Bajaj Finance Ltd (BAJFINANCE) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Bajaj Finance Q2 FY27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. I am 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. I now invite Mr. Rajeev Jain for his opening remarks, post which we'll open the floor for the Q&A session. Thank you, and
Moderator: Over to you, Mr. Jain.
Rajeev Jain (Bajaj Finance Ltd): Thank you, Morgan Stanley team, for hosting us. Very good evening to all of you, or good morning, depending on the geography you are in. Welcome to the BFL Q2 earnings call. The investor deck for Q2 has been uploaded on our website. I hope you have had a chance to go through the same. I'll quickly focus on key updates for the quarter and a management assessment before Q&A. I expect to take between 15 to 20-odd minutes. Let's quickly ju- 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 a 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 8,800 and, 74 crores. PAT grew by 29% to 6,367 crores. Before prudent macro, 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 a 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 you move forward, is now down to just 2,400-odd crores. MSME grew by 3%. It should now start to grow, actually. So we should start to see, as we get into the second half, a double-digit kind of growth momentum in the in the business. Gold loan portfolio continued 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. It's at 2,022 branches. And we remain, you know, 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%. So overall, pretty secular growth across all lines of business. In a way, on a if I if I look at the 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 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, as I talked about,
Rajeev Jain (Bajaj Finance Ltd): 129 million and cross-sell franchise to that 82 million. Liquidity buffer remains 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 have 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 are making in gold loan branches, MFI branches and technology transformation. We remain pretty comfortably placed to deliver a 25 to 40 basis point 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 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 2 and Stage 3 assets actually increased by 1601 crores. It actually includes the 1,047 crore increase in Stage 2 in the gold loan business. Due to the short tenor schemes that were 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 1100 crores came from gold loan in Stage 2. 550 crores has already been has been resolved and has flown back to Stage 1. So, it's a transient movement for a quarter is is really what we see to be. And don't see any impact on credit cost or even otherwise or in terms of auctions 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 are reasonably comfortable with the credit cost outlook for FY27. Of course, this we remain in a VUCA world. So 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 principal reason why we're raising capital. And 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 have actually outlined to shareholders. So it's pretty much for growth that we are looking to raise capital as we move forward. Quickly let me 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 are 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%. So as we deepen our understanding of enterprise AI and deploy it we are experienced, 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
Rajeev Jain (Bajaj Finance Ltd): and 65 agentic applications, we are well on track to deliver 118 odd agentic applications and 600 odd agents for the year. So, I won't cover panel 13 and 14. Just the only point I'll cover in panel 13, 14 is that we launched our first custom risk model from a risk management standpoint. We'll book 500,000 accounts in our B2B business, look at its CMOE performance, and based on that, start to evaluate that for other lines of businesses. So, it's in a testing phase. Overall, as from a modeling standpoint, it does show a 15, 20% improvement in terms of risk outcomes. Let's see how the models perform in reality, and based on that, then we will start to take a view. We are working on our B2C model as well at this point in time, subject to the CMOE performance. We would launch our B2B, B2C model as well, if the performance by January for our B2B business holds based on our 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 continued to make progress in terms of, on a year-on-year basis, improved from 19.7 to 19.1%, and their PAT grew by 18% despite a very, very intense competitive environment that they continue to face. And 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%, and 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, I would say, good growth to be in, underlying credit while maintaining credit cost at, as I've said, that probably it's likely that in four years, this is likely to be one of the lowest years on credit costs. We are well on track for that. And Gen AI 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, so it's a transient point. With that, I'm happy to take questions.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Please limit yourself to one question so we can accommodate as many as possible. We will wait for a moment while the question queue assembles. First question is from Nihar Puran Engineer from CITIC International. Please go ahead.
Piran Engineer (CITIC International): Yeah, hi team. Thanks for taking my questions and congrats on the quarter. Just, I may 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 3 months or 6 months of interest versus 12 months?
Rajeev Jain (Bajaj Finance Ltd): Go ahead with the second one, Puran.
Piran Engineer (CITIC International): Yeah. So, the second one is, like historically, two-wheeler customers, you all have been uncomfortable cross-selling other loans to, they were never part of a cross-sell franchise. Given the fact that you have open market two-wheeler customers have significantly lower, you know, asset quality, or significantly better asset quality performance, do you consider them to be part of your cross-sell franchise?
Rajeev Jain (Bajaj Finance Ltd): Fair. Sandeep, you want to answer?
Sandeep Jain (Bajaj Finance Ltd): Yeah. So, answer is the exact issue what we faced in Q2, and that's the reason why
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