In FY2018, new loans booked exceeded 15 million in numbers.
BFL has undoubtedly emerged as one of the leading diversified non-banking financial companies of India. I am, as you must also be, proud of its achievements — especially its ability to outperform itself quarter after quarter and year after year to post excellent results, and maintain some of the most robust operations and business practices in the Country.
Last year, I had written, “I have no doubts that your Company will perform at least as well in FY2018 as it has in FY2017.” It has. Now let me raise the bar. We, the Shareholders, want BFL to perform even better in FY2019. Because we know that it can.
A listed Company, Bajaj Finance Ltd. (‘BFL’, ‘Bajaj Finance’ or ‘the Company’) is a subsidiary of Bajaj Finserv Ltd. and is engaged in the business of lending. It is a deposit taking Non-Banking Financial Company (NBFC-D) registered with the Reserve Bank of India (RBI), and has a diversified lending portfolio across retail, SMEs and commercial customers. BFL also operates through a 100% subsidiary called Bajaj Housing Finance Ltd. (‘BHFL’ or ‘Bajaj Housing’) which is registered with National Housing Bank as a Housing Finance Company (HFC). BHFL started its operations in financial year 2017-18 (FY2018), and all incremental home loans-cum-mortgage business is now done through BHFL.
The CSO estimates real GDP growth for FY2018 at 6.6%, which is 0.5% less than the 7.1% growth witnessed in FY2017. Despite this lower growth forecast, there is a positive trend relating to investments. There seems to have been a relatively sharp growth in gross fixed capital formation (GFCF). Consequently, after falling for several years, the share of GFCF to GDP has finally risen to 31.4% for FY2018. Although this is still less than what it needed to sustain a steady-state GDP growth of 7.5% to 8%, reversal of the downward trend should augur well for the economy. But that remains to be seen.
BFL enjoyed yet another strong year of performance aided by a diversified product mix, robust volume growth, prudent operating costs and effective risk management. With assets under management (AUM) of H 80,444 crore on standalone basis and H 84,033 on consolidated basis, BFL has emerged as one of the leading diversified NBFCs in the country today.
BFL focuses on six broad categories: (i) Consumer Lending, (ii) SME Lending, (iii) Commercial Lending, (iv) Rural Lending, (v) Deposits, and (vi) Partnerships and Services.
BFL continued to be the dominant consumer durables and digital products lender in India. In FY2018, It financed 9.9 million purchases against 7.2 million in the previous year, a growth of 38%; Its unique Existing Member Identification (EMI) card, with 12.9 million cards in operation, enables customers to avail instant finance after the first purchase.
SME lending offers secured and unsecured loans to its customers. Till January 2018, secured lending was being done by BFL through three product offerings: Loan Against Property, Lease Rental Discounting and Home Loans. From February 2018 incremental loans sourcing under these three categories as well as Developer Financing are being done through BHFL.
Rural business caters to needs of consumer and MSME customers in rural markets. In FY2018, BFL expanded its rural footprint by setting up branches in two new states and penetrating deeper in the existing states. At the end of FY2018, it was present in 602 locations across 10 states in India. The business had a consolidated AUM of 6,131 crore as on 31 March 2018 compared to 3,072 crore a year earlier, representing a growth of 100%.
Commercial lending comprises six products: Loan Against Securities, Financial Institution Group lending, Warehouse Receipt Financing, Working and Growth Capital Financing for the auto component business, Light Engineering and speciality chemical industry verticals. Commercial lending business closed FY2018 with an AUM of H 12,375 crore, representing a growth of 57% over FY2017.
As at the end of FY2018, BFL had a deposit book of H 7,569 crore, which was a growth of 83% over the end of FY2017. The deposit book’s contribution to BFL’s overall borrowing was 12%. Investments made to expand retail and HNI deposits and online distribution channel partnership with reputed institutional players have helped to rapidly grow the deposits balance sheet in FY2018.
BFL entered into an strategic partnership with One MobiKwik Systems Pvt. Ltd. (‘MobiKwik’) on 8 August 2017, and invested approximately Rs. 225 crore in the equity shares and cumulative compulsorily convertible preference shares (CCCPS) of MobiKwik. Based on the capital structure of Mobikwik as on the date of investment, the Company will hold approximately 12.38% of equity in Mobikwik on a fully diluted basis post conversion of CCCPS. This partnership should enable BFL to provide both debit and credit engagement tools for its existing customers. As a first step, the Company has launched a digitised EMI card for its existing and new customers in October 2017.