Chairman's Letter

 

We have crafted a visionary blueprint (Long-Range Strategy) for the next decade that reshapes our ambition, strategy, approach, and goals of customer share, market share and profit share. The blueprint envisages your Company to become a dominant payments and financial services company in India over the medium term.

Sanjiv Bajaj Chairman

Bajaj Finance Ltd.

 

Dear Shareholder,

Last year, I discussed your Company's implementation of its Omnichannel strategy. I am happy to share that your Company has made substantial progress across all aspects of this strategy. This has enabled customers to move between online and offline and vice versa in a frictionless manner, accelerated business operations and resulted in significant reductions in process complexities and operational costs. Thanks to this strategy, your Company has rapidly ascended to become the largest private sector non-banking financial company in India. I extend my heartfelt congratulations to everyone involved. However, we must continue to strive for excellence as there is still a lot to accomplish.

Where do we go from here? We have crafted a visionary blueprint (Long-Range Strategy) for the next decade that reshapes our ambition, strategy, approach, and goals of customer share, market share and profit share. The blueprint envisages your Company to become a dominant payments and financial services company in India over the medium term. You can find detailed insights into this plan in the Management Discussion and Analysis (MD&A) section. I am tremendously excited about this blueprint—it is bold and ambitious, yet achievable.

This blueprint anticipates rapid growth for India. In FY2024, India's real GDP is expected to comfortably surpass 7% annually, or 12% in nominal terms. Assuming no major unforeseen disturbances occur, I foresee similar growth rates for FY2025 and FY2026. Structural reforms, deregulation, robust infrastructure investments and a vibrant financial sector will be key to achieving these growth rates.

The financial sector is crucial and indispensable for any nation state that aims to achieve robust economic growth. That applies to India too. Banks and Non-Banking Financial Companies (NBFCs) in India are very well positioned to play that role. With robust loan and deposit growth and low levels of bad loans as of FY2024, banks and NBFCs can invest in creating new products, delivery channels and outreach to serve the increasing financial services needs of India.

Now, let me discuss NBFCs. NBFCs have become key players in India's financial sector, supplementing banks by filling the credit gap for under-served segments and Micro, Small, and Medium Enterprises (MSMEs). With a deep understanding of local markets and a strong drive for innovation, NBFCs have advanced credit dissemination, offering customised products and services at a reasonable cost. NBFC sector AUM is estimated at US$ 326 billion as of FY2023, reflecting their increasing role in meeting the needs of growing India. This performance shows the sector's strength and its vital contribution to India's economic growth.

Your Company had yet another strong year exhibited in superior financial results. In FY2024:

  • Customer franchise grew by 21% to 83.64 million
  • Number of new loans booked was 36.20 million
  • Number of customers on Bajaj Finserv App was 52.41 million
  • Assets under management (AUM) increased by 34% to 330,615 crore
  • Net interest income (NII) increased by 29% to 29,582 crore
  • Net total income (NTI) increased by 26% to 36,258 crore
  • Total operating expenses (Opex) grew by 22% to 12,325 crore
  • Opex to Net Total Income (NTI) stood at 34%
  • Pre-impairment operating profit increased by 28% to 23,933 crore
  • Impairment on financial instruments increased by 45% to 4,631 crore
  • Profit before tax (PBT) increased by 24% to 19,310 crore
  • Profit after tax (PAT) increased by 26% to 14,451 crore
  • Capital adequacy ratio as on 31 March 2024 was 22.52%, Tier-I adequacy was 21.51% including CET1 ratio of 21.32% which are well above the RBI norms.

However, FY2024 also presented a challenge for your Company, as RBI advised halting sanction and disbursal of two product lines due to certain deficiencies related to Key Fact Statement (KFS). Since then, the Company has complied with the necessary corrections and has formally requested a review and removal of these restrictions. Your Company remains fully committed to maintaining highest standards of compliance and regulatory adherence.

Let me now talk about your Company’s subsidiaries. Bajaj Housing Finance Ltd. (BHFL), one of India’s leading housing finance companies, also had a strong year. In FY2024, its total AUM increased by 32% to 91,370 crore; PBT rose by 27% to 2,161 crore; and PAT increased by 38% to 1,731 crore. Its GNPA and NNPA ratios at 0.27% and 0.10% bps are amongst the lowest in the industry.

Though significantly smaller than Bajaj Finance and BHFL, your Company’s other subsidiary, Bajaj Financial Securities Ltd. (BFinsec) which is registered with the SEBI as a stockbroker and depository participant, has also done well. With an AUM of 3,817 crore, it generated revenue of 486 crore, PBT of 71 crore and PAT of 56 crore.

While we continue to build large and profitable businesses, your Company also cares deeply about Environmental, Social and Governance (ESG) practices. Our ESG theme is 'A Legacy of Responsibility'. To fulfill this vision, your Company has created a comprehensive framework for Responsible and Sustainable Business conduct. It covers corporate governance, financial inclusion, environment conservation and protection, social empowerment, customer orientation, human capital management, cyber security, and stakeholder management.

Your Company remains very excited about its long-term growth prospects. It remains committed to continuous transformation, excellent customer service and fostering a supportive and dynamic work environment, all leading to higher shareholder value creation.

To prepare your Company to achieve its long-term growth objectives, the Board of Directors, has approved the promotion of Anup Saha, Executive Director as Deputy Managing Director and the appointment of three Chief Operating Officers. I wish them all the very best in their elevated roles.

Finally, what are my thoughts about the near future? The economic future of India looks good. As does that of your Company. I am positive that with our dedicated management team and deep digital empowerment, we will see even better years ahead.

As always, thank you for your support. We truly appreciate it.

 

Yours sincerely,

Sanjiv Bajaj Chairman

 

© Bajaj Finance Limited