Thank you, Nirav. Good evening, everyone.

This is Anuj Singla from J.P. Morgan.

Thank you very much for joining us for the Bajaj Finance Q1 FY27 earnings call. To discuss the earnings, I'm pleased to welcome Mr.

Rajeev Jain, Vice Chairman and Managing Director, and Mr. Sandeep Jain, COO and CFO, and other senior members of the management team.

On behalf of J.P. Morgan, I would like to thank Bajaj Finance management for giving us the opportunity to host them.

I now invite Rajeev for his opening remarks, post which we will open the floor for Q&A. With that, over to you, Rajeev.

Thank you, Anuj. Thank you, J.P.

Morgan team. Apologies to start four, five minutes late.

Unfortunately, Sandeep is not here. There is a bereavement in his family.

He's not here. I was just speaking to him and I told him this is the first time in 19 years since I know that he was not there for AGM.

When he was not even CFO, he was always there assisting the CFO. It is unavoidable.

Very good evening. I have the senior management team members, rest of them are all here.

Welcome to BFL Q1 earnings call. The investor deck has been uploaded on our website.

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

I expect to take between just about 15-odd minutes. Let's jump to panel number five.

Excellent quarter, I would say. I've used this word after long time, I would say, probably six, seven quarters.

Across all metrics actually, volume momentum, new customer addition, we added 5 million new customers. AUM, we added a record ₹37,000 crore of AUM in a quarter.

Profit growth was strong at 28%, and ROE crossed 20%, despite the overhang still there on account of BHFL dilution. Pretty good quarter, I would say.

ROA came in at 4.7%, and ROE at 20.4%. Opex to NTI came in at 33.1%, marginally higher than last year.

It'll smooth out as I cover over the next few panels. Panel six, seven, and eight is what I'll quickly cover the key high points.

AUM growth was secular, I think, and broad-based as you can see from the composition summary later in the deck. Gold loan business sustained its strong momentum, grew by 112%.

Business is now 4% of AUM. By year-end, we foresee 2,700 to 2,800 branches.

All goes well, maybe 3,000 branches and AUM of between ₹29,000 and ₹31,000 crore, all organic. Is the only point I would make.

Rural consumer finance and urban consumer finance grew by 49% and 38% due to organic volume growth on one hand, but also increase in SKU prices. Out of, let's say, 40% average growth, 20% is on account of SKU price increase and 20% is organic growth.

We foresee further risk in terms of SKU prices going up is what the indication that we are principally getting from OEMs. Let's see.

MSME grew by 2%. As you are aware, since last July we've been pruning business due to a set of risk action that we have taken.

It should come back into growth momentum by Q3 or so. NIMs remained steady in Q1.

Deposit book came in at ₹68,500 crore. It's now 15% of the balance sheet.

Opex to NTI came in at 33.4%. The marginal increase principally reflects our accelerated investments in gold loan and MFI branch expansion, as well as impact of new labor code.

New labor code contributed to 16 basis points ₹60 crore, but in terms of 10 bps. 10 basis points.

So, 10 basis points impact. Since you count decimals, I'm making the point on decimals.

Labor code, gold loan, and MFI branches. Overall, we're confident of delivering 25 to 40 basis points improvement for FY27 in opex to NTI.

Full-time employee headcount stood at 73,261. We added 16 1,650 employees.

Excluding gold loan and MFI, the net addition was 811. On credit quality now.

Credit performance principally remained quite strong, with loan loss to average AUM in the new frame that we've talked about improving to 1.54% versus same time during same period, 1.87%. Both numbers are comparable.

As a measure of prudence, we have recognized an additional management and macroeconomic provision of ₹296 crore during current quarter on account of what's happening geopolitically and the monsoon uncertainty. Of course, monsoon has covered a lot of ground, I would say, in the last 15-odd days, but I think we still have some distance to cover on monsoon before we say that the Super El Niño did not impact the country.

If you exclude this provision, because this is a macroeconomic overlay-struck provision, loan loss to AUM for the current quarter would have been 1.31%. New stage two and stage three contribution was 1.87% from 1.94% in the previous quarter.

We expect continued improvement at this juncture on this metric over the coming quarters. Vintage performance, which is principally how the portfolio churns across 3 MOB, 6 MOB, 9 MOB, continued to reflect, I would say, significant and sustained improvement, and is now running below our FY20, our pre-COVID benchmark.

I keep reminding people within the company and otherwise that pre-COVID remains my benchmark. People say our size was smaller.

I don't agree with that point. I've made this point many times.

Across businesses, now we are looking lower than or equal to our pre-COVID benchmark, and we in general remain quite optimistic about the credit cost outlook for FY27. GNPA and NNPA came in in line, 0.96% and 0.39%.

Provision coverage is at 60%. We'll continue to hold there structurally.

On portfolio credit quality, all businesses are green. You may see a marginal blip in business loan, but I have penciled as green because it's just a denominator effect rather than a numerator effect.

The 3 MOB, 6 MOB, 9 MOB, 3 MOB, 6 MOB, and some vintage 9, we are beginning to see significant improvement even over FY20. FinAI, while if some of you were there on the AGM, I've covered a lot.

If you're not there, I'll just cover some points that are principally not covered. We showed five, six different examples in production.

If it was a physical one, I would have showed it as a live demo, but on VC, it was difficult to do a live demo. We're doubling down on FinAI transformation.

We're expanding the AI unit from 230 to 400 people. We're also adding another 300 people in digital platforms unit.

It'll principally augment our customer-centricity, rapidly accelerate our technology transformation, and strengthen our lowest-risk framework. This year the digital platform will deliver 40,000, 45,000 45, 40, 45 47,000 crore of business.

I am targeting, next year we should be delivering as Anurag is confirming, ₹50,000 crore, I'm targeting ₹100,000 crore volume is what between customer-centricity, AI transformation, and tech transformation and digital transformation, all these three as they come together, that's really what we are aiming to do so that from a push business, we continue transition towards being a pull business. In Q1, on FinAI, 27 bots are now live.

As we get deeper and deeper into this, we find more and more opportunities. It's a continuous transformation frame.

On data for AI, 45 million customer interactions were analyzed in the quarter through voice and text AI initiatives, and it resulted in 4 lakh additional offers and delivered ₹517 crore of disbursements just as a result of better insight into the consumer. On product and service discovery, banners, videos, podcasts are enabling faster and more efficient marketing.

You will see massive acceleration in this by November, December, massive, both from a GEO, SEO, and otherwise. In underwriting processes, we are seeing 20% plus efficiency using AI.

On disbursements, AI voice and text bots did ₹2,500 crore. We will do ₹11,000-₹12,000 crore in the full year this year.

On service, AI bots are now handling 71% of our DIY customer service volumes. 17 agentic applications have now got deployed out of 118, and we'll rapidly accelerate as we get into the year.

I'm on panel 13. It's a busy panel.

I'll just cover two-odd points that it gives you texture on our data intelligence, consumer, agentic AI, and custom AI models. The interesting thing is custom AI model, which is on track to go live in Q2.

That should help us for our B2B business generate half a million customers that we could not do earlier. The next business will be our B2C business that'll go live by October, November.

We're beginning to have confidence to build models using AI, which are faster, number one, and gives us insight that our traditional models did not give us. That's on AI, I would say.

I would go to subsidiaries. BHFL did its second AGM yesterday.

Strong quarter, I would say, highest ever quarterly AUM addition. Disbursements grew 33%, AUM grew 24%.

They continue to remain under pressure on attrition, given the intense competitive activity in the business. Their opex to NTI, which they can control, continues to improve, came in at 19.6% against 21% a year ago.

Both their PAT and PBT grew by 23%. ROE improved to 12.5%.

Asset quality remained pristine at 29 basis points and NNPA at 12 basis points. BFSL, strong AUM growth.

Profit growth was softer at 22%. Company's beginning to mature now, and we have plans to continue to scale the business.

To summarize, I would just say and open it up for questions. I would say, we've begun FY27 with reasonably strong momentum.

It should lead to accelerating growth, credit costs that are structurally improving. Of course, I would flag geopolitical tensions as an area to continue to watch for.

Monsoon hopefully should be behind us in the 30 days, and continue to maintain strong profitability ratios, which are being reinvested to remain a growth-oriented company. That's from me for the quarter.

It's a clean quarter. Shouldn't have questions, but let's do questions.

Good evening, Rajeev sir. Congratulations on an excellent quarter, like you said.

Sir, the question is that fact that it was an excellent quarter, despite that, we've not seen any change in your assessment for FY27. Looking at this kind of a growth in the first quarter itself, don't you think this year we can grow at maybe a higher rate?

Also, drawing from the fact that what you just alluded, business and professional loans you've turned from amber to green. You yourself acknowledged that maybe from third quarter, we can start growing it.

Don't you think this 22% to 24% corridor that you've given for AUM growth can maybe see some upside? The other thing is on credit costs as well, sir.

Starting the year, if I exclude the management overlay and the macro provisions that you've created, credit cost of about 1.3%, 1.32% thereabouts. There also, do you think, at least the guidance that you've given on the credit cost, we could be at the lower end of that guidance?

No,

it's a fair question. It's the only question I didn't [chuckles] cover.

It's fair you're asking this. As they say, one swallow doesn't make a summer.

We'll wait for one more quarter. I think we see continued momentum.

We are a growth-oriented business. We're seeing opportunities.

We've got to grow. All engines are firing for the firm, even MSME should be back.

If you look at quarter one, logically, but I would wait for second quarter, whether it's top line, which is AUM, or PBT growth, or ROA, or ROE. It does seem we are much better than the guidance that we gave in March.

I would, Abhijit, I would say to all investors, wait for one more quarter and we sustain it, then we know we are ready to revise. That's a fair question.

Got it, sir. Sir, just a follow-up on that.

You spoke about that the ROE and the PBT. There, I'm just trying to understand this quarter we created about ₹300 crore in management overlay, macro provisions.

Is the thought process that given that all cylinders are firing, credit cycle is good, utilize it for strengthening the balance sheet, improving the provision covers, and keep ROE in a certain range, or is the thought that maybe once we are behind some of these things, like you said monsoons might be behind us in the next 1 month, we don't know about this West Asia war that is going on, do you think this will be a more constant phenomenon, this macro overlay, or can we see that if the quarter is actually good, credit costs are actually lower, we see them translating into profits?

I would just say, one day at a time, Abhijit. Okay.

I make one point, which is important. As I've said, that we will continue to work towards strengthening balance sheet resilience.

That's the word. Second word that I use is bulletproofing balance sheet because we are truly living in a VUCA world.

We do not know where is the next crisis coming from. Given our size, scale, complexity, and sheer expectations from various stakeholders, I want to make sure we are one of the most resilient companies in India.

That's really what the philosophical point is. Give us one more quarter, we will provide greater clarity on guidance for the year and direction of overlay creation.

Thanks, Rajeev sir, and wish you the best. Thanks.

Yes, yes. Sir, I just [Foreign

language] Nobody will have any other question.

Sir, I just had one last question, and this is something we keep discussing a lot. You have this term till, I think, March '28, if my memory serves me right.

While we keep

I lost you, Abhijit.

January '28. No, I'll answer.

We'll make a decision by January '28, December '27, January '28, which gives us a good 18 months to continue to stay focused on building a resilient business.

Hi. Good evening.

Thanks for the opportunity. One question in directional credit cost and yield.

It has been kind of a very, very excellent quarter, but even broader if you see post-COVID, the credit cost has been kind of a for the industry, despite the geopolitical turmoil and whether it's Russia-Ukraine war, now trade war, and now this. You had a turbulence here.

For Indian NBFC the retail side of it, the credit cost has been seeing a directional improvement. Do you see there's some kind of a structural improvement or this is again a cyclical where kind of a mean reversion will happen?

If this is a structural, do you see that structurally the yields may see a compression because if the credit cost is improving, not just for you, for a broader retail lending side of it? Second, if you can help the absolute amount of course you have given, that the bot lead generated disbursements, but what would be the share today of this quarter, the share of that in the total disbursement?

Thanks.

That's it. Look, I can't speak about the macro.

Okay. One, I'm not a macro person, I'm a micro person.

I've said in the past that risk going wrong is choices we make. It's got nothing to do with macro, in general.

Leave a COVID aside. In general, risk decisions are the choices we make.

We are very clear, the choice we're making is to being the lowest-risk company in India. That's a choice that we have made given our size, scale, as I keep repeating, complexity.

Growth orientation, risk doesn't hold the company back, it propels the company forward. I'm very clear about it.

Look, it's as the risk costs are going down, we're accelerating momentum. It's a simple explanation in front, it's right here.

Risk was not doing well, we were not doing okay even on growth. Risk starts to do well, growth starts to do okay.

One, We are a micro-focused management, that's one point I would make. The choice that we have made is we want to be the lowest-risk company.

Now, it depends on what your risk thresholds are. Okay?

That's a third point I would make. Our thresholds remain quite low.

We track bureau data as to what is the industry's credit cost by a line of business versus ours. Our risk thresholds are 30%, 35%, 40% of the industry, in general, on 30 days past due and 60 days past due.

I track it since COVID. That's our in general threshold levels, and that's where we intend to remain.

I won't comment on macro. I would still same point I would repeat, Avinash, that while you see crisis, you say it doesn't lead to that kind of pressure, the pressure that you'd envisage.

You're not seeing us gray, the speed at which we are graying. VUCA world is not making life easier, it's only making life harder.

Is the only last point I would make.

Thank you. If you can quantify the share of,

Yeah, share of AI. I talked about it actually in the AGM.

The number for digital contribution, right? Or AI contribution?

You're asking AI contribution or digital contribution?

Yes, AI contribution. The absolute amount is given, disbursement, but we don't know the, yeah, total.

Let's say in a given month, if we do 4 and 2, ₹6,000 crore of urban and rural consumer PL, that's around 6000-odd crore. Between 20% to 22%, 17%, 18% 17%, 18% is coming from voice bot.

Voice bot, data put together, that would be 20-odd percent put together. Go ahead, Anurag.

Call center business, 30%.

Of the call center business, as Anurag is confirming, 30%. Data, conversion, everything put together, you assume it is 20%.

Just for PL. Whereas for gold loan, digital platform is now contributing to 25% of the business.

For BL, it's 20-odd percent. I'll just make one point which probably I didn't make, that you will see continued integration of digital platform infrastructure and AI infrastructure.

You'll start to see business by business on our asset, AI embeddings emerge. The same asset will continue to morph into having AI embeddings on one side, I'm talking app and web, and on the other, you will start to see a altogether new consumer AI platform emerge by May, June '27.

That should further accelerate our momentum as a firm.

Yeah. Hi, thank you for the opportunity.

I have a question on the cost of fund. The sequential decline has been quite controlled at 5 bps or so.

And 4Q was already a decent quarter there. If you can help us understand what has been our strategy on how much liquidity we are holding, what will we do for the next three quarters for most of the year, and in what direction could this cost of fund I know it's a volatile year, but if some idea you can give us around there.

Second question is on the FinAI bit. Interesting to hear all the digital and AI integration that you're speaking about.

If you can help us understand, how will you make sure that the opex on the AI bit is under control, given all the concerns around the globe on rising token costs? How much of open-source or SLM models are you using in your FinAI bit?

Thank you.

Just on cost of funds, principal point which I have made many times in the past is that one is our liability maturity longer than our asset maturity, just at a philosophical level. That's first point.

That's be on a behavioralized basis. I think that's important.

Overall cost of funds, the incremental cost of funds has gone up. You would track the fixed income markets.

Clearly one is seeing increase of anywhere between 30, 50, or 60 basis points. Slowly, we do see directionally or West Asia crisis, if it doesn't settle down, it being inflationary.

We're watching monsoon, if it doesn't do as well, that could also be inflationary. Again, as I said, those are the two uncertainties that we're principally facing.

You've seen stabilization in cost of funds over the last three-odd quarters now. We had gains in between January last year to September.

Since September, it's mostly stabilized. You will see slow creep up from here on is all I would say.

Anand, if you want to comment. No,

we expect it to remain range-bound at these levels only, and maybe with a slight upward bias, as Rajeev pointed out, because of some of the other issues that those are there. Otherwise, we expect it to remain range-bound at these levels only, possibly.

Thanks, Anand. On your second point, you're clear about it that tokens are a cost.

I'll let Anurag make a point. We built a so-called calculator, which ensures that we know what we're spending on.

I'll let Anurag expand on it.

That's right. One of the baseline that we use is wherever the costs are involved, we make sure the cost of the AI is less than the cost of the human labor getting deployed.

If I can talk about voice AI, will be 1/3 of the human cost today we run our voice model at. Vision AI, as you rightly mentioned, we use lot of open-source technologies, and we use our own context layer or the RAG infrastructure, that's what we call it, which necessarily feeds the local AI models rather than going to large language models.

The third strategy that we use is we do not go for a full-length large language model. We use Flash to mini models, which delivers better outcome at a lower cost.

I think we use these three kinds of strategies to contain the cost. This with respect to the new business origination, there we keep cost at times in mind, or rest of the time, the business takes care of the cost.

Yeah.

I'll just summarize Anurag's point. On one side is the use case.

Use case must be at 1/3, 1/5 the cost. That's one side.

Other side is, how do we do technology development to ensure that we are optimizing at best? If OCR for two vision documents can solve the problem, why use AI?

That's as simple an example with 98% accuracy. Then we're not doing this for happiness, we're doing it to generate efficiency.

That's the second point. Third point, however, I would just say that as the adoption increases across the firm, as the deployment increases, it's a line to watch for, is the only third point I would make, because once people, whether employees or consumers, start to use it extensively, we would see the benefit that we are clearly counting on, but I would not ignore the point on cost as well.

First two done, third we're watching out for.

Right, that's useful. Just on that point that you mentioned, that we are not going full-length on LLMs, you have in-house SLMs, right, which your engineers have created or not?

Just one extra point there.

That's what I mentioned, the internal RAG infrastructure and the building on the open-source models, yeah.

Got it. Thank you so much, yeah.

Thanks for taking the question. Firstly, again touching upon the point on margin, this time yield improvement appears to be largely because the growth was led by consumer durables and we kept excess liquidity as well compared to where we were in fourth quarter.

We guided for margin moderation in FY27, but are we more comfortable with where the margins stay, because you mentioned cost of borrowing should be range-bound, and I don't think there would be too much of pressure in terms of the yields currently. How do we look at the margins?

Second is again on growth. In fact, you indicated credit quality is much better.

In fact, we revised the number of customers which we want to add to the franchise from 15-17 to almost 18-20. SKU pricing is going up.

Would it be still towards the longer-term guidance of 23-25, or you are more comfortable that we can even cross that looking at how things are panning out for us? The balance sheet strengthening point, yeah, we are already 2% ECL coverage on the overall AUM when our GS2 plus GS3 itself is 2-odd percent.

Why still so much of balance sheet strengthening is required? We are almost 100% covered as far as GS2 plus GS3 is concerned.

One last point in terms of the leverage. On deck 42, you have indicated last time you evaluated the capital raising when leverage was 4.9 and that's marked yellow.

We are currently at 4.9. Any plans out there, or we are still comfortable with our capital adequacy?

Yeah. Okay.

I'll go in the reverse. Kunal, as I said to Abhijit, just give us one more quarter.

Second quarter goes well, we'll revise our guidance on some of the metrics that we've given a management assessment on. It's unfair to give a guidance based on one quarter performance.

That's one. Two, you're looking at the numerator of my provisions, I'm looking at the denominator, which is that we'll have ₹6,30,000 to ₹6,50,000 crore balance sheet.

We want to make sure [laughter] that we're really, really, really, really solid, is the only point I would re-belabor again on. Third, capital raising, we are at 21% at this point in time.

We still have to dilute BHFL. We're at 86.7%.

We've to go down to 75%, while we have time and we are in no hurry. First port of call most likely will be BHFL dilution, and then if our growth momentum continues to accelerate, then think about capital raise.

At this point in time, I do foresee, in general, that our profit growth, in general, from a resilience standpoint, should be faster than the balance sheet growth. That's the best way to build balance sheet resilience, is the way I think about it.

That's just the third point, Kunal, I would make.

Got it. Margins?

Margins, give us one more quarter. Plus, minus, as as as Sandeep is not here, I'm missing him.

Whatever Sandeep has guided for or what we've said, I think that moderation, 10, 15 basis points is what we foresee at this juncture. Give us Give us a quarter.

Okay. Got it.

Thanks.

I'm not hesitant. You may say, "Why are you hesitant?

What are you thinking?" I'm thinking nothing.

[laughter]

Okay.

I can change the guidance today. It's not a problem.

It's not lack of confidence, it's just

Okay.

It's just being conscious of the fact that what we say, we stay with. That's all.

Nothing else. That's all.

Since this question has been asked second time, I want to make sure it's not lack of confidence,

just Perfect. No, yeah, that conveys, yeah.

Thanks. Yeah.

That's all.

Yeah. Hi, team.

Congratulations on the quarter. You sound much more confident this quarter than at least I've heard in the last 10, 15 quarters.

Congrats on that.

Last quarter also I was confident. You may No, but

this time [laughter] it is double and we can all sense it. Anyway, thanks for taking my question.

Just two things. One is, you always share your statistics around consumer leverage, 3PL number of customers used to be 7%, 8%, went to 13%.

Where does that stand? That's number one.

Number two, just qualitatively and quantitatively both, can you just talk about the gold loan business, because there's just so much competition, every Tom, Dick, and Harry wants to enter this space. We've built a book of ₹20,000 crore targeting 50,000 or whatever.

You also mentioned one thing in one of your replies that digital platforms is 25% of the business. How does that really work?

Just more color on the gold loan business would be useful. Thanks.

Yeah. As one thing as we track bureau data, I think and Avinash had asked this question, maybe I should have mentioned it then, that at least we're seeing stabilization.

Okay? Leverage levels overall not not going up at a 2% level.

Last year the number looks to be at 1% level. Okay?

The 30 DPD data for the businesses that we are that are prone to higher level of prone to leverage and prone to are are looking better. They are flattish actually, as Shruti is confirming.

They're not deteriorating anymore. Year-on-year, there is improvement.

I still compare versus FY20. I still see So what year-on-year there is improvement in in We track BL portfolios.

We track PL portfolios. We track professional loans portfolio.

Year-on-year, all three, when we take bureau data versus our data, we are seeing improvement across the board on bureau data and, of course, our data. That's one point.

Level of leverage versus 2%, the number is looking like 1% for last year, increase. 41% is, I think, what the number is looking like.

That's second point.

What is 2%? I didn't understand that.

41%, consumer debt to GDP, what we track, the number as

a consumer debt Consumer debt to Okay.

Yeah. That number was growing by 2% a year.

That number was growing by 2% a year for the last four years. Last year it grew by 1% is what my latest understanding is.

There are two parts I'm discussing. One is bureau data.

Okay? Bureau data is showing in unsecured businesses YoY improvement, and of course we are showing improvement.

As I made a point to Avinash, my thresholds are 40% of the industry. I I must just make that point at a micro level on our behalf.

That's one part, which is bureau data. The second part is consumer debt as a percentage of GDP.

The number as of March 31, number is looking to be 40 Just give me one minute. Piran, I'll come back on that on the second point.

Now coming to gold loan until they until they fetch that number. On gold loan, look, we're in the business for the last six, seven years.

Okay. We took our time cracking it.

We principally cracked it in 20 SBO is the business in '22, November. '23.

'23. '23.

'23, November, virtually, we converted the business into a company within a company. Since then, I would say, we've not looked back.

It's principally focused on strategy is very simple, Piran. One, this business is a network expansion business.

Doesn't happen through the main branches of the company. Happens through standalone gold loan branches, as we call them.

Okay. We've tried.

Out of 1,700 branches that we have today, only 80 are integrated branches, rest 70 And they are courtesy legacy prior to '23. Since then we are very clear, it's network expansion, process excellence, and these are the only two principal points.

We are right now adding 110 new branches a month, okay, should take us to 2,700, 2,800 branches. 2,800 branches should mean from a capacity standpoint and our assessment to deliver a peak outcome at a at maturity a ₹14 crore per branch number, that's a 37,000, 38,000 crore capacity.

We think in the current year we'll deliver a between ₹29,000 to ₹31,000 crore AUM. 25% of the business comes through digital platform.

That's our principal mode to the

This 25 an open market customer can also come through the digital platform or it's primarily

Actually, this was a question that was asked, that how many are ETB and how many are NTB on the app. Anurag has just stepped out.

Out of 86 Or

just overall would be useful.

Yeah. Out of 86 million customers, my sense is ETB, NTB of app is 67%, 70% 70% is ETB, and 30% is NTB customer coming for payments business, coming for just downloads as a result of ASO activity.

Between 70-30 is the mix.

Understood. Just one other banks sort of mentioned that gold loans is cannibalizing their own personal loan business because they offer it at lower rates.

Do you see that not for your business, but in general as a threat to the PL segment where somebody could just easily take a gold loan and PL loses popularity? No.

Two things are happening. I think it's a good business for self-employed.

90% of the customers are self-employed. 90?

More. 95% are self-employed.

It's a good business for a self-employed customer. One, it has no friction cost.

Okay? Entry, exit costs are very low.

Let me make a point and those who have small working capital needs, it's a very good proposition. That's the second point.

Third, has much lesser credit filters, while RBI has tightened the requirements as a result of the comprehensive regulations that came out and that went into force from April 1, but still remains low on credit filters. I think And last point.

It's right now at 4,000, 4,100 gold is, at 4,500, 5,000, it was becoming a business in terms of what one could originate. Okay?

One could easily say at $4,500 we track let's say, or ₹1.5 lakh per 10 grams, it's a reasonable frame for a customer to raise ₹8-₹10 lakh of working capital, which was never the case when gold was at $2,000. I think that's a fourth point.

You're seeing expansion of the denominator itself, is the only added point. If it comes back to 2,500, then the fourth point will go away, rest will remain true.

Understood. Yeah.

That's useful color. Thanks, and wish you all the best.

Hi, Rajeev and team. Good evening, and thanks for taking my question.

Hi. One question is on your comment that you saw 20% YoY growth in SKUs in, I think, consumer B2B as in, yeah.

Now, one of the components which is smart phone sales, that is not seen much growth, right, on a YoY basis. What are the SKUs which are compensating?

If you can give some color on how you got a 20% growth. Something would have substituted for smartphones, etc.

[Foreign

language] But I'll let Manish comment.

Hi. You're right.

If you look at it from an industry point of view, and we all look at the same report, which is the Counterpoint report, which talks about that the shipments of the smartphones in India have declined by almost 13% to 15% in the last quarter.

Right.

We continue to register very good growth in terms of smartphones in the range of approximately 20% to 23%. On top of it is obviously the increase in the ATS.

The ATS or the ticket size between last year to this year, if I talk about the month of July, is about close to 30% to 33% higher versus last year.

There are two points. One contributed by Apple and another contributed by

It's actually a combination of both.

Yes,

as Rajeev is pointing out, that we see a 30%, 33%, 35% higher increase in ticket size because one is the contribution of Apple to our overall sale has increased vis-a-vis last year.

Apart from that,

for every manufacturer, the ATS itself has also increased from last year to this year. It's a combination of both these two things for us.

At an overall level, we see about between a 30% to 33% increase in the ticket size of smartphones. On the other appliances and all, the ticket size is actually almost flat.

If you basically talk about air conditioners, etc., that's also a result of the GST decrease that happened. Basically, the air conditioner saw a GST decrease by 10%, which has now got made up because the increase in commodity prices, etc.

The air conditioner and the panel prices or the washing machine prices are almost flat versus last year.

Primarily, it's just a penetration thing. Smartphones, you're sort of bucking the trend in the overall industry just because you're improving penetration.

Yes, that's right. The affordability penetration, and we continue to mine deeper and deeper into our customer franchise.

Therefore, both our franchise and distribution, that combination gives us a higher penetration of the overall attach rates.

Since you made this point, Abhishek, I'll just add a dimension, as I've said, and I should have probably captured it, that we looked at distribution and we said, as you've seen over the last seven, eight quarters, our branch expansion, non-gold loan and MFIs, either flat or going down, actually. Because when we look at India from the top, we think we are covered.

We said, we do not think it's covered. We're doing bottoms-up work.

We've done bottoms-up work after, I would say, two-odd years. We are very clear, 4% to 5% distribution expansion we'll continue to do.

If India opportunity is real, we've got to continue to do plumbing. We have now identified 160-odd branches so far that we'll open in the current year.

It's a ongoing, continuous work. We will add 200 170 to 250-odd branches every year as a firm which have material outcomes on a 2- to 3-year forward basis.

Understood. By the way, thanks for that color.

That was very interesting. Can you comment on competitive intensity in personal loans and also in MSME?

When do you see disbursements growth picking up? You said AUM start improving from 3Q.

Are you already seeing disbursements growth pick up over there? Some color on these two fronts.

Thanks a lot.

Competitive intensity is a way of life for every line of business. [Foreign language] I am competing, and that's now for three, four years.

There's nothing new. I think, we're used to it across every line of business.

It's not one competitor, it's five, six competitors. Actually, one has to look at competitors as PSU banks, private banks, non-banks.

All three are competing. I'll make an important point, that's where the franchise value frame will come in.

That's where let me connect one last dot. What we are doing on customer-centricity, digital transformation, and AI will ensure that our cost of originating a new customer, cost of managing a customer, cost of cross-sell, and cost of credit, as you mine more and more and more, and the example that Manish gave, we just keep doing that.

I think I said in the last quarter that the color of the balance sheet in three-odd years could change, and NIMs could look lower, opex could look lower, credit costs could look lower. I made the point in fourth quarter.

It'll take us two, three years to get there, but that's where the direction will eventually go to at 200 million customers.

ETB contribution is now 63%.

As Manish is saying, confirming, ETB contribution is

Is now 63%, and it used to be in the range of close to about 60%.

That will lead to lower credit cost only. 3% movement in 16% 16 million loans will lead to lower credit costs.

It's given, actually.

Sure. Got it.

Got it. Thank you, Rajeev, and all the best.

Hello, Bharat. Good evening.

Yeah. Hi, Rajeev.

Just a comment. I was so glad to hear your comment that you as an individual leader and Bajaj Finance as a firm is deeply focused on micro rather than take refuge in macros.

Our investing world is having too many people who look at macros. I feel very safe when you say that you and the firm are deeply focused on micro.

That really gladdened my heart to hear that. Also, in terms of the performance, I think finally the symphony seems to be playing out where all notes have been struck well, and I think the final output has been sweet.

I hope that this is now going to amplify itself. Just one question.

Probably you might regard that as a bit of a greedy question. At 20.5% ROE and about 4.7% ROA, I feel with the deep AI commitment that we have made, much like very early we were technology savvy and we were digital savvy, and in AI, as I see, clearly we have taken a lead in the lending industry.

Therefore, that should have deep implication over period of time in terms of our business velocity, cost, credit quality, as well as opex containment. When do we think of ROE touching about 24% and ROAs going beyond 5%?

I'm mindful of the fact that Bajaj Housing Finance business is a low ROA and low ROE, and would continue to remain within a certain boundary. Therefore, our Bajaj Finance net standalone is much better number, but I'm saying on a consolidated.

Do you think it is possible where ROAs will cross 5%, 5.25%, and little bit of leverage stretch, and we touch closer to 24% ROE?

Bharat, if I was to maximize, the answer is yes. Taking a longer-term sustainable view, if it happens, nothing like it.

That will be true symphony. We'll go for a orchestra one day together.

[laughter] Okay. Continuing to reinvest in business, I am interested in long-term sustainability.

There are two new lines of business that we are at this juncture planning to launch by January, February. We are, as I showed in my AGM today, that we continue to grow with India.

We think India opportunity is real. I'm not sure now is the time to maximize.

Now is the time to continue to, but we must remain responsible. Now can 19, 21 become 20, 22?

Very much possible. With investing, which means we become more efficient.

AI transformation starts to either accelerate top line or decelerate costs. Logically, it should do both, but given our sustainability quotient of continuing to invest in building businesses, looking for new opportunities, I would say, instead of 19, 21 can we look at 20, 22?

As the drag reduces of excess capital, that will also have a role to play. You will see improvement in Q2 in ROE because we would have paid dividend.

Actually, that number will automatically improve. As I said earlier, we don't foresee raising capital.

I hope I'm not trying to avoid your question. I'm not trying to avoid a number, I'm not one of those.

I'm just saying

I know that.

I'm just saying you're our well-wisher. You should wish that we are getting to ₹10 lakh crore with the same sustainability and profitability metrics, which is really what I've shown today in AGM, and I believe, even I used to have doubts in my mind that, is it possible that ₹6 lakh crore pe same ratios will hold?

They're holding. [laughter] Now I have no doubt that even at 10 or 12, they'll hold.

We've crossed that point where we should even evaluate that higher scale would lead to dilution. I hope I've tried to No,

no, absolutely. My question was not about immediacy.

I was talking of a runway of three to four years, where 20.5% touching hopefully 0.5%, 0.75% of a percent every year to say somewhere around 23%, 24% over three- to four-year timeframe. No.

Let me connect this to strategy, Bharat, for a moment. I think it's important as a point.

We deliver customer-centricity and people think I'm making a good-to-make point. If my cost of originating customer goes down, it will dilute NIM marginally because I'm doing more with my customer.

At 200 million franchise, which nobody comes near, and we are very confident of getting there, it'll bring down the cost of operations and it'll bring down the cost of credit. That customer-centricity is central to the strategy of us delivering that frame.

Now whether that number is 22 or whatever, that I don't know, but it is so strategic. I spend virtually 3/4 of a day in a month on customer-centricity.

We've created a dedicated unit in the company. We are thinking of new products in the company.

For the first time, I can't think of lending companies around the world who would have design thinking units. We've set up 10 design thinking units in the company because as you're thinking of customer-centricity, we're saying products the way they look today may not look that way tomorrow.

We're investing in areas that are not logical, that have not been normal to us as well, investing in customer-centricity units, investing in design thinking units. These are all longer-term initiatives, let me tell you.

We're doing primary research in that unit, we're doing secondary research. I've worked for 33 years, you never do research.

It doesn't come normally to bankers to do research. We are shaping the company, Bharat, and to all investors, I would say, in a little different way.

It's a reasonable work in progress, whether AI transformation on one side, design thinking on the other, customer-centricity on the other. All this comes together to symphony, that's what we are working for.

I can tell you my efforts and my actions, and number is an outcome.

Good night. Thank you so much.

Thank you. Thank you for all your questions.

Thank you so much. Good night.