ValuePickr Forum

Bajaj Finance Limited


This heralds really well for Bajaj Finance.

The report actually mentions of small ticket size loans (~Rs. 15,000) that can be availed by first time borrowers for consumer durables and other smaller purchases. Also the size of the opportunity is already very large and is going to become even bigger by 2022. Bajaj Finance has quite a bit of runway available to it.

Disc: Invested


I remember several quarters back management were cautious on SME . Latest commentary they are positive on this sector . Management planing to expand to more towns/ cities ( current around 1300 and planing to be in 2000 ) . Geographical expansion/ product expansion — Seems good growth is still available even for the current size of the company.

I dialled in on the quarterly earning conference call. Here are my notes (I am omitting the financial numbers since those are covered in other posts. This is the management commentary).

Macro/Micro Environment

Country’s macro environment is degrading - US$/INR exchange rate, crude oil prices rising, current account deficit and inflation rising. The risk of rising interest rates is high. In such an environment the low margin businesses (i.e. low spread loans) are the most adversely affected. Which means BFL’s mortgage & LAP business (about 30% of AUM) would be affected. The management believe’s BFL will be the least impacted among its peers in this segment.

Micro environment (term used by the MD) is improving. Which implies discretionary consumption is increasing, 2/4 wheeler sales are rising, commercial vehicle sales are growing. This means BFL’s non mortgage/LAP porftfolio (~70% of AUM) will be positively affected.

Now among the top 3/4 retail loan franchises in India

Bajaj Finance is now among top 3/4 retail loan providers in India, in terms of retail AUM.

New panel to track risk

The management has constituted a new panel to track credit risk across its porfolio. Coming from a corporate banking background, I know that a dedicated team which tracks and monitors the credit risk does wonders to the asset quality. They keep the sales teams in check, sales teams have an incentive to increase the loan book. They usually don’t last long in their roles to suffer the consequences of loans going bad. I am talking about corporate loans. Retail loans are shorter in tenure.


Bajaj Housing Finance Limited (BHFL) commenced operations in Dec 2017. Going forward all the incremental loans for mortgage, LAP, lease rental discounting, real estate developer finance etc will be booked in BHFL. The management and the board believed that as the overall AUM increases, a sharper focus on these product lines and an independent management would make this business better. Apparently BFL is the market leader in non-salaried mortgage (can someone confirm this?). The separate entity is supposed to make it even better.

No cost EMI competition on ecommerce

Many banks are offering no-cost EMI on ecommerce websites via credit cards. The management says they never looked at competition to build any business line. Ease of access, better service, faster disbursement and good recoveries have been the differentiators for BFL. Won’t worry about competition. Competition dissipates outside the top 120 branches in the tier 1/2 cities. This is where growth will come from.

Also about 59% of the loans come from existing customers. The company keeps investing in technology and analytics to enable cross-sell and repeat borrowing from existing customers. Going forward this will also enable the to move to pre-approved personal loans disbursal. The loan can be disbursed in 10 mins following a phone call from the customer care. They want to do away with online form filling and rule based identification.


Bajaj Finance’s investment in MobiKwik doesn’t seem to be doing well. In the last quarterly earnings conference call the only thing the management mentioned about MobiKwik was that “they (i.e. BFL) are still in the learning mode”. In the previous call the MD was quite positive about how MobiKwik would help BFL:

  1. Help disburse loans within 5 mins
  2. Make loan servicing very easy

However no word about this in the latest call. Also MobiKwik has seen many top management exits in the recent past:

  1. Nov 2017: MobiKwik marketing head Akash Gupta quits to start green-tech venture
  2. Jun 2018: Marketing head Daman Soni quits Mobikwik

Soni’s exit becomes the second major reshuffle in the wallet company after Vineet Singh, who was the chief business officer, also parted ways in April this year…Soni joins the list of executives who have left Mobikwik like Rukaiya Rangwala, who left in April this year and Vivek Sinha who quit in May. Rangwala was heading payment gateway business at Mobikwik and Sinha was the head of retail business.

Although a small investment (~Rs 225 crore), it would have paid off disproportionately had the synergies worked out.


Does the separation of mortgage/LAP business in a separate entity(Bajaj Housing Finance Limited or BHFL) mean that we are likely to see a demerger in the future? The management says that in about 2 years, 100% of the LAP/mortgage (what is the difference between the 2 anyways?) will be in BHFL. Will such a demerger be beneficial to shareholders? It would certainly be for BHFL since it will allow it to access funds at a lower cost.

I was wondering how to estimate the benefits of such a demerger to shareholders?


HFC enjoy some perks from NHB, like lower cost of funding. So many nbfc shifting mortgage business to seperate HFC.
I dont think it’s necessarily for demerger. Bajfin mgmt did say they will demerge BHFC, if its AUM gets big enough. But the shift is not for demerger.


I watched CNBC after long time yesterday and that too in mute mode. I lost count how many times anchors mentioned and discussed this stock. I checked the valuation which looked too high but the stock is making new high as well. This is one of those stocks that keeps rising in this narrow market. A classic sign of developing mine field in my opnion.


From the annual report…


BF is a gem in the market. Good companies/management/business do not sell cheap or at reasonable valuation.YOY the company has been growing steadily and I see a long runway ahead. Excellent ethical management with superior execution capabilities.Yes it is expensive now and may correct 10-15%.Better to load up in my opinion.

Disc: invested


Other interesting observations from the annual report:

Ecommerce EMI transactions

BFL financed 702,000 EMI transactions in FY18 v/s 167,000 in FY17. A massive 320% growth!!! What explains this massive growth?

RBL cobranded cards

BFL launched these co-branded credit cards in FY17. There are 380,000+ cards in circulation now. I remember the MD’s comments from one of the previous conference calls - this business becomes disproportionately profitable after the number of cards in circulation crosses 1 million.

Rural growth fastest

Rural lending grew by 100% YoY. Assets for rural lending now constitute 7% of the total AUM, compared to 3% 2 years back.


At the end of FY18, BFL had a deposit book of 7,569 crore, which was a growth of 83%
over FY17. The deposit book’s contribution to BFL’s overall borrowing was 12%. In the previous year the contribution was 8%. Deposits help BFL reduce the average cost of funds.


Another article on credit growth. It again highlights favourable tailwinds for the sector and the runway available to BFL.

All areas that BFL lends in are the fastest growing - Consumer Finance, Credit Cards and Personal loans.

Lastly, TU Cibil’s analytics show that nearly 15 crore Indian consumers who are not currently borrowers can be eligible for retail credit.


Will HDFC Bank’s NBFC subsidiary “HDB Financial” be tough competition for Bajaj Finance?

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For anything like this to have reasonable impact on Bajaj Finance, it needs to show in results… till then its just speculation/random talk

I am planning to attend Bajaj Finance’s AGM on 19th July. I have never attended an AGM before Do I need to inform investor relations to get an invitation? Or can I just walk in?


You dont need to inform investor relations or get an invitation.

You can directly walk in… If you are an existing shareholder., please carry with yourself the AGM attendance slip (duly filled).
The AGM attendance slip is normally sent to shareholders along-with the Annual Report via email.

If not., you can fill the details like your name, DPID, no. of shares, etc. at the reception counter.

I will be there too at the AGM.


Got it! Thanks. The email had a link to the attendance slip.

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Results are out: Income/adj AUM growth of 39%, PAT growth of 81%, EPS growth of 76%


Investor Presentation:


I attended AGM of the company yesterday.

The company once again posted blockbuster results.

I will try to put forth as much possible from yesterday’s management discussion & their replies to question asked.

Notes from the AGM :

1) On Impact of any political uncertainty in the future : The company said that they had handled well a far more difficult once-in-a-century scenario of demonetisation., where-in approx 85% of the cash in the market was taken out of circulation.
If the company could manage it well., political uncertainty doesnt look much of a challenge.

  1. The company said they are walking away from the distributors & focussing more on reaching out to as many places & as many customers. This is a win-win situation for both the company & the customers. Also, the company gets to know the true picture of customer’s credit-worthiness.

  2. The company is also in the process of launching a subsidiary for financial securities. They intend to earn from brokerages, as well they will be saving some money on services which they externally use for customer’s loan against security. The ‘loan against security’ disbursement of the company, as of now, is about Rs. 8,000/- crore.
    So the existing brokerage houses can see strong competition coming in the future from BFL.

  3. This is really amazing. Speaking of customer obsession., the company said that of the total loan disbursement in Q-1., 73% are from existing customers.
    This shows the faith of customers in the company.

  4. Once again, 5th time in a row, the company figured in the “Best company to work in” list. It was on 16th position.

  5. On question asked on Bajaj Housing Finance Ltd’s future operations & the forecast : The company said that it has just incubated., so it is better to give it time for 3-4 years to completely mature., & not forecast or comment on it now. They have formed a complete management team for this venture.

  6. 2-wheeler finance : constitutes 7-8% of the loan book., & the company said they are not looking forward to financing another company’s 2-wheelers, as of now.

  7. On Market opportunity : The company re-iterated that the Market Opportunity is very large., but they believe that more important is “doing it responsibly”.

  8. On work culture : The company has 11 tenets., & each employee works according to the company culture.

  9. The company believes in ‘continuous transformation’ & ‘always raising the bar’.

  10. EMI cards : The company is adding approx 40,000 EMI card customers every month.

  11. Network : The company is now active in about 1480 locations in the country.

  12. NPA’s : The net NPA’s are in control., in the range of 0.38%

  13. On risk associated with health-care financing : The company said that they are mostly positioned in leading hospitals., where the patients availing their services have less chances of defaulting.

  14. E-commerce lending : credit facility available to only Bajaj Finance EMI card holders.

Overall a very positive feeling in the AGM & positive outlook for the future.