Net-net we should be able to deliver a 25-27% balance sheet growth
Rajiv Jain, MD, Bajaj Finance
May 17, 2019 | Source: Economic Times
The consolidated AUM growth is at 41% year on year: We If you look at full-year growth, we have grown 41% on a full-year basis and in the second half of the year, the growth has been 41%. I would say we are staying focussed on our strategy and continue to execute it. The growth was quite granular. Our B2B,, B2C businesses, rural, SME lending, commercial lending, mortgage lending all grew between 30 plus and 40 plus. So, it was a pretty granular quarter from a growth standpoint and most metrics.
How come a company which is as big as yours is not feeling the pressure of a slowdown? I would say the power of the franchise. The company has 35 million consumers at this point of time or customers on its franchise and our wallet share of those clients remains reasonably small, based on our various assessments that we have on those clients. So the headroom for growth for us as a company remains reasonably solid from a medium-term standpoint.
What would be your guidance for this calendar year and this financial year? Given the harsh external environment at this point in time, I would continue last year’s guidance of a 25%-27% balance sheet growth and a 23%-25% net income growth. We are pretty confident that we should be able to deliver that as a company however harsh the environment gets.
Why are you so confident? How come you are ignoring liquidity crunch for NBFCs: As it is visible now, our asset side strength is always known. We have demonstrated over the last six months or two quarters, the strength of a liability franchise during a very harsh environment for non-banks in general. The companies’ balance sheet on a net basis has grown Rs 18,000 crore. I would say that is what gives us the confidence to ride through the harsh environment that you are reading in the last six months. The environment should ease rather than get more difficult as we get into the balance of the year.
What is your strategy in place to take care of increasing your exposure in housing when other HFCs are suffering? There are two different parts to your earlier question. If there is one category where we have actually gained market share as a result of the liquidity issue in the last six months it has been our captive two-wheeler financing business. We have clearly gained market share there and that is the only line of a business where we have gained market share as a result of the external environment being difficult. Mortgages remain a very long term potential from a retail banking/retail ending standpoint. While our growth rate is strong (43% on a full year basis), our overall market share and mortgages remain very small. Our franchise has very large volatile mortgages. Our franchise has 30% of the countries’ mortgage stock and our market share of that is in low single digits. The opportunity remains very large in mortgages and that is really why we have created separate subsidiary run by an independent CEO and management. We are quite excited. We have to run ALM right it is a long-term large profitable opportunity.
What happens to your spreads in that case? Would you be passing them on or would it give you an uptick in short term? You know ALM is of two size. One is the maturity and another is interest rate risk. In general, our view for the last 12 years has been that do not take risk on both sides. In fact, if you look at it in that context, you actually see that in the last six months, our cost of funds have increased by 10 bps in the full value sheet. During this period, we saw a very difficult environment. During this period, we saw things ease but we remain very steady. We do not want to take either interest rates risk not balance sheet risk or liquidity risk. We take credit risk, operating risk and operational risk and we want to continue to sharpen our pencil on these three areas.
How exactly would FY20 be different for Bajaj Finance from FY19? We continue to sharpen our pencil. Our products suite is largely complete. In geographic coverage, we will continue to grow 15-20% on an ongoing basis. We will continue to sharpen our pencil on risk management, and remain very liquid. We are sitting on close to Rs 7,000 crore of liquidity at this point in time as a company. We hope to ride through this difficult phase in gaining market share and remain unaffected by what is happening externally.
What is your assumption of growth in terms of the slowdown and other variable factors? The company continues to invest in creating new product lines. If you asked me three years ago, I would have said if any consumer durable slows down, I would slow down. We have built out a very large mobile financing business. Mortgages, if you take the last three years prior to the current year, were growing at the rate of 22-23%. As a result of separation of the 100% subsidiary, a separate independent management, the business has grown 43%. Given the breadth of portfolio, breadth of of opportunities and our low market share in each one of the categories that we operate in, the opportunities remain very large. So, something would not work but lots of things would work. Net-net we should be able to deliver a 25-27% balance sheet growth and a 23-25% net income growth