlay in good times to release in bad times?

Okay. I'll just make a point before I Okay, is it to build resilience?

Answer is yes. Okay?

The fundamental reason for creating overlay let me articulate, is not because we see stress building, but I want us to remember always that this is bulletproofing of the business. It is for resilience.

We are a cyclical business. We will see credit costs go up marginally, credit costs go down marginally.

Okay? It is for those marginal periods of when we go to 2.

we went to a peak of from 1.75 to 2.15. Let me give you a cycle view of us as a firm.

That's a very low cycle view somebody could argue that we go from 1.75% in a low period to historically, now the number would reduce further as I've said, to 2.15. That's really if you see last two years been.

That's really our cyclicality for us as a firm. We would like to further strengthen that, I would say, narrow the band further so that we can, in a cyclical business, reduce cyclicality, which is what we call resilience, is the way we are thinking about the business model.

Sandeep, you want to add something else?

Kuntal, very clearly, we continue to rest our model on empirical data, which is what anybody would build the model on. That's point number one.

Point number two is, while we do look at forward economic factor and guidance to look at what kind of overlays one should have from macro perspective, which is the integral part of, I would say, ECL framework itself. At times, it fails to capture the potential effect of what's happening in the real world.

Let me give you a clear example. El Niño that we are seeing in the country, we are 87% monsoon at this point in time, or the oil price, which is now constantly hovering at $100 to $110 kind of price.

The cascading impact of this on the economy, on the interest rate, on the inflation is very difficult to factor in the macro module. That's where the management judgment comes into picture.

Let me also be very clear. It's not a perfect science.

It's an estimate of the management in terms of the portfolio could get impacted. We believe at this point in time, unsecured businesses barring salaried because salaried may not get impacted so much because of oil price and inflation, but the self-employed customers could really get impacted.

We have done stress testing on those set of customers and proposed a higher provisioning on the customers who are in stage one in the unsecured non-salaried portfolio. We've also done stress testing of stage two outstanding of the customer and proposed additional provisioning on peer.

We did not do stress testing specifically on stage three because stage three, if you remember, last year in quarter three, we have already introduced LGD flooring, which captures, I would say, significantly higher provisioning coverage than what is required for the kind of portfolio that we manage. I think keeping in mind all of those things, we keep reviewing this on a quarterly basis.

Based on the evolving and emerging situation, we decide if there's a need for us to have overlays.

The statistical modeling technically could argue the 60 the 60% floor probably needs to release today.

Right?

Let me make that point. You have I'll compound your point further.

You may say, that means you have more than even this. The answer is probably yes, but we are just focused on the resilience.

I want to make one last point, Kuntal. Sometime very soon, we will cross the point of where the largest non-bank merged into bank.

Okay? We are we are seized.

One, we are proud of that moment would be proud of that moment as and when it happens, but we are also seized of the importance of resilience in our balance sheet that is needed to continue to grow from thereon and get to a, as per last LRAC, ₹11 lakh crore number by FY30. That's all I would just say from a last point standpoint.

No, thanks. This really helps, but can you just quantify what is the current stock as of today of macro and management overlays?

The overall macro provision stands at about ₹226 crore, if my memory serves me well, that's a number. On the management overlay side, we have created a provision of ₹512 crores.

₹185 crores was taken in last quarter, and ₹327 crores we have taken in the current quarter. Apart from that, the LGD flooring that we have created would also carry a number between say ₹350 crores to ₹500 crores of additional provision that is already sitting in stage one, two, three assets, mainly because the actual number of the empirical data may suggest a lower number, but because we have applied a principle of LGD floor, we continue to make provisioning at a higher rate.

That number could be in the region of ₹350 to ₹500 crores is what our estimate at this point in time is.

Wow, thanks. This is good conservative stance, and thanks for this clarification.

Thank you.

I'll join the queue.

Hi. The first question is on growth guidance.

Last time you said you would review post the second quarter. You said it's very fascinating to see almost 26% growth, plus the capital raise is also for the growth story.

What would be the growth guidance here onwards for near and medium term? That's the first question.

Second, in terms of the overall margins, cost of funds are down 9 basis points, but given that we are in the rate hike scenario, we had still seen some margin compression and NIMs on calculated basis appear to be down. How do we see once cost of funds start to seep?

What is the outlook on margins? Yeah.

I would say FY27, two quarters gone. We're seeing the early onset of festival first 9, 10 days.

I would say probably between 26, 27% growth we should deliver now for on a full year basis. I think that's medium term, we maintain a guidance of 23 to 25% on a year lower here and a year higher there.

That's the second point. On NIM, clearly at this point in time, we're baking in two more increases in the current year.

That would take us to 6% kind of rates. You'd see marginal moderation on NIM as we move from here.

We should be able to manage comfortably is what I would say in terms of NIM. Because part of that would come from OpEx to NTI.

Part of the same would come in from, of course, from credit costs as you're seeing. Overall, profitability and return ratio, we should be able to continue to navigate is what I would say to you.

Moderation in NIM would be only marginal? That's what you are suggesting?

Yes. Yes, at this point in time, yes.

Got it.

You've seen, I think, a 10, 12 basis points compression in Q1 to Q2.

Yeah.

I think H1 H1 NIM over March is about 5 basis point lower. The Q1 was marginally higher.

Q2 was 10, 12 basis point lower than Q1. We are seeing moderation in NIM.

It remains manageable. We remain confident.

From Q2 level, not much of an impact on margins?

I'm not saying that. That's what you're saying.

I think we continue to remain in cost of fund increase environment. We're mindful of it.

In the last quarter, we have done significant amount of interest rate hedging. That has brought down the cost of fund effectively in the last quarter at BFL and BHFL level.

That's what you would have seen in BHFL as well. As the repo rate goes up, it will also have its cascading impact coming in quarter three and quarter four.

I would bake in at this point in time a marginal, additional compression versus what we had given as a guidance at the beginning of the year. Far, we are 5 basis point down versus beginning of the year on first-half basis.

I had given a guidance of 10 to 15 basis point compression in the current year. I would say carry a marginal headwind to that number than anything else.

Perfect. This is useful.

Thanks. Thanks for answering all the questions.

Yeah.

Thank you, Kunal.

Hi. Thanks for the opportunity.

I had basically I would say two parts to this question. One is on the fee and the non-interest income, right?

Currently we are running at 20% growth run rate, significantly ahead of what we have guided. Now the other part to this is basically there are some, I would say, headwinds or overhang on this number.

May not be from maybe, say, this year's perspective. One is basically some bit on say maybe Flexi, most importantly on say the insurance piece which is there.

How do you see this say, from F28 onwards if the current insurance norms remain where it is? Given that we do have some benefit that can come through from the MDR on UPI as well, right?

Given finally we can monetize the entire network that we have built. How should we think about this?

Yeah. The H1 non-interest income has grown by 20%, right?

In general, our guidance was 16 to 18%, but as we outlined in Q1, and same is true for Q2, because of stronger growth in our B2B businesses. I think that's just point number one.

Overall fee base is diversified. Includes some parts of discussion documents which are in public domain, some parts of draft regulation.

We are continuing to strategize. We remain comfortable that in a longer term, we should be able to sustain a 15 to 18% fee income growth is what I would just say to you Viral.

At this juncture, given that both papers are regulatory in nature, we have a set of strategic thought process that we are working on, which we will deploy as the regulations come through is what I would say. At this juncture, it's very premature.

We're working on it as management, and have our plans ready.

Got it. Just one more follow-up on one of the previous questions, Rajeev, which is the gold loan.

Now over there, I understand you are focusing on the longer tenor product keeping customer interest in mind, but that will also effectively curtail our LTVs or rather the ticket size that we can offer to the customer, right? Because of the embedding of the entire interest in the loan.

Do you think that this can be a challenge say from a customer acquisition standpoint in the near term given that competitor's

No, see, we have to run a business keeping in mind interest of the customer, interest of the company, and what is long-term sustainable, right? Just that that's really how we build businesses.

We're very clear that a short-tenor loan doesn't work for the customer, doesn't work for the company, and is not sustainable. We fundamentally remain focused on organic expansion, that's one part, in terms of distribution expansion.

Two, mining our franchise. Three, as I articulated last time, focusing on our mining franchise through digital infrastructure, which is a differentiation is really how we've chosen to build the business.

We remain comfortable that it can navigate through the competitive intensity without compromising on the margin profile of the business. That's the last point.

Given the intense competitive activity, there's significant noise on the pricing. This business is supposed to be fundamentally a profit builder.

That's really the goal of the business rather than an AUM builder. That's really how we are organized ourselves in terms of the business model, and that's what we intend to remain focused on, irrespective of the noise on what it means.

We make the choices. I'm very clear about businesses that we build, that we make the choices, makes it a little harder, makes it a little longer to play through.

We'll take the long route. Yeah.

Viral, from a customer centricity perspective, that's something that we laid out very clearly as part of last year's LRS. We are very clear that we'll do what is right for the customer.

We believe that structurally a longer tenor bullet repayment model serves the customer better versus a short tenor, which may give more LTV, but eventually puts the customer into default position, which is not necessarily the objective of working with our customers for gold loan business. I think we are very clear, irrespective of what market does, we would prefer offering a little longer tenor scheme to the customer with a bullet payment option that the customer is used to.

Even if it comes at a cost

of

slower growth, we are quite okay with it.

Got it. I think this is just completing Kunal's question.

I think Kunal asked you on growth, and you responded on growth and margins. Just one piece that is remaining is on the credit cost front, right?

Given that we are significantly, I would say, including the overlays also running closer to the lower end of your guidance, how do we kind of foresee the rest of this year?

Rest of the year, we should look at it in the same corridor is what I would just say to you. In similar corridor.

Thank you.

Good evening. Of course, on capital raise, you have outlined the growth as underlying thing.

If I look, your profitability also the possible stake sale from your subsidiary Bajaj Housing, and also the timing in the past at tier-one level when you have come for capital raise. Thing, looks, I would say much of a in advance or too prudent.

What exactly, what kind of a growth? Because you have too many cushions including your current tier-one.

That is kind of calls for such a large capital raise plan at this earlier stage. Second, on insurance thing, if at all this regulation in gyming it were to come through, will you remain an open architecture and will or there will be some kind of a rethinking kind of distributing your own group product or that irrespective of commission regulation, you will remain open architecture?

Thanks.

Yeah. I'll take the second one first.

We'll wait for the final regulations to come to make a decision is what I would just say. It's a discussion paper.

It has to get converted into draft regulations, and then regulations. No point in speculating at this point in time is what I would just say to you.

As I said earlier, we are creating multiple scenarios for us as a firm as to how will we navigate while protecting our fees and margin. That's the only point I would make.

We are clear about the medium-term guidance on fees and margin. That's point number one.

Point number two, your question is principally on capital. As I said, it's principally for growth.

As I said, we added close to ₹38,500 crores in the quarter itself, 26.5% growth. I'm not changing, I must say to you, the longer-term growth guidance of 23 to 25.

I think it's important to make that point clear because that's a good number to compound at the levels we are in. In a year, we may grow 27.

In a year, we may grow 23. Long-term compounding is really what we are principally focused on, coming from underlying quality of the business and the margin profile of the business.

Just at a philosophical level, to make the point. The third point, which is important, which I would like to highlight, and we've been covering that in our investor deck for a long, long time actually, and I'll break this into two parts because, as you said, we could use it to do dilution in BHFL rather than raising capital.

One, Last 3 years ago, we raised ₹10,000 crores. Since then, exactly the balance sheet ending this year will grow 90%.

I should

Double actually. In 3 years, you have actually doubled, I should be raising 20.

I'm raising or looking to raise 17.5. I think that's point number one.

In absolute, the number may look large, but in terms of previous raise to balance sheet growth, and during this period, you have continued to deliver if you take core ROE of between 19 and 20%, on a 3-year basis. Size or the quantum is actually smaller than what we raised last time around.

We could very well raise part of this, you are right, from BHFL dilution. We have 3 years' time, that's point number one, and We are on track within that timeline.

We have to do this. This would give BHFL some more time as well to transition their business model from super prime and prime to prime and near prime.

Allow them to migrate their business which would be eventually lot more beneficial to BFL shareholders. Because at the end of the day, we intend to remain 75% holder.

We today are 87% holder. When we take a longer-term view and look at the transition that BHFL is undergoing at this point in time, we think we want to give them little more time to re-pivot the business which they are very well on track to.

That's why I articulated that Sambhav loans are now ₹500-odd crores a month. I think exiting the year, they would be at ₹800 crores a month.

Should continue to probably get to ₹1,300, ₹1,400 crores a month sometime by third quarter of next year. That's really how their plan is organized around.

Hopefully that gives you an answer to all the three questions in a terms of quantum, one. Two, why not raise through BHFL dilution.

Three, last point, leverage, I made the point and then I passed it. We show in our resilient business model that We've kept bringing down the rate at which when do we raise capital, the leverage ratio has kept coming down.

We used to raise at 6, last raise was at 5.4.

5.4.

5.4. We think, from a sustainability of the business model given the size of the firm, we'll probably start to raise at between 5 and 5.5.

We'll lower the corridor from 5.5 to 6 to 5 to 5.5 is We are right now at 5. 1.

1.

That's really the thought process in terms of wanting to raise capital, become more resilient, make the really bulletproof is really the principal objective. Thanks.

On RBI revolver loan, any update? Based on that amendment described, what could be exposure of yours kind of falling under the definition of a revolver?

Thanks.

It's a draft, as you're aware. Comments have been submitted by everybody.

We hope that RBI would find a middle path, which benefits, which creates sustainability on one hand, protects the customer centricity on the other, and helps innovation from a way forward standpoint for non-banks. Now, that is my expectation.

We'll see what it comes out to be. Let's assume for a moment that RBI decides that it is a complete ban.

There will be transient impact on AUM and a marginal compression in NIM and profitability. We will abide by what RBI has to state and work along.

We're already launching a set of different variants of term loans on 1st of November which do not allow of course withdrawal, but has some more attractive features to ensure that we can find a middle path in the term loan structure. That's something that we are looking to launch by 1st of November as well as a firm.

Both insurance, this, we would like to act as a firm rather than wait. Least it does is it creates greater diversification and more resilience.

Most it does is it augments growth. Either way, I would say we're in a better place than just probably wait.

Is what I would just say. I hope that answers your question.

Hi. Good evening, and congrats for the quarter.

One question on gold loan, I think one of your peers just said that in this calendar year, around 4.5 lakh crores of disbursements have happened to customers who are deeply delinquent. That is 90 DPD plus.

What are you seeing if you've looked at this number? Second, in your own disbursement

Sorry, repeat the number, Abhishek.

₹4.7 lakh crore of disbursement

Yeah.

so far in the calendar year. Right?

In gold loan. Ek to what are you seeing in your numbers?

Are you seeing this in the overall industry numbers? Are you seeing a progression of your customers into say GS2 or even GS3 apart from the ₹1,047 crores that you mentioned is short duration, etc.?

Underlying trend, is it worsening, or are you seeing delayed payment, anything of that sort?

Okay. Abhishek, the rightful metric is not dispersal in this business.

The average book itself is 6, 7 months.

Yeah.

I think that's the first point to remember. Dispersal is a vanity number.

AUM is the rightful number. If you ask me, the better number from a core underlying growth is tonnage.

We actually track tonnage.

Sure.

Is my tonnage growing or not? That's, I think, the fundamental metric is tonnage, real metric, because gold price go up or down.

What is the franchise value is tonnage and or growth in tonnage to determine growth in business. Second is AUM.

Dispersal doesn't matter. Dispersal is actually quite inconsequential.

Now coming to dealer metrics, we don't see any. In that sense, this stage two movement is a little bit of learning for us.

That's why we've taken the what I would call a tough action that we've taken, that this is how the business is to be organized. Whereas, I must say, Abhishek, this is for the record, that in general, gold loan companies are not organized this way.

They're very comfortable with stage two. They wait for things to go into stage three and then do auction.

In general, our assessment is that auction is not a rightful metric. Auction is not liked by any constituent, is how I would simplify.

It's better to manage it through risk rather than manage it through auction, is how we have taken a position to be, and that's how we will build the business out. We remain committed to continue to grow the business as I said, organically, and using our franchise, and using our digital infrastructure.

I guess, Rajeev, the intent was to understand what kind of tonnage or what kind of customer is getting the loan. Are they already leveraged somewhere else,

or

so, that you don't see any adverse Yeah. No,

no, we don't see. We're not seeing any movement.

We're not seeing any movement in that metric. The average ticket size remains between 2.

2.2, 2. 2.4, 2.4, 2.5 lakhs, 2.4, 2.5 lakhs.

We're not seeing any structural change versus a year ago to today at this point in time, and during this time, gold has dropped off from 5,400 to 40 to 4,200. times.

We continue to hold LTV of 75% at this point in time.

Inclusive of interest.

Inclusive of interest, as Siddharth is clarifying. Got it.

Got it. Rajeev, the second question is, if I look forward into 28, 29, couple of headwinds to revenues are there, right, just maybe something on the revolver piece, insurance piece, maybe even cost of funds wise.

Do you think you can protect this at the operating profitability level, that is through maybe cost or yield, or do you think you can lean on your credit cost, which is anyway running below where you're guiding for this year, and that will come in use to protect your ROA? Which part of the ROE tree would you have more control on sort of?

One, as management, we are paid to deliver long-term guidance. I think that's point number one, I must make to you.

We are supposed to find answers. I think let me simplify that point.

Since COVID, there's been no dull moment. Either credit cost is going up, or growth is stronger, or profit is stronger, or ROA is stronger, or ROE is weaker.

I think there is no dull moment since COVID. We're now used to we or all management should be used to no dull moment in building businesses or running businesses.

For every action, there is a reaction. For here, every action, you have to find a strategy.

We're committed to find a strategy. We'll hold to our long-term guidance.

It may mean acceleration in top line. It may mean marginal slow down in in fee income.

It may mean OpEx growth is slower. It may mean never say never, loan loss go further down.

Or it could have See, we have to deliver the long-term 23 to 25% profit growth to investors and 19 to 21% return on equity. We are reasonably agile as a firm.

We'll mobilize to deliver that. Long-term shareholders you may have to just wait for a little bit of time if action is very significant, is all I would just say.

You may say I'm talking philosophy, I'm not talking philosophy. I've run the firm for 20 years, trust me.

I know what I'm saying. Sure.

Of course. Thanks for answering, and all the best for the future.

Thank you.

Thank you for the opportunity. I have just one question.

It is on your rural book, both consumer finance and personal loan. Now, the portfolio credit quality on the slide 59, 60, I don't think there's a very dramatic change for September.

A little bit of uptick in stage two for rural consumer finance sequentially. Any color around what is our thought process going into the second half for our customers from the deeper pockets, given that we've heard some noise around droughts in certain states, etc.?

How are we thinking about disbursements in these segments, probably geography wise? Any color on that would be useful.

Thank you.

It's fair question. We've been watching the El Niño movement.

We've been tracking all the 720 districts. We are aware of the districts across the country where drought is declared.

We've been pruning business watching the monsoon movement now for the last 3, 4 months. This includes reduction in MFI business in some of the districts.

It includes reduction in business in our B2B business, not only rural, even urban. Because to us, urban is 500-plus cities.

Anything after 125 cities, I would say to you is rural at one level, at a fundamental level, if I may make the point. Wherever 3 MOB starts to move, which means it starts to reflect the underlying pressure point, we act.

Actions have been taken, as I said, no dull moment. You see all this don't believe it's in a cruise mode.

We've been pruning back. As I said earlier, that we've taken a proactive call that 3PL, we will drop from where it is today at 7% in terms of origination, to half business to business.

In some business, zero. Where I have no margin, it'll be zero.

is the decision management has made. We are going about it.

We still think, given our relative size to size of the retail or total business in India, we can still continue to grow comfortably. We've acted at this juncture.

It does seem Maharashtra is probably most impacted and Maharashtra is very large for every lender whichever part of the business you take, given the given the just the sheer per capita and the GDP contribution to the country. There are certain parts which are more affected than otherwise.

We've acted in some, we are acting in some, we're continuing to take a whole host of actions to to manage the prune business and navigate through that.

Right. And 20- 7% loan book growth guidance is inclusive of all these calibrations that you have already made and are planning to make?

Yeah. Okay.

I would just say, thankfully, I would say it's still better than what we were originally estimating 4 months ago. That I would just say, it covered ground.

Till June it was looking much worse, quite honestly. Coming in at 87% LPA is a much better number than it seemed as a 30-year biggest El Niño.

It's much better than it was expected to be, but some districts are much more affected than we would have liked them to be. Sorry, you are on to your point.

I was just saying 26, 27% loan book guidance is inclusive of all these calibrations that you have already made and are planning to make? Yeah.

Okay. Yes.

Yes.

Thank you and all the best.

Thank you.

No. Thank you.

Good night, and talk soon at the end of Q3. Thank you.

Thank you, all. Thank you for patient listening.

Thank you for questions. Thank you.