Bajaj Finance focuses on payment and financial services

Bajaj Finance Ltd on Tuesday ruled out any possibility of becoming a universal bank and instead said it plans to build a full-fledged payments and financial services business within the next 2-3 years.

“My understanding from shareholders is that our view is that we are focused on building a financial services business for payments and financial businesses, and that we will continue to remain a non-banking business and meet all banking-like regulations over the next 2-3 years. We would like to reach 100 million customer franchises over the next five years,” Bajaj Finance chief executive Rajeev Jain told analysts on a conference call on the results.

The company delivered 80% year-over-year (year-on-year) growth in consolidated net profit to 2,420 crores in the fourth quarter due to lower provisions and higher base income. Net profit for the corresponding period last year was 1,347 crores.

Jain also said the company will launch its super app by May 1. It will also build a new web platform which will be rolled out during the year. This is part of the omnichannel distribution channel, in which customers will be able to switch seamlessly between physical and online stores to make payments, transfer funds, borrow and invest across different channels. “Phase 1 of the web platform will go live by October 2022 and Phase 2 by March 2023. After the implementation of both phases, customers will enjoy a full service experience independent of platform (start on app, end on web and vice versa)” he added.

Due to significant investments in digital initiatives, Bajaj Finance saw operating expenses on net interest income (NII) remain high at 34.6%. Jain said the company continues to invest in people and technology for business transformation. He expects operating expenses to remain at 34.5-35.5% in FY23. However, he said investments will not come at the expense of profitability.

Its core revenue growth, however, remained strong, with the NII increasing 30% year-on-year for 6,068 crores in the March quarter. The other major part of his income came in the form of fees and other income from 1,164 crore, up 51% from a year ago. Consolidated results include the results of its wholly owned subsidiaries, Bajaj Housing Finance Ltd (BHFL) and Bajaj Financial Securities Ltd (BFinsec).

Its portfolio of new loans increased 15% year-on-year to 6.28 million in the fourth quarter of FY22. Among the fastest growing segments is the securities lending segment, which grew 79 %, rural B2B loans 43% and commercial loans 39%. His total deposits amounted to 30,290 crore, up 19% from the same period last year.

Management said asset quality had returned to pre-covid levels. Its gross non-performing assets (NPA) as a percentage of total assets was 1.6% in March, compared to 1.73% as of December 31, 2021. The provision coverage ratio was 58%. The company said it had not taken advantage of the deferral that the Reserve Bank of India (RBI) had allowed until September 30 with regard to upgrading NPA accounts. Its loan losses and provisions fell 79% year-on-year to 702 crores in Q4 FY21. As of March 31, it had a cash cushion of 10,110 crores.

On RBI’s recent credit card rules, Jain said the company is reviewing these guidelines but remains committed to all co-branded partners, including DBS Bank and RBL Bank.

Bajaj Finance’s Board of Directors has recommended a dividend of 20 per share on a par value of 2 (1000%) for exercise 22. The script closed at 7,240 each, up 3.3% from the previous day’s close.

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Elaine R. Knight