Bajaj Finance Ltd — Q2 FY25
Bajaj Finance reported a mixed Q2 FY25 with AUM growth of 29% YoY and PAT up 13% to INR 4,014 crore, but elevated credit costs dampened profitability.
neutral
high
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Claim Ledger
Did management answer the analysts?
Every material analyst question, graded on whether management actually answered it — with the verbatim exchange and quantitative claims checked against filed numbers.
68%Questions answered2Evaded / deflected11Questions audited
Partial answer
High priority
Confidence that slippages and credit costs have peaked; NIM outlook with rate cuts.
Asked by Chintan Joshi, Autonomous
Management gave qualitative confidence but no hard commitment on timing of peak.
no specific timelinecautiously optimistic language
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Question
On asset quality, could you give us some more color on what gives you the confidence that slippages and credit costs may have peaked out here? ... And then on net interest income, if you could please help us think about where NIMs might go over the next year with the rate cut likely.
Rajeev Jain, Managing Director
The main interesting thing that we are seeing in the cycle is actually that the bounce rates are still lower. ... we are cautiously optimistic that we should ... come back to a hundred and eighty-five to hundred and ninety-five basis points of credit cost.
Answered
High priority
Clarification on credit cost guidance range (185-195 vs 175-185).
Asked by Chintan Joshi, Autonomous
Management directly clarified the correct range without evasion.
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Question
Just a clarification, Rajeev, you said 185 to 195 previously. I presume you meant 175 to 185?
Rajeev Jain, Managing Director
No, no, no. ... the 170-172 basis points that we used to be pre-COVID, based on the regulatory changes and our write-off policy changes, adds up being between 185-195 basis points.
Partial answer
High priority
Normalization timeline for Rural B2C and Business/Professional loan segments.
Asked by Dhaval Gada, DSP
Management gave growth guidance but not a clear timeline for normalization to green.
no specific normalization timelinequalitative only
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Question
First is on the Rural B2C business and also the business and professional loan. Both of them are color-coded yellow. Just if you could give some perspective on when do we see normalization in both these segments?
Rajeev Jain, Managing Director
Rural B2C ... we foresee that business still, however, may grow only by 12-14% on a full year basis. ... Business and professional loan ... it's now at 98.63. ... we've stamped it as yellow.
Evasive
Medium priority
Medium-term cost-to-income ratio target (30-31% OpEx to NII).
Asked by Dhaval Gada, DSP
Management refused to confirm the 30-31% target, only said trend down.
no commitment to targetvague trend language
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Question
somewhere in COVID, I think our aspiration was 30% to 31% kind of OpEx to NII. Is that what one should expect in the medium term based on the business mix that you're targeting?
Rajeev Jain, Managing Director
I can't say whether a number will get to 31 ever, because at our base, 31-33 is a significant drop, but you will continue, you should continue to see the number trend down.
Partial answer
High priority
What could prolong the elevated credit cost cycle?
Asked by Piran Engineer, CLSA
Management gave macro context but did not directly address what could prolong the cycle.
no quantification of prolongation risk
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Question
what would make the cycle prolong, as in this elevated credit cost cycle? ... what's changing right now versus, say, three months back.
Rajeev Jain, Managing Director
the fact that various actions by the bank has started to slow down the unsecured market. ... the personal loan year-on-year growth is degrowth ... minus 3% to 4%. ... we remain cautiously optimistic of the same.
Answered
Medium priority
Reason for weak fee income despite digital lending ban lift.
Asked by Piran Engineer, CLSA
Management clearly explained the reason for fee income decline.
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Question
on our fee income now ... it does not look like we've seen any fee income growth. In fact, we've seen degrowth QOQ. So anything here to read into it?
Sandeep Jain, COO and CFO
the transfer of the collections activity to RBL Bank, which otherwise would have come to us as payment towards the collections activity, would have sat in the fee income.
Answered
High priority
Growth vs credit cost approach; any change in strategy?
Asked by Kunal Shah, Citigroup
Management clearly stated no change in approach and explained growth composition.
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Question
wouldn't it maybe in terms of the approach, maybe in terms of the growth versus credit cost, is there any change in the approach that we are looking, or there is no need to change at this point in time?
Rajeev Jain, Managing Director
there's no need to. ... the organic number would have looked like 24% to 25% ... without having to compromise in any given manner, the credit quality.
Evasive
Medium priority
Risk of Urban B2C turning amber given elevated stage 2 and GNPA increase.
Asked by Kunal Shah, Citigroup
Management did not give a clear answer on whether Urban B2C might turn amber.
no direct yes/novague 'watchful' language
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Question
Do you see the risk of urban B2C also getting into amber, given the collection efficiency and this kind of trend in stage two?
Rajeev Jain, Managing Director
No, we remain watchful, Kunal, is what I would say ... we saw inching up on panel 51 across. ... between managing risk and managing growth, we'll choose credit.
Answered
Medium priority
Whether management created a management overlay buffer against one-time gain.
Asked by Kunal Shah, Citigroup
Management directly stated no overlay was created and explained why.
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Question
was there the option to create the management overlay buffer against this one-time gain? And would you have done that?
Sandeep Jain, COO and CFO
we don't have options. ... we did not felt a need at this point in time to create an overlay.
Answered
Low priority
Reason for halving of tractor distribution network sequentially.
Asked by Viral Shah, IIFL Securities
Management clearly explained the adjustment and gave current volume run-rate.
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Question
if I look at the distribution slide for Tractor, I see that nearly on a sequential basis, the distribution has halved, so is there anything to read into it?
Sandeep Jain, COO and CFO
depending on the activation rate ... we do the adjustment. ... Don't read anything into it. ... we are now disbursing between 65 to 70 crores of volumes a month in.
Answered
High priority
Profitability differential between captive and non-captive two-wheeler business.
Asked by Viral Shah, IIFL Securities
Management quantified risk cost differential and explained impact on profitability.
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Question
is there any, say, the ROA or the profitability differential between, say, doing the non-captive business versus the captive business?
Rajeev Jain, Managing Director
the non-Bajaj book for us ... comes in at half the risk cost. ... In the short term, it'll have some impact on profitability. Over long term, it will be beneficial.
Answered
Medium priority
Festive season demand trends so far.
Asked by Umang Shah, Kotak Mutual Fund
Management provided specific growth numbers for the festive season so far.
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Question
if you could just comment on this ... festive demand.
Rajeev Jain, Managing Director
So far, at this point in time, looks like the count growth is, like, between 20% and 21%. ... In terms of value ... 19% to 20% growth.