IF RAJEEV JAIN, managing director and CEO of Bajaj Finance Ltd. (BFL), is given an option between growth and risk, he will choose the latter. “We are a risk-first company,” he says. The risk-handling ability of the non-banking financial company (NBFC) helped it report two years of high growth after Covid. “We ended FY24 with ₹3.3 lakh crore AUM, 34% growth over FY23, by enhancing the scale and breadth of the product suite,” he says. Net NPA of 0.37% reflects a prudent risk management framework, says Jain. BFL disbursed 36.2 million loans and added a record 14.5 million customers, taking the total to 83.64 million, in FY24. BFL also launched new business lines — loan against property (LAP), new car finance, microfinance and tractor loans — which helped it expand to new markets in the hinterland.

This does not mean there were no setbacks. In November 2023, RBI put restrictions on Ecom and Insta EMI card products due to non-adherence to digital-loan guidelines. The restriction was lifted in early May. BFL also faced challenges in the rural B2C business. “As a risk-first company, we consciously reduced our rural B2C portfolio growth on an AUM basis,” says Jain.

NIM, too, moderated due to increase in cost of funds and gradual shift in AUM towards secured assets. With launch of secured businesses such as LAP, new car/tractor loans, loans to large and emerging corporates and planned launch of commercial vehicle financing in early 2025, NIM is expected to be lower than pre-Covid levels, says Jain. “This pivot in AUM composition will create the right blend of secured and unsecured book on a standalone basis. It will provide stability and longevity to AUM,” he adds. Jain expects the pivot to stabilise by September 2024. Accordingly, we anticipate a 30-40 bps moderation in NIM in next two quarters, he says.

BFL is also diversifying the composition of its liabilities. In Q4 FY24, it raised ECB loans of $725 million (₹6,016 crore). With this, ECBs account for 2% borrowings. “At peak, it used to be 4%. Based on market conditions, we expect to take it to around 4% this year,” says Jain. Deposits grew 35% in FY24. The NBFC has a robust deposit book of over ₹60,000 crore. On a consolidated basis, banks’ contribution to borrowings is 30%, down from the peak of 36% in FY20.

The Future

BFL plans to follow the omnipresent approach. The investments over last three years across app, web, technology and branches will enhance customer experience and increase reach and efficiencies, says Jain. “We have started deploying GenAI across operations, services and contact centres,” he says. BFL is also using AI and ML for innovation, process automation and enhancing efficiency and customer experience. “We are strengthening underwriting, productivity and risk management through technology,” says Jain. BFL expects 26-28% growth in FY25.

BFL has also been undertaking several financial inclusion initiatives. It has extended credit to more than 19.8 million new-to-credit customers in last five years. Over past three years, it has disbursed more than ₹86,000 crore to over 13.12 million women. “In FY25, we plan to expand reach to around 18,000 villages to support 4,00,000 women,” says Jain. It opened 100 microfinance branches in FY24.

Jain is not perturbed about competition from cash-rich conglomerates such as Reliance, Tata and Godrej and says they will grow the industry rather than pose a threat to its top position in the NBFC industry.

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