Bajaj Finance Limited (BAJFINANCE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Bajaj Finance Limited Q3 FY 2022 Earnings Conference Call. This call will be recorded, and recording will be made public by the company pursuant to its regulatory obligations. Certain personal information such as your name and organization may be asked during the call. If you do not wish for it to be disclosed, please immediately discontinue this call. [Operator Instructions] I now hand the conference over to Mr. Anuj Singla from Bank of America Securities. Thank you, and over to you, Mr. Singla.

Thank you, Faizan. Good evening, everyone. This is Anuj Singla from Bank of America Securities. Thank you very much for joining us for the Bajaj Finance earnings call to discuss quarter 3 FY '22 results. To discuss the results, I am pleased to welcome Mr. Rajeev Jain, Managing Director, Bajaj Finance Limited; and Mr. Sandeep Jain, CFO; and other senior members of the management team. Thank you very much for giving us the opportunity to host you, sir. I now invite Mr. Rajeev Jain to take us through the key financial highlights for the quarter, post which we will open the floor for Q&A. With that, over to you, Rajeev, sir.

Thank you, Anuj. Thank you, BoFA team. Very good evening to all of you. I doubt to wish you all a very, very Happy New Year and hope this year is better than the previous 2 years, and we see end of pandemic and going into endemic. I'll be referring to the Q3 FY '22 investor presentation that we have uploaded on the Investors section of our website. So let's just quickly go through that. Let's go to Panel 4. Overall, a very good quarter for the company, I would say, across-the-board improvement in all metrics that I'll just take you through very quickly. The company is quite well prepared to navigate wave 3, given strong management overlay provisions that we have created and significantly improved Stage 2 and Stage 3 assets of the company. So overall, I would say, a pretty good quarter. Business transformation Phase 1 is delivered, and execution of Phase 2 has already been started. Very quickly, we'll go through number. My presentation is broken into 2 parts. I intend to take 20-odd minutes, 10 minutes on numbers, 10 minutes on business transformation and then open the forum for questions to be responded between me and Sandeep Jain. Balance sheet, INR 18,000 crores, year-on-year growth of 26%. OpEx to NIM has started to come closer to our guidance frame of 32%, 33%, came in at 34.7%. PAT came in at 21%, 25%. ROE on a quarterly basis came in at 5.3%. Net NPA came in at 0.78%. So all numbers are in line with what it used to be pre-COVID. Some are better than pre-COVID. So if pandemic become endemic, we are headed to, hopefully, strong few years as you go ahead from here. Let's just go through the quarter. Panel 5, year-on-year, that's why I did not compare -- profits are at up 85%. I did not compare them because they're not comparable. Highest ever AUM growth in a quarter, we've never grown INR 14,700 crores. That was the core AUM growth that we clocked, taking our balance sheet INR 1,81,000 crores. Overall AUM composition also remained very steady. Later in the presentation, we can have a look at it between 1% plus/minus. Other than the auto finance business, which is part of our remedial frame, its contribution has been going down. Other -- all asset compositions have remained very, very steady. So far in January, given that we are in wave 3, I thought I'd just use this opportunity to provide some update or color. There is no impact of Omicron at this point of time on the business momentum. And things, at this juncture in the first 17, 18 days of the month on business momentum remains steady. If there is no disruption or increased disruption as a result of wave 3, hopefully, full year AUM should be quite strong. We booked $7.44 million loans year-on-year, as I said, not comparable. Customer franchise, $55.36 million. As the Phase 1 of three-in-one has gone live or Phase 1 of business transformation has gone live, we do want to -- and when we look at the new customer origination, we do believe that as a result of this, from $7 million to $8 million guidance that we had given to The Street for many years, we think that guidance gets up to $8 million to $9 million. As the infrastructure becomes more and more robust, and we continue to deliver more and more journeys, hopefully, that number can someday look at a $10 million kind of number. But at this point in time, we believe that, for the next 6 to 9 months horizon, it should look more like $8 million to $9 million per year run rate rather than $7 million to $8 million run rate. Cross-sell franchise, $31.26 million, year-on-year growth of 24%. Geographic footprint added 94 locations in the quarter. We are now at 3,423 locations and 1,28,000 distribution points. Competitive intensity across products remain pretty -- has increased rapidly post wave 2. Mispricing is more rampant. So far, as a company, we've managed to protect our margin profile across businesses. But normally, that's one of the things that I'm not personally happy with because in retail businesses, it gets followed up by credit costs. But it's quite intense competitive activities, what I would say. Interest income reversal going back closer to P&L for Q3 was INR 241 crores. We had guided it should come back to INR 180 crores to INR 200 crores by Q4. We're holding on to the guidance. That's really where it will go to. It's very close. Last year same time, it was INR 450 crores. This year, same time, it is INR 241 crores. And by next quarter, if there's no wave 3, then it go back to INR 180 crores to INR 200 crores. Cost of funds came to 6.72%, providing a reasonable lift. We are originating as much longer assets as liability. We are continuing to make the liability profile longer, raise INR 2,700-odd crores in NCDs in 3 years and above in fixed interest rate entities. In -- of that 2000, 100 came in 10-year money. I think in the last 2 quarters here is INR 5,000-odd crores. In the last 2 quarters, we've raised close to INR 5,000-odd crores in 10-year money. We -- in first 14 years, we didn't raise that kind of money altogether. Liquidity buffer came in at INR 14,400 crores, should normalize to INR 11,000 crores. But between choosing long-term borrowings and liquidity buffer, choice is quite clear. We'll choose long-term borrowings as a company. Panel 6 very quickly, over to some more detail. Deposit book, INR 30,500 -- just a tad below INR 30,500 crores, 20% of total borrowing came in at 70%-30% in terms of mix between retail and corporate. OpEx to NIM, 34.7%. We expect it to normalize between 33% and 34% by Q4. Continued to invest in teams and technology for business transformation. I'll cover that in just 2, 3 more -- next 2, 3 slides. So we continue to invest as we focus on delivering the near-term quarterly profitability. Loan loss and provision took INR 1,051 crores. We've increased management overlay provisions in Q3 from INR 832 crores actually to INR 1,083 crores to protect ourselves or the balance sheet from probable losses that may arise out of wave 3. Wave 3 clarity on impact will only emerge once January default rates, January collection efficiencies, February default rates and February collection efficiencies emerge. That's, I would say, 60 days away or 45 days away. Just even from a stress testing standpoint, but we thought it prudent to take a management view and have carried INR 250 crore additional provision in Q3 against third wave. Debt management efficiencies across products improved further. We are looking at them as ever best collection efficiencies or debt management efficiencies that across by line of business that we've seen in the last 14, 15 years. Bounce rate for July across products are in line with December. So at least 1 metric out of 4, that determines fundamentally what losses could look like is at least out of the wake. And we'll wait for other 3 to emerge before taking a view on what could arise out of wave 3. Having said that, as I said, we want to continue to remain conservative given continued uncertainty of waves. We are in third wave. We might have a fourth wave. Over the last 2 years, I now worry about the month of June. Last 2 Junes have been terrible. If June -- by June, if we are endemic, then I would say we are endemic. So as a measure of prudence, we've decided to carry -- and given strong profitability, we've decided to carry sufficient overlays. And we are forecasting that, on a full year basis, instead of INR 4,300 crores, INR 4,500 crores of loan loss provisions, we will carry INR 4,800 crores to INR 5,000 crores. Of this, if I may, you've already taken INR 4000...

100.

4,100 crores in the 3 quarters. And depending on how it plays out the fourth quarter, we may take the balance. Gross NPA and net NPA, improved sequentially. And of course, year-on-year, significantly came in at 1.73 and 0.78. They are very close to being back to pre-COVID levels. We are very close -- and they are very close to where we've been historically for last 5, 7 years prior to COVID. So it came in at 1.73, 1.78. Point 16 RBI changed the NPA classification requirement for NBFCs. There was no impact of the same on the -- on gross NPA and net NPA for us as a company. Overall, Stage 2 went down actually by INR 600 crores, as you can see from the numbers. Overall, Stage 3 went down by INR 1,000 crores. So between Stage 2 and Stage 3, the numbers went down by INR 1,600-odd crores. Panel 7, I'm down to the last 2 panels quickly. Portfolio quality rather than taking you through the 9 panels, which are appended in the slides later, I thought I'll cover it in executive summary. From a management assurance standpoint, 7 portfolios are green. They are -- 2 portfolios are yellow. Actually, AF portfolio has actually moved from red to yellow. It used to be 86% current business. It is close to 83% current business now, all goes well. And despite the fact that portfolio has reduced by INR 4,000-odd crores in the last 2 years. So it's a declining asset base on which there is improvement. I've stamped as management insurance, home loans as yellow because it came in at 99.1% versus 99.5% that used to be historically for the -- at a pre-COVID level. Otherwise, I could easily argue when home loan is green. So 8 out of 9 are fundamentally green, and AF being yellow. Consolidated post-tax profit grew 85%, as I said, year-on-year, not comparable. But INR 2,125 crores is the highest ever profit that we have generated in any quarter. Capital adequacy pretty strong, came in at 27%. Tier 1 itself is at 24.5%. As I said, in Q3, if you look at our long-term guidance metrics that we've guided The Street on, we've actually made all of them on a quarterly basis at a -- so if pandemic becomes endemic and given the state of portfolio that we're in and with the business transformation going live, I would say, I'm quite excited about the next fiscal. Now BHFL balance sheet, jumping to the subsidiaries, grew 39% to a tad below INR 50,000 crores at INR 49,203 crores. Capital adequacy was 19.5%. We would like to run that business at a 7x kind of -- 7.5x kind of leverage. As a result, the BFL Board today -- BHFL delivered a profit of INR 185 crores, tad of INR 185 crores, a growth of 87%. BFL Board today, as a result of 7.5x to 8x kind of leverage thought process that we have, has approved investing infusing INR 2,500 crores of capital in BHFL as a rights issue from BFL. BFSL acquired 65,000 new customers. Just to recall, we were acquiring 110-odd customers in BFSL in the previous quarter sequentially, which is here to focus on activation and the quality rather than quantity. And the activation rates now, which used to be 20% to 23% in Q3 as a result, are now looking at 43%, 44%, and that's a direction that we want to take. We do want to grow BFSL. BFSL came in a PAT of INR 7 crores. BFL Board has also approved infusion of INR 400 crores of equity share capital as a rights issue in BFSL as well today. So overall, you've committed INR 2,900 crores of capital in today's Board meeting into both the subsidiaries as a company. That's really on the financials. As I said, overall, a good quarter for the company. That's probably being polite, but we are quite happy with the progress company has made in coming out of wave 2. What I do want to spend the next 10 minutes on is update on business transformation. I have 4, 5 slides that I'll quickly cover. Two of them are busy. I don't intend to cover them, but I'll just take you through very quickly on them. Just before that, various conversations various people have various views on what we're creating and so on and so forth. I thought I just simplify and clarify our stance on what we are doing this business transformation for. As a company, we have a very clear view that we are a consumer financial services business, a diversified consumer financial services business. That's what we are. We believe that the purpose of any business transformation is the means to an end. It should, to the core business, result in stronger growth momentum or to be the customer experience or better cross-sell or should lower risk and improved operating efficiencies. That's really the overall objective of any business transformation should be, and we are pursuing this whole agenda of business transformation singularly with our objective. I thought I'd just clarify my stand very clearly as management to make that point. All business transformation, it's also clear. I'm sure you know, we're all learned people, you become learned over the last 18 months. We are very clear, it takes time, team and technology. We are increasingly super clear about that it needs all these 3. It's been 15 months, we started to provide quarterly update to The Street. And since we started the Phase 1 of business transformation, and I thought it would be an appropriate moment for me to share and update us to what's gone live and was going to go live in Phase 2. Due to wave 2, it got delayed by 3 months. It should have logically gone live in October, it went live in December. Phase 1 has now gone live, with this staggered release methodology. Phase 1 had 3 sprints. Sprint 1 is now live for 100% of the customers. Sprint 2 and 3, together, are live for now 10% of customers. It will go live for 100% of the customers between 24th and 26th and -- between 24th, 26th and 30th of the month, and we will sunset over a period of 15 days from there, the 15, 30 days, depending on how many customers move, the older app infrastructure. But Kurush is looking at me. The point that he's making is, we'll have to go by -- if a customer does not want to upgrade as a customer, we may not want to do -- push a force upgrade. So that's a point well taken, Kurush, without you stating it. So -- but that would be our intention because we do believe new infrastructure brings significant larger infrastructure and much better customer experience for customers. Next 2 slides, I'll demystify the entire new digital platform. And the 2 slides from there on, I'll cover what we will cover in Phase 2. I think that's the purpose of this conversation. I'm not going to go through this panel. There are 2 panels on what I would call 15 components. The way you should read it is that, on panel number -- in this panel, the verticals read them as -- the first column read them as components at a design level and rest of them you read as features. Overall, the new digital platform has 15 components, just go to the next slide, and has 55-odd components -- features, sorry. Yes, which is mentioned on this panel below. Overall, 15 components and 55 features. Let's just go back for a moment. That's -- this is really all any of you as customer or if you came in as a prospect would experience. You would experience the entire payment stack that you see on top. You would experience 27,000 retailers through the no-cost EMI marketplace, which attracted 45 million visits in Q3 alone. So it's already $250 million run rate asset. The insurance marketplace, which has gone live, has 9 insurance companies and 800-odd products. Investments marketplace, the entire mutual fund infrastructure through BSE StAR sitting there. Health Rx, which is for a customer, our proprietary health infrastructure and BFSL app. These are proprietary app ecosystems. You would see lead journeys as what we call three-in-one financial services. You would experience earn and burn, earn for payment transactions, burn on convert to cash, bill payment and voucher. You would -- you press the button and say, "Call me back in any of the places." You would get a call anywhere between 5 and 15 minutes depending on which of the 3,400 cities you are you pressed the button from. The productivity apps that are not visible to the customer, but that's really what integrates the -- integrated voice and marketing cloud infrastructure. You would see all these services, including calculators and profile updates and so on and so forth. You would see 31 app-in-apps across travel, entertainment, food, day-to-day shopping at this point in time. You would experience the featured search and content search as a customer, which we think is a [ Euroframe ] because it's right on the home page. You would be able to do -- you would be able to see, as I said, NPA, social share, wish lists and so on and so forth, personalization, nudges, notification. Data, you will not see as a customer, but we would take consent from you, depending on -- based on consent. It runs business rule engines. This platform has -- is integrated with 400-plus digital APIs to make things happen. The next 2 are not really relevant for you, but without a very scalable core platform, it won't work. So I mentioned in the past quarters, 3, 4 quarters ago that fundamentally restacking the core took the most amount of time other than focusing on a good UIUX. Restarting the core is an important dimension to being able to deliver at scale what we intend to deliver. Also meant investing in core infrastructure, like high availability infrastructure and much more deeper investment in disaster recovery, et cetera. What we've also done is what I've put is because it is a functional construct is 600 lateral and fresh hires we've got added to be able to deliver this over the last 15-odd months. This is really what you will see, as I said, between 24th and 26th January as we -- as Google allows us to transition 100% of the customers. And as we see stabilization of the platform, that's really all of you, either as prospect or new customer, would experience. What we are focused on is what I would call Phase 1. It was focused on creating a strong, stable and a scalable foundation for us to build the overall business transformation for the next few years. What Phase 2 will fundamentally do is to focus on from existing customers to go to new Bajaj customer journeys, would introduce a lot of new features and functionalities, would augment current feature set and [indiscernible] journeys for our existing customers, taking them closer and closer to DIY. At the end of the day, that's really what we'll transition from processes to journeys is really where we are reorganizing our thought process and company over the last 15, 18 months. And it's a journey, and we'll continue to stay ahead going after journeys. What that would do is what you see as the yellow is really what will come in over a grid of 8 to 9 months. On this panel, I'm not going to spend time. On this panel, yellow, and the next panel yellows, these are the new stacks, and the features and components are not going to change, but the features are going to change. So we'll transition from 15 stacks and 55-odd features -- 52-odd features to 15 stacks and 70-odd features and components. The only difference versus what we did Phase 1 and Phase 2 is, is that consumers will not have to wait for 8 months to experience the yellows that I talked to you about. Because, as I said, we are focused on building a stable and scalable infrastructure. As that gets delivered, every 3 months, we'll release sprints. Actually, we'll release 2 months, but since we just started work on Phase 2, this time around, we will do it in 3 months. So this will get delivered over 4 sprints between July and -- within July and October, November, is really how we are looking at this frame to be. During this period, as I said, purpose of business transformation, this is a longer-term frame. We continue to remain committed to deliver our long-term guidance metrics as a company. This is being created with a 5- to 7-year view. Let me simplify the conversation. This will help the company not on quarterly outcomes. This will help the company get closer and close to customer. As I said, deliver the objective of business transformation, which is to either reduce costs, improve velocity, improve growth momentum, reduce risk and improve customer experience. So that really... And it's not new, as you will see some of the expression here, as I said in the AGM that our agenda is omnipresence. So physically, we continue to mobilize that we are in 3,400 cities. Digital platform, Phase 1 has gone live. 16.5 million customers currently sit on the old platform, 6 million now sit on the new platform, 0.5 million new customers we acquired through EMI card in the fourth -- third quarter alone, they are not just new customers. Of the 1.3 million [ safe ], they gave 240,000 loans. So we have a 30% conversion rate, which is a great number, I would say, in terms of activation. I already talked about 45 million EMI store visits. So as Phase 1 goes live, these panels will get filled more and more, is really how it already has 28,000 SKUs and 24,000 merchants. The point-of-sale transformation, which allows good customers to apply for PL ride at the point of sale, give INR 600 crores of personal loans in Q3 alone and 91,500 credit cards. Payments, we have 5 million -- just a tad below 5 million wallet now, million wallet. We added 2.6 million wallets in Q3 alone. The P2M infrastructure, which you saw as yellow in Phase 2 will go live in February. We are not waiting to -- for that to happen in Phase 2. And we are waiting for regulatory approvals to move ahead further on [indiscernible]. The team onboarding, as I showed, we already hired for the payments business 120 people, which will go to 400 people by June. So that's really the quarter gone by. That's really the business transformation update. And we are added as management to chew gum while walking. That's the quarter. Happy to take questions.

[Operator Instructions] The first question is from the line of Kunal Shah from ICICI Securities.

Yes congratulations Rajeev and the entire team. So firstly, with respect to this entire app, I just want to assess the adoption. So how should we actually gauge the adoption? Maybe there are some metrics which you have highlighted in terms of people who were there on the consumer and how many -- how they have been onboarded on to the new app, so maybe [ 16.5 and 6. ] So in that in terms of maybe when you were making the remarks, you said that many of them would not to -- would not like to migrate and there will be no force upon them. So if you can highlight out of the total customer base, what is the final endeavor which we are looking at and by what time we would be seeing it? And as and when the new features get introduced, how do we convey it to the customers, okay, that this is getting launched, this is what has happened? Because I think insurance and something was not available, it is coming through now whatever comes on from 24th to 26th. How do we keep on intimating to the customers and improve the adoption out there?

So 2 things, Kunal, from a -- let's -- so there are 2, 3 large engines that'll drive adoption. You walk into the point of sale, your agreement is now on it. I mean on -- from 1st of February. So any new customer or existing customer comes on board, he has to go and do a TP and do an agreement there in the app. I mean our entire ARU infrastructure is now driving this app because, at the end of the day, if I'm trying to do activation and response units with sense, which do largest amount of communication with prospects and with existing customers, all of it is driving it towards the new digital platform. So adoption will be reasonably rapid. We are very -- and all channels in the company will go towards it. So that's first part of the conversation because all journeys will we get, we've been there. Whether it's a personal loan or it's a point of sale, the mobile receipt, if you -- if you're a defaulting customer, you want to see the receipt you will instantly see it there. So wherever you will touch the -- wherever you'll touch us as a customer, the connect will be through the app as you move. All services -- service touch points will be through the year. So service, collection, sales, all through the app. So that's one part of the conversation. Second part is, as Phase 2 goes live, we think we are already beginning to track in set of internal metrics. We'll start to publish them for either, let's say, fourth quarter next year onwards, we are already tracking a set of, what we would call, 21 metrics that determine effective app ecosystem. So just as it gets matured, we'll start to share that as well. So we are a transparent company, but it must reach a particular maturity before we feel comfortable starting to share. So wait for 3 more quarters.

Okay. Sure. And overall, maybe in terms of the transitioning. So if I'm an existing customer, but there are no repeat transactions which are happening. But maybe through, say collections or some other servicing whichever is setting, and which was I'll keep on migrating to the new app and at least will connect with it?

But it's an important conversation, Kunal. And if you go to the functional architecture that we've actually published, number one, number two, conversation that we did with the community on taking on payments as a large frame. The first step that you will see, we are very clear that the engagement would happen through that. That's why you see on top, just if you go there, on top, you see UPI, BPI, EMI card, BBPS. BBPS is now already clocking 250-odd-transactions in a month -- 400,000 transactions, Kurush is correcting me, in a month. So we will start to see -- and we're just getting our feet wet. Let me just make that point very clear. We've been focused on, as I said, building a strong, stable and scalable foundation. And we have a large franchise, accelerating it and your large profit pool, accelerating it is not going to take too much effort.

[Operator Instructions] The next question is from the line of Abhishek Murarka from HSBC.

First of all, many congratulations for the quarter. So 2 questions. The first is on OpEx. So have you got a budget for what you will be offering as cashbacks or incentives on the app? And are you also seeing -- you're hiring about -- you've hired about 600 people, you will be hiring another 800 as per your presentation. So are you seeing a lot of wage inflation there? And overall, how should we think about OpEx in terms of cost to income given these 2 things in the background? So that's one. I'll come back to the second question.

We'll guide in case there is change. We do believe, as I said, we'll continue to chew gum while walking. We remain committed to deliver 33-odd percent kind of OpEx to NIM ratios that we were at pre-COVID levels. Over time, Abhishek, as velocity grows, as we become more efficient as other -- the number will go down or could go down. I wouldn't say will go down, could go down. But the 33% number or 32%, 33%, 34%, I'm not fixated on the number. I'm fixating on the trend line that we will continue -- we remain committed to delivering profitability while investing in our future.

Great. So basically, what you're seeing is despite all these efforts of investing in people and also through the app on cash back and all that, it's not going to skew the cost-to-income ratio from that level, 33% to 34%, 35%, whatever it is, low 30s.

No. Yes. When and I said, no...

Okay. The other question I had is basically on the provision guidance. Now we've gone up to $48 billion to $50 billion, and you said you're trying to be cumulative. But on the other side, you've also said that the impact of wave 3 is not really as much as wave 1, wave 2. So why have we really increased this guidance?

As I said, we remain in an uncertain zone. We don't want credit costs drag, P&L drag the overall momentum. Let me simplify the conversation. We like to run a fully costed P&L as a company, and that's really what we've done for the last 14, 15 years. And we want to remain conservative. As I said, this is management overlay. If it doesn't occur, which is for the first 17 days is looking like, and by June, we don't have a fourth wave, this is available to be rolled back. Because let me, in fact, further complicate the conversation. The gross NPA, net NPA is back to pre-COVID levels. The Stage 2, Stage 3 assets, adjusted our balance sheet are back to pre-COVID levels. So we are very comfortable on all these 4 metrics. But the uncertainty is what is causing us as management to take a conservative view. That's all.

[Operator Instructions] The next question is from the line of Shubhranshu Mishra from Systematics.

Rajeev, congratulations on the set of numbers. So 2 questions. First is slightly quantitative if you can define what is the age in -- average age [indiscernible] score of the new to Bajaj customer. How many of them are 700-plus? The second is if you can also list out the concentration of the distribution reach on Slide 47. We did announce the consumer durable digital product store, lifestyle retail stores. So what are the top 1000 or top 500 stores in each category cater toward the either in terms of volumes or value to the AUM? And last question is qualitative. When do we plan to become a bank or apply to become a bank?

So first is the TG. Fundamentally, look, at a design level, we focus on who we want to do business within the EMI card space. So we target essentially those prospects that we intend to onboard as a customer. So that's level 1 point that I must make. Level 2, as a result, they have to be 700-plus, or 720-plus or they can be 0 minus 1. So that we are clear about it. Normally, we see from a trend line standpoint, as I said, we acquired 492,000 customers in that Q3, that means 160-odd thousand customers in EMI card platform every month. 80%, 85% of the customers are 720-plus from a bureau standpoint. And between 12% and 15% could be 0 minus 1. But even those 0 minus 1 are the ones that we want to target. So that's point number two. TG remains between 30 to 45. That's really the TG that comes through the board because the moment you want 85% of them to be bureau tested, naturally, in general, you're going to find that TG. And we find that, that TG, above 30 TG is about building a long-term business. That's third question. Fourth, sorry.

Contribution by top 1000...

Contribution by top -- top 20 dealers would have 20% market share. That's not changed. It's also not changed because we've kept going deep. So if you say -- if you take a top 20 city view, that number would be very different. But the moment you take a 3,423 cities view, the number has been at 20% now for a long, long time. Of course, the top 20 also keep going down. The top 20, some of them have got down to 1,500 kind of city. That's also -- not 1,500, they have 2,000 stores. So it could be down to -- so number would be 20%. It's reasonably distributed both geographically and from a concentration of retailer contribution. Bank, no, there's no plan. We'll definitely update before we decide. I think at this point in time, there's no such plan and that's up for -- RBI came out with their guidelines, it's up for the shareholders to decide. And we, as management, will follow what shareholders decide.

The next question is from the line of Prakhar Agrawal from Edelweiss.

I have 3 sets of questions. Firstly, in terms of home loans, so you highlighted that is [indiscernible]. What are the exact pressure points that you're seeing to highlight that [indiscernible] particularly as a yellow? Second, when you talk about...

We lost you, Prakash.

[indiscernible] yellow, Prakhar.

Prakhar, Prakhar. Yes, Prakhar, sorry.

Yes. So I was talking more from a home loan perspective. What makes you classify that as yellow, which is first. And second, in terms of customer acquisition, so you saw I said that from a normalized level, you probably may go to $8 million to $10 million over a period of time. What exactly is the architect that gives you increased level in terms of higher customer acquisition there? And lastly, in terms of when you make a point that competitive intensity in few of these operating segments have risen, where exactly have you seen this -- which player have exactly seen this risen? And do you see that profitability in a few of the segments also getting curtailed because of higher competition? Because downside is what you said that has stagnated in January or probably similar in December. Do you see pressure points in profitability in few of the segments wherein that you're seeing higher competition?

So look, it's visible all over. We're able to get an auto loan at 7.5%. You're able to get home loan at 6.6%. GSEC is at 6.6%. [indiscernible] home loan is at 6.3%. So that's competitive intensity for you. Personal loans are going at 10.5%, 11% for best customers. To my mind, personally, does not adjust for -- the pricing, there's not adjust for risk, to my mind, I mean now, and I could be wrong. And we are clear that there are -- based on our PPM frames, there is a red line to where we can go on product from a pricing standpoint. So that's really the second response to the second point, it's all around us. Try and apply for a personal loan, you can get it at 11% [indiscernible] salaried personal loan. Professionals, doctors are getting money at 11%. So it's not risk-adjusted, in my mind. Home loan, if you see, I've put up the panel, Panel 58, logically, should be to 99.25 kind of number, in my assessment. And that's why yellow. It's not a red in any given manner. It's just as you see the number to be here. To my mind, it should be 99.25 kind of number. As it gets there, we'll stand it as green. It does not reflect a deteriorating credit situation given the nature of the business, but that's a management assurance assessment. Were these the 2 questions, Prakhar?

So just last one was on customer acquisition that you said that $8 million to $10 million is what we're targeting. So what is the underlying architect there which you see that over a period of time, you will be able to ramp that customer acquisition at a normalized level of $6 million to $8 million?

I think as the digital platform becomes more and more robust, as the journeys become more and more integrated, you will see that happen. I would only just add one more dimension since we're pushing this conversation is that this is only an app conversation. There's eventually even whether you came on app or on web, the experience should be same, it should be same, not even similar. So as both the platforms are created, are optimized, deliver identical journeys, I'm quite excited and do believe that the momentum could be strong. That's what gives me the -- that's the -- that's our assessment as management.

The next question is from the line of Kuntal Shah from Oakland Capital.

Rajeev, thanks for the explanation and the commentary thereon. But just one request that this presentation was just released 5 minutes before the call, and I think that most of us would not have [indiscernible] to it.

That's correct.

And if the presentation were to refer to Kubernetes and data lakes, I can assure you, 99% of the people on this call wouldn't even understand it.

That's okay. That's -- I don't have a view on that. We are supposed to provide update, Kuntal. So our Board meeting was finished at 5, it went on a little longer. As you can see, you just committed large capital, it is an explanation to the Board and to commit such large amounts of capital to the 2 subsidiaries. So you can imagine our state. We've been at it in the morning, and we just at 7:00 also answering questions.

My 2 questions are, you mentioned there are going to be almost 600-plus APIs. APIs can enable even third party to offer solutions on your platform, provided you are not willing to or you don't want to. So are you planning to make it an open kind of a marketplace where they can also mutually benefit from your reach and your customer base and you could do a revenue share with them? And I saw a marketplace of Bajaj 2-wheeler. So is your move beyond Bajaj ecosystem is...?

Yes. We'll be launching 2-wheeler financing for non-captive customers by -- between 1st of June or 1st of July. In fact, we would have launched it if not for the marketplace. Let me make one important point that as we deliver Phase 2 or any new large product, the old approach to launching products, conceptualization to delivery, we would not do anything that is not available on day 0 to customers on the digital platform. So technically, we could have gone live on 1st of February with a 2-wheeler financing business. We've held it back for 5 months because we want SKUs across mechanical and electric to be visible and available to customers to be able to compare and shop. So that's one part. And two, as I said, on day 0, we would not launch without being on the digital platform. Your second question, Kuntal, was?

APIs.

APIs [indiscernible]

[indiscernible] third-party products [indiscernible].

Okay. To the inner programs, inner programs are mostly APIs. APIs at level 1. Over time, as we see which piece is generating velocity, we will keep integrating tighter. There's a lot of conversation that goes around saying people are building super app, super app. Super apps are not created, they get created because that's what consumers asked in search and then you deepen journeys. At this point in time, you see 31 of them. They are all APIs, but they are level 1 APIs. They will get to level 2, level 3 and so on and so forth, wherever we see velocity. So 31 is going to 46 or 47, what have we said? 51 -- 50, sorry. So those are -- in our programs are built as APIs, but let me caution, built as level 1 API. So they'll get to level 2, level 3. Answering your second order question, no view on exposing it to other than in-app programs. Our main focus in Phase 2 is to make our customers' journeys easier and easier and easier. Because that's really what generates -- we are a consumer -- diversified consumer financial services business. And that's really what generates the balance sheet and the profitability. And our entire focus is on that. I hope that answers the question.

No, I just wanted to know the pros and cons of opening it for third-party applications, which you are not present on or are not willing to be present on but...

So there's no never say never, Kuntal, but don't have a view at this point in time. I think that's the -- so if we think for travel and for shopping, our customers -- or for things like casual gaming, customers are interested, they're already there. Over time, we see on the search menu, customers are looking for another category based on data, we'll go out and build partnerships. Over time, we see, in the existing in-app programs, clients are doing more activity, we will integrate tighter. That's how -- that's our view.

The next question is from the line of Nitin Jain from FairConnect.

Yes, so I just have one quick question. The speed at which the company is acquiring fixed deposits, like despite offering better rates than private banks, that seems to have decelerated over the past few quarters, like from where we were growing 8% to 10% Q-o-Q, we are down to low single digits. So any comment on that? That's all.

No, it's a very fair question, and it's a correct question. We've invested in 10, 11 channels over the last 4, 5 years. And we told the team the time has come for you to demonstrate that the distribution has as much role to play as pricing. And that's really what we are testing for the last 6, 8 months. We do see that -- and we just increased pricing. We have internally pegged it as part of our ALCO processes to GSEC that we kept pricing very tight, but the business still generates between INR 950 crores to INR 1,000 crores of retail deposits with average deposit of INR 3.5 lakhs a month. So we just -- let me use the word, we're just maturing the business to -- so that's on one part. And the second dimension is that at the end of the day, retail liabilities is a cost center. There is a cost that we decide that we are willing to spend to diversify the balance sheet on the liability side, and they have to make and made in that. So these are the only 2 objectives, which is maturing the maturity of the distribution investments that you made and to running it in a disciplined manner, within a particular cost base.

So just if I can add a follow-up. Is the cost of acquisition of deposits, has it gone up recently? Or how is it?

No. It's not gone up. It's actually gone down, but that's the pool that is available. That -- so.

Rajeev, referring to the overall cost of fund that it creates for the company?

No, no, I was referring to cost of acquisition.

Okay.

The second -- the third point that Sandeep is making, is a correct point as well. That at the end of the day, there are users of this money who also asked on ALCO, what do I do with the money if it comes at this price. So eventually, you have to find a rightful balance once the business reaches a particular point of maturity. So that's really the point that Sandeep made is equally important. Between these 3, that's how you see, and your observation is correct, slowing down of the origination.

The next question is from the line of Dhaval Gada from DSP Investment Managers.

Rajeev, congrats on good numbers, just -- and the additional disclosures. So I just had a couple of questions. First was on new loan origination. So the point is in terms of sales velocity of existing customer base, if you see the current traction, it seems to be similar to second half of last year, but still substantially lower than the pre-COVID run rate. So the question is, is this number less relevant as the ticket size sort of increases, or it's important and that's something that we expect to normalize in FY '23?

You mean loans booked, right, Dhaval? You mean loan booked?

The number of loans booked Yes, yes. [indiscernible]

It's a correct observation. It's a correct point that versus the 6 million, the 7.4 million looks good, but the point that you're making is correct. In December '19 quarter, we had booked $7.8 million.

$7.67 million.

$7.67 million, $7.7 million to be precise. During that period, if you recall, post pandemic, we came to a conclusion, and we disclosed that to The Street. There's 2 lines of businesses that washed away last 3 years of profitability. One was the retail EMI spends business. And that used to do 200,000 accounts a month. We capped that at 60,000 accounts. So from a 600,000 accounts, we allowed them to do only, even in a seasonal -- festive season quarter, like the previous one, we capped them at 200,000 accounts, 220,000 accounts. So that's 400,000 plus minus gone away. The second was that we used to do these wallet loans to our existing customers of INR 5,000 to INR 10,000 for 3 months so-called in the new jargon, which didn't exist then called BNPL. We used to do 70-odd thousand loans in a month. That was 200,000 loans in a quarter. We walked away from that, last -- now last to last April. So that's how the 600,000 number logically gets reconciled to 7.4%. So 7.7%, apple-to-apple is 8 million is how you should read it. Observation is correct. Is it important? The answer is yes. In new loans booked remain an important metric because it demonstrates engagement, demonstrates velocity. So it remains important. And we think as the economy comes back, as pandemic becomes endemic, given the franchise creation, given the deep distribution, given the new digital platforms that are getting created, we will see both happen, new customer acquisition and new loans booked. I'm waiting to see hopefully a normal summer. We've not seen a normal summer. Summer contributes to 40% of the business. We've not had a normal summer, which is April, May, June, for last 2 years. So I hope that answers the question.

Got it. And just one sort of follow-up. The small point is, in this period of December '19 to now, I mean, we've seen about 33% accretion on cross-sell customer base, 33%, 34% acquisition on the EMI base as well, EMI card base. So adjusted for the engagement ratios pre-COVID versus where we should be next year, broadly, should it be similar even adjusting for the RMI loss and the wallet loan loss, it should be similar?

Yes. We will see increased velocity. I am -- it's a point of view. I can't say that -- as we -- as I mentioned earlier to the response that as this whole business transformation gets delivered, as customers become -- we will -- should see increased velocity and increase engagement, and that should lead to higher volumes.

Got it. And the second question, Rajeev, I had was on the digital EMI card. So if you look at the base now, I mean, it's almost like 5% of the EMI card base. If you look at the engagement metrics here, I mean, at least optically, they look better than the existing EMI franchise. So just -- I mean, I wanted to understand the economics part of it. I mean should this card be much better breakeven compared to the normal origination? And also [indiscernible].

They are profitable on day 1.

They're profitable on day 1. Understood. Understood. And some initial thoughts on...

I would say engagement part. Out of this 492,000, 300,000 pay fees and become -- pay fees instantly and become -- and get an EMI card. And 192,000, as and when they decide to take the product, come and, at that point in time, pay. So that's how the breakup is. If you take it further -- so 492,000 on aggregate is profitable on day 1 adjusted for as a P&L.

[Operator Instructions] Ladies and gentlemen, we will take the last question from the line of Aditya from Citigroup.

If you could talk about the 2 segments. So one, you mentioned affordable housing in the last quarter. So what's the profile of that business in terms of target yield, ticket size and geography? And on IPO financing, which seems to be low, at least on a quarter-end basis, is there a change in view on doing less of that? Or could this be just a period end balance sheet phenomenon?

So affordable housing has just gone live. BHFL has just started to -- we [indiscernible] team. We are testing it into market. We're building that business with a long-term view very clearly. So that's very, very early days. So, Aditya, very premature to make any comment on that. It will probably be 18 months before we start to warm it up, let me make a point. So that's one part of the conversation. To IP financing, just quarter end, it had no outstanding. So that's one. Two, IP financing is a phenomenon, will, as you're all -- would be all aware, would base on the new guidelines of INR 1 crore requirement would probably cease to exist from 31st March on. So it seems as a market participant at this point in time. So -- but we -- through retail customers who want it, we would, of course, offer it. But retail customer was never participating that aggressively. But from a longer-term standpoint, I could argue that it's a step in the right direction to retailize the market participation.

Got it. And just secondly, is there a -- on the LCR norms, what is the expected impact? And I mean, so what portion or what amount of liquidity in this quarter, do we have -- have we kept in rupee billion terms to comply with LCR norms?

Sandeep?

Yes. So Aditya, we are carrying a large amount of liquidity otherwise also. So there is absolutely no impact that the company has from LCR perspective. The only change that was supposed to be done by us is that so far, a large part of the investment was going in mutual funds versus mutual fund now it goes into some of the trade bills and so on and so forth. So that's the only change that has taken place. That also allows us to leverage. So [indiscernible] can be used for raising more debt as well. So that's the thing that has changed. From an overall guidance perspective, we expect the liquidity buffer for us to go down to 10,000, 11,000 kind of range as we go along from here. So that's on LCR.

So even when on LCR, ramping up to 100%, there is no material impact?

We are more than 100% even now.

As Sandeep says, the mix change is -- serves that. There is no financial impact other than that. Anuj, should we call it a day?

Yes, sir.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Anuj Singla for closing comments.

Thank you, Faizan. Rajeev, sir, any last comments before we close the call?

So far, so good. Thank you all very much. It's late in the evening, and stay safe. This is the most transmissible variant. So please stay safe and wish us being safe. Thank you. Thank you, all. Thank you.

Thank you, sir. Thank you, Rajeev, sir, and Bajaj Finance for giving us the opportunity to host you. Thanks, everyone, for joining. This concludes the call for today. Over to you, Faizan.

Thank you. Ladies and gentlemen, on behalf of Bank of America Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.