Ladies and gentlemen, good day, and welcome to Bajaj Finance Limited's Q1 FY 2027 Earnings Conference Call hosted by JPMorgan. This event is not for the members of the press. If you are a member of the press, please disconnect and reach out separately. Please note that this call and your questions will be recorded, and the recording will be made available publicly. By participating in the event, you consent to such recording, distribution, and publication. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. I now hand the conference over to Mr. Anuj Singla from JPMorgan. Thank you, and over to you, sir. Thank you, Nirav. Good evening, everyone. This is Anuj Singla from JPMorgan. Thank you very much for joining us for the Bajaj Finance Q1 FY 2027 earnings call. To discuss earnings, I am pleased to welcome Mr. Rajeev Jain, Vice Chairman and Managing Director, and Mr. Sandeep Jain, COO and CFO; and other senior members of the management team. On behalf of JPMorgan, I would like to thank Bajaj Finance management for giving us the opportunity to host them. I now invite Rajeev for his opening remarks, post which we will open the floor for Q&A. With that, over to you, Rajeev. Thank you, Anuj. Thank you, JPMorgan team. My apologies to start four to five minutes late. Unfortunately, Sandeep is not here. There is a bereavement in his family, so he is not here. I was just speaking to him, and I told him this is the first time in 19 years since I know that he was not there for AGM. He is not even the CFO; he is always there assisting the CFO. It is unavoidable. Very good evening. I have the senior management team members. The rest of them are all here. Welcome to BFL Q1 earnings call. The investor deck has been uploaded on our website. I hope you have had chance to go through the same. I will quickly focus on key updates for the quarter and management assessment before Q&A. I expect to take just about 15-odd minutes. Let us jump to panel number five. Excellent quarter, I would say. I have used this word after a long time, I would say probably six, seven quarters. Across all metrics, actually. Volume momentum, new customer addition. We added 5 million new customers. AUM: we added a record INR 37,000 crore of AUM in a quarter. Profit growth was strong at 28%, and ROE crossed 20%, despite the overhang still there on account of Dewan Housing Finance Corporation Ltd. dilution. Pretty good quarter, I would say. ROA came in at 4.7% and ROE at 20.4%. OPEX to NTI came in at 33.1%, marginally higher than last year. It will smoothen out as I cover over the next few panels. Panels six, seven, and eight is what I will quickly cover the key high points. AUM growth was secular, I think, and broad-based, as you can see from the composition summary later in the deck. Gold loan business sustained its strong momentum, grew by 112%. Business is now 4% of AUM. By year-end, we foresee 2,700 to 2,800 branches. All goes well, maybe 3,000 branches and AUM of between INR 29,000 crore and INR 31,000 crore. "All organic" is the only point I would make. Rural consumer finance and urban consumer finance grew by 49% and 38% due to organic volume growth on one hand but also increase in SKU prices. Out of, let's say, 40% average growth, 20% is on account of SKU price increase, and 20% is organic growth. We foresee further risk in terms of SKU prices going up, is what the indication that we are principally getting from OEMs. Let's see. MSME grew by 2%. As you're aware, since last July, we've been pruning business due to risk action that we had taken. It should come back into growth momentum by Q3 or so. NIMS remained steady in Q1. Deposit book came in at INR 68,500 crore. It's now 15% of the balance sheet. OPEX to NTI came in at 30.4%. The marginal increase principally reflects our accelerated investments in gold loan and MFI branch expansion, as well as impact of new labor code. New labor code contributed to 16 basis points. INR 60 crore, but in terms of 10 basis points. 10 basis points impact. Since you count decimals, I'm making the point on decimals. Labor code, gold loan, and MFI branches. Overall, we are confident of delivering a 25-40 basis points improvement for FY 2027 in OPEX to NTI. Full-time employee headcount stood at 73,261. We added 1,650 employees. Excluding gold loan and MFI, the net addition was 811. On credit quality now. Credit performance principally remained quite strong, with loan loss to average AUM in the new frame that we talked about improving to 1.54% versus same time during same period, 1.87%. Both numbers are comparable. As a measure of prudence, we've recognized an additional management and macroeconomic Provision of INR 296 crore during current quarter on account of what's happening geopolitically and the monsoon uncertainty. Of course, monsoon has covered a lot of ground, I would say, in the last 15 odd days. I think we still have some distance to cover on monsoon before we say that the super El Niño did not impact the country. If you exclude this provision because this is a macroeconomic overlay stock provision, loan loss to AUM for the current quarter would have been 1.7%. New stage 2 and stage 3 contribution was 1.87% from 1.94% in the previous quarter. We expect continued improvement at this juncture on this metric over the coming quarters. Vintage performance, which is principally how the portfolio churns across 3M EV, 6M EV, and 9M EV, continues to reflect, I would say, significant and sustained improvement and is now running below our FY 2020, our pre-COVID benchmark. I keep reminding people within the company and otherwise that pre-COVID remains my benchmark. People say our size was smaller. I don't agree with that point. I've made this point many times. Across businesses now, we're looking lower than or equal to our pre-COVID benchmark. We, in general, remain quite optimistic about the credit cost outlook for FY 2027. GNPA and NPA came in in line, 0.96% and 0.39%. Provision coverage is at 60%; we'll continue to hold there structurally. On portfolio credit quality, all businesses are green. You may see a marginal blip in business loans, but I have penciled as green because it's just a denominator effect rather than a numerator effect. The 3M EV, 6M EV, and 9M EV. 3M EV, 6M EV, and some entities of nine, we are beginning to see significant improvement even over FY 2020. FINAI, while if some of you were there on the AGM, I've covered a lot. If you're not there, I'll just cover some points that I principally not covered. We showed five, six different examples in production. If it was a physical one, I would have showed it in as a live demo. On VC, it was difficult to do a live demo. We're doubling down on FINAI transformation. We're expanding the AI unit from 230 to 400 people. We're also adding another 300 people in digital platform unit. It'll principally augment our customer centricity, rapidly accelerate our technology transformation, and strengthen our lowest-risk framework. This year, the digital platform will deliver INR 40,000 crore, INR 45,000 crore, INR 47,000 crore of business. I am targeting the next year; we should be delivering, as Anand is confirming, INR 50,000 crore. I'm targeting INR 100,000 crore volume. Between customer centricity, AI transformation, and tech transformation, and digital transformation, all these three as they come together, that's really what we are aiming to do so that from a push business, we rapidly transition, we continue to transition towards being a pull business. In Q1, on FINAI, 27 bots are now live. As we get deeper and deeper into this, we find more and more opportunities, so it's a continuous transformation frame. On data for AI, 45 million customer interactions were analyzed in the quarter through voice and text AI initiatives, and it resulted in 4 lakh additional offers and delivered INR 517 crore of disbursements just as a result of better insight into the consumer. On product and service discovery, banners, videos, podcasts are enabling faster and more efficient marketing. You will see massive acceleration in this from by November, December. Massive, both from a GEO, SEO, and otherwise. In underwriting processes, we are seeing 20% plus efficiency using AI. On disbursements, AI voice and text bots did INR 2,500 crore. We will do INR 11,000 crore, INR 12,000 crore in the full year this year. On service, AI bots are now handling 71% of our DIY customer service volumes. 17 agentic applications are now got deployed out of 118, and we will rapidly accelerate as we get into the year. I am in panel 13. It is a busy panel. I will just cover two odd points that it gives you texture on our data intelligence, consumer, agentic AI, and custom AI models. The interesting thing is custom AI model, which is on track to go live in Q2. That should help us for our B2B business generate half a million customers that we could not do earlier. It will go live even for the next business will be a B2C business that will go live by October, November. We are beginning to have confidence to build models using AI, which are faster, number one, and gives us insight that our traditional models did not give us. That is on AI, I would say. I would go to subsidiaries. BHFL did its second AGM yesterday. Strong quarter, I would say. Highest ever quarterly AUM addition. Disbursements grew 33%; AUM grew 24%. They continue to remain under pressure on attrition, given the intense competitive activity in the business. Their OPEX to NTIA, which they can control, continues to improve, came in at 19.6% against 21% a year ago. Both their PAT and PBT grew at 23%. ROE improved to 12.5%. Asset quality remained pristine at 29 basis points and NPA at 12 basis points. BFSL, strong AUM growth. Profit growth was softer at 22%. Company is beginning to mature now, and we have plans to continue to scale the business. To summarize, I would just say, and open it up for questions, I would say we began FY 2027 with reasonably strong momentum. It should lead to accelerating growth. Credit costs that are structurally improving. Of course, I would flag geopolitical tensions as an area to continue to watch for. Monsoon, hopefully, should be behind us in 30 days. Continue to maintain strong profitability ratios, which are being reinvested to remain a growth-oriented company. That is from me for the quarter. It is a clean quarter. Should not have questions, but let us do questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead. Good evening, Rajeev, sir. Congratulations on an excellent quarter, like you said. Sir, the question is that the fact that it was an excellent quarter; despite that, we've not seen any change in your assessment for FY 2027. Looking at this kind of growth in the first quarter itself, don't you think this year we can grow at maybe a higher rate? Also drawing from the fact that what you just alluded, business and professional loans shift down from MAB to bring in your sense of knowledge that maybe from third quarter we can start growing it. Don't you think this 22%-24% corridor that is given for AUM growth can maybe see some upside? The other thing is, on credit costs as well, sir. Starting the year, if I exclude the management overlay and the macro provisions that you've created, a credit cost of about 1.3, 1.32 thereabout. There also, do you think, at least the guidance that you've given out on credit cost, you could be at the lower end of that guidance? It's a fair question. It's the only question I didn't cover, so it's fair you're asking this. As they say, one swallow doesn't make a summer. We'll wait for one more quarter. I think we see continued momentum. We are a growth-oriented business. We are seeing opportunities. We got to grow. All engines are firing. For the firm, even MSME should be back. We will revise guidance on Logically, if you look at quarter one, logically, but I would wait for second quarter, whether it's top line, which is AUM or PBT growth, or ROA or ROE. It does seem we are much better than the guidance that we gave in March. Abhijit, I would say to all investors, wait for one more quarter, and if we sustain it, then we know we are in way to revise. That's a fair question. Got it, sir. Just a follow-up on that. You spoke about the ROE and the PBT. There, I'm just trying to understand this quarter; we created about INR 300 crores in management overlay macro provisions. Is the thought process that given that all cylinders are firing, credit cycle is good, utilize it for strengthening the balance sheet, improving the provision covers, and keep ROE in a certain range? Or is the thought that maybe once we are behind some of these things, like you said, monsoons might be behind us in the next one month. We don't know about this West Asia war that is going on. Do you think this will be a more constant phenomenon, this macro overlay, or can we see that if the quarter is actually good, credit costs are actually lower, we see them translating into profits? I would just say, a quarter at a time, Abhijit. Okay. I will make one point, which is important, as I have said, that we will continue to work towards strengthening balance sheet resilience. That's a word. Second word that I use is "bulletproofing balance sheet" because we are truly living in a VUCA world. We do not know where the next crisis coming from. Given our size, scale, complexity, and sheer expectations from various stakeholders, I want to make sure we are one of the most resilient companies in India. That's really what the philosophical point is. Give us one more quarter. We will provide greater clarity on guidance for the year and direction of overlay creation. Thanks, Rajeev sir. Just the last. Yes, sir, you had something. Yes. Nobody will have any other questions. Sir, I just had one last question. This is something we keep discussing a lot. You have this term till, I think, March 28th, if my memory serves me right. While we keep- I lost you, Abhijit. Abhijit? Sir, we lost the line for Abhijit. His line dropped. We move on to the next. A request for the- January 28th. No, I'll answer. We'll make a decision by January 28th. December 27th, January 28th. Which gives us a good 18 months to continue to stay focused on building a resilient business. Thank you. A request to all the participants: kindly limit yourself to one question per participant and rejoin for a follow-up. Next question is from the line of Avinash Singh from Emkay Global. Please go ahead. Hi. Good evening. Thanks for the opportunity. One question in the national credit cost and yield. It has been kind of a very excellent quarter. Even broader, if you see post-COVID, the credit cost has been kind of for the industry, despite the geopolitical turmoil and whether it is a Russia-Ukraine war, now trade war and now this, so you had a turbulence there. For Indian, I would say HDFC, the retail side of it, the credit cost structure had been seeing a decimal improvement. Do you see the same kind of structural improvement, or this is again a cyclical where kind of a mean reversion will happen? If this is structural, do you see that structurally the yields will see a compression because of the credit cost is improving? Not just for you, from broader retail lending side of it. Second, if you can help, the absolute amount, of course, you have given that the bot lead generated disbursement. What would be the share today or this quarter, the share of that in the total disbursement? Thanks. That's fair. Look, I can't speak about the macro. Okay. One, I am not a macro person; I'm a micro person. I've said in the past that risks going wrong is choices we make. It's got nothing to do with macro. In general, leave COVID aside, and in general, risk decisions are the choices we make. We are very clear: the choice we are making is to being the lowest risk company in India. That's a choice that we have made given our size, scale, as I keep repeating, complexity, and growth orientation. Risk doesn't hold the company back; it propels the company forward. I'm very clear about it. Look, as the risk costs are going down, we are accelerating momentum. It's a simple explanation in front. It's right here. Risk was not doing well, we were not doing okay even on growth. Risk starts to do well, growth starts to do okay. One, we are microfocused management. That's one point I would make. The choice that we have made is we want to be the lowest risk company. On the other hand, if I want to make a point on, now, it depends on what its risk thresholds are. Okay? That's the third point I would make. Our thresholds remain quite low. We track bureau data as to what is the industry's credit cost by line of business versus ours. Our risk thresholds are 30%, 35%, 40% of the industry, in general, on 30 days past due and 60 days past due. I track it since COVID. That's our, in general, threshold levels, and that's where we intend to remain. I won't comment on macro. I would still, same point I would repeat, Avinash, that while you see crisis, you say it doesn't lead to that kind of pressure, the pressure that you run with such. You're not seeing us gray, the speed at which we are graying. VUCA world is not making life easier; it's only making life harder. It is the only last point I would make. Thank you. If you could quantify the share of Yeah. Share, yeah. I talked about it, actually, in the AGM. The number for digital contribution, right? Or AI contribution. You're asking AI contribution or digital contribution? Yes, AI contribution. The absolute amount is given, disbursement, but we don't know the Let's say in a given month, if you do INR 4,000-6,000 crore of urban and rural consumer PL, that's around INR 6,000-odd crore; between 20%-22%, 17%-18% is coming from voice bots. Voicebot data put together, that would be 20-odd%. Put together. Go ahead, Anand. The call center business is 20%. Of the call center business, as Anand has confirmed, is 30%. Yeah. Data conversion, everything put together, you assume it is 20%. Just for PL. For gold loans, digital platform is now contributing to 25% of the business. For BL, it's 20 odd%. I just make one point, which probably I didn't make, that you will see continued integration of digital platform infrastructure and AI infrastructure. You will start to see business by business on our asset, AI embeddings emerge. The same asset will continue to morph into having AI embeddings; on one side, I'm talking app and web, and on the other, you will start to see a altogether new consumer AI platform emerge by May, June 2027. That should further accelerate our momentum as well. Thank you very much. Avinash, I'll request you to come back for a follow-up. A request to all the participants: kindly limit yourself to one question per participant. Next question is from the line of Shreya Shivani from Nomura. Please go ahead. Yeah, hi. Thank you for the opportunity. I have a question on the cost of funds. The sequential decline has been quite controlled at 5 basis points or so, and 4Q was already a decent quarter there. If you can help us understand what has been our strategy on how much liquidity we are holding, what will we do for the next three quarters for most of the year, and in what direction could this cost of fund, I know it's a volatile year, but if some idea you can give us around there. Second question is on the FINAI bit. Interesting to hear all the digital and AI integration that you're speaking about. If you can help us understand, how will you make sure that the OPEX on the AI bit is under control given all the concerns around the global rising token cost? How much of open source or SLM models are you using in your FINAI bit? Thank you. Just on cost of funds, principal point which I've made many times in the past is that one is our liability maturity is longer than our asset maturity. Just at a philosophical level, that's first point. That's on a behavioralized basis. I think that's important. Overall cost of funds: the incremental cost of funds has gone up. You would track the fixed income markets. Clearly, one is seeing increase of anywhere between 30, 50 or 60 basis points. Slowly, we do see directionally, West Asia crisis, if it doesn't settle down, it being inflationary. We are watching monsoon. If it doesn't do as well, that could also be inflationary. Again, as I said, those are the two uncertainties that we are principally facing. You've seen stabilization in cost of funds over the last three-odd quarters now. We had gains in between January last year to September. Since September, it's mostly stabilized. You will see slow creep up from here on as well, I would say. Anand, you want to comment? We expect it to remain range-bound at these levels only, and maybe with a slight upward bias, as you pointed out, because of some of the other issues that those are there. Otherwise, we expect it to remain range bound at these levels only, possibly. Thanks, Anand. On second point, sorry, on your second point, we're clear about it that tokens are a cost. I'll let Anand make a point. We built a so-called calculator, which ensures that we know what we are spending on, but I'll let Anand expand on it. Yeah, that's right. One of the baselines that we use is wherever the costs are involved, we make sure the cost of the AI is less than the cost of the human labor getting deployed. If I can talk about voice AI, will be one-third of the human cost today we run our voice model at. Vision AI, as you rightly mentioned, we use lot of open-source technologies, and we use our own context layer or the RAG infrastructure, that's what we call it, which necessarily reads the local AI models rather than going to large language models. The third strategy that we use is we do not go for a full-length large language model. We use FLAS to mini-models, which delivers better outcomes at a lower cost. I think we use these three kinds of strategies to contain the cost. With respect to the new business origination there, we keep cost at times in mind, or rest of the time the business takes care of the cost. I'll just summarize Anand's point. On one side is the use case. Use case must be at one-third, one-fifth the cost. That's one side. Other side is, how do we do technology development to ensure that we are optimizing at best? If OCR for two vision documents can solve the problem, why use AI? That's as simple an example with similar, with 98% accuracy, then there's no fun, and we are not doing this for happiness; we're doing it to generate efficiency. That's the second point. Third point, however, I would just say that as the adoption increases across the firm, as the deployment increases, it's a line to watch for. This is the only third point I would make because once people, whether employees or consumers, start to use it extensively, we would see the benefit that we are clearly counting on, but I would not ignore the point on cost as well. First two done, third we are watching out for. Right. That's useful. Just on that point that you mentioned that we are not going full length on LLMs, you have in-house SLMs, right? Which your engineers have created or not? Just one extra point there. Yeah, that's what I mentioned, the internal RAG infrastructure and the building on the open weights, open source models. Yeah. Got it. Got it. Thank you so much. Thank you. Next question is from the line of Kunal Shah from Citigroup. Please go ahead. Thanks for taking the question. Firstly, again, touching upon the point on margin, this time yield improvement appears to be largely because the growth was led by consumer durables, and we kept excess liquidity as well compared to where we were in fourth quarter. We guided for margin moderation in FY 2027, but are we more comfortable with where the margins stay? Because you mentioned cost of borrowing should be range-bound, and I don't think there would be too much of pressure in terms of the yields currently. How do we look at the margins? Second is, again, on growth. In fact, you indicated the credit quality is much better. In fact, we revised the number of customers which we want to add to the franchise from 15, 17 to almost 18, 20. SKU pricing is going up. Would it be still towards the longer-term guidance of 23-25, or you are more comfortable that we can even cross that looking at how things are panning out for us? The balance sheet transitioning, balance sheet strengthening points: we are already 2% ECL coverage on the overall AUM when our GS2 plus GS3 itself is 2%. Why still so much of balance sheet strengthening is required? We are almost 100% covered as far as GS2 plus GS3 is concerned. One last point in terms of the leverage. On BEC 42, you have indicated last time you evaluated the capital raising when leverage was 4.9, and that's marked yellow. We are currently at 4.9, any plans out there, or we are still comfortable with our capital request here? I'll go in reverse. Kunal, as I said to Abhijit, just give us one more quarter. Second quarter goes well, we'll revise our guidance on some of the metrics that we've given a management assessment on. It's unfair to give a guidance based on one quarter performance. That's one. Two, you are looking at the numerator of my provisions. I'm looking at the denominator, which is that we'll have 630,000-650,000 growth of balance sheet. We want to make sure that we are really, really, really, really solid. This is the only point I would belabor again on. Third, capital raising: we are at 21% at this point in time. We still have to dilute BHFL. We are at 86.7%. We have to go down to 75 while we have time, and we are in no hurry. First port of call most likely will be BHFL dilution, and then if our growth momentum continues to accelerate, then think about capital raise. At this point in time, I do foresee, in general, that our profit growth, in general, from a resilience standpoint, should be faster than the balance sheet growth. That's the best way to build balance sheet resiliency, is the way I think about it. That's just the third point, Kunal, that I would make. Got it. Margins? Margins, give us one more quarter. Plus, minus, as Sandeep is not here, I'm missing him. Whatever Sandeep has guided for or what we've said, I think that now moderation 10, 15 basis points is what we foresee. Give us a quarter. Okay. Got it. Yeah. Thanks. I'm not hesitant. I want to make the point that you may say, "Why are you hesitant? What are you thinking about?" I'm thinking about nothing. Okay. Okay. I can change the guidance today. It's not a problem. It's not lack of confidence. Okay. It's just being conscious of the fact that what we say, we stay with. That's all. Nothing else. That's all. Since this question has been asked second time, I want to make sure it's not lack of confidence. Okay, perfect. Yeah. That conveys. Yeah. That's all. Thanks. Yeah. Thank you very much. Next question is from the line of Piran Engineer from CLSA India. Please go ahead. Yeah. Hi, team. Congratulations on the quarter. You sound much more confident this quarter than at least I've heard in the last 10, 15 quarters, so congrats on that. Last quarter also, I was confident. This time it is double, and we can all sense it. Anyway, thanks for taking my question. Just two things. One is you always share your statistics around consumer leverage. Yeah. Like 3PL number of customers used to be 7%, 8%, and it went to 13%. Where does that stand? That's number one. Yes. Number two, just qualitatively and quantitatively both, can you just talk about the gold loan business? There's just so much competition. Every Tom, Dick, and Harry wants to enter this space. We've built a book of INR 20,000 crores targeting INR 50,000 or whatever. You also mentioned one thing in one of your replies, that digital platforms is 25% of the business. How does that really work? Just more color on the gold loan business would be useful. Thanks. Yeah. One thing as we track bureau data, I think Avinash had asked this question; maybe I should have mentioned it then: that at least we are seeing stabilization. Okay. Leverage levels overall are not going up at a 2% level. Last year, the number looks to be at a 1% level. Okay. The 30 DPD data for the businesses that are prone to higher level of leverage and are looking better. They are flattish actually, as Shruti is confirming. They're not deteriorating anymore. Year-on-year, there is improvement. I still compare versus FY 2020. Year-on-year, there's improvement in, we track BL portfolios, we track PL portfolios, we track professional loan portfolios. Year-on-year, all three, when you take bureau data versus our data, we are seeing improvement across the board on bureau data and, of course, our data. That's one point. Level of leverage versus 2%, the number is looking like 1% for last year increase. 41% is, I think, what the number is looking like. That's second point. Sorry, what is 2%? I didn't understand that. 41% consumer debt to GDP, what we track the number as consumer debt. As a consumer debt. Okay. Yeah. Okay. That number was growing by 2% a year. That number was growing by 2% a year over the last four years. Last year it grew by 1%, is what my latest understanding is. There are two parts I am discussing. One is bureau data. Okay. Bureau data is showing in the unsecured businesses YY improvement, and of course, we are showing improvement. As I made a point to Avinash, my thresholds are 40% of the industry. I must just make that point at a micro level on our behalf. That is one part, which is bureau data. The second part is consumer debt as a percentage of GDP. The number as of March 31st, number is looking to be 40. Just give me one minute, Piran; I will come back on the second point. Coming to gold loan until they fetch that number. On gold loans, look, we are in the business for the last six, seven years. Okay. We took our time cracking it. We principally cracked it in SBO, the business, in 2022 November? 2023 November, virtually, we converted the business into a company within a company. Since then, I would say we have not looked back. Strategy is very simple, Piran. One, this business is a network expansion business. Does not happen through the main branches of the company. Happens through standalone gold loan branches, as we call them. Okay. We have tried; out of 1,700 branches that we have today, only 80 are integrated branches. And they are courtesy legacy prior to 2023. Since then we are very clear; it is network expansion, process excellence, and these are the only two principal points. We are right now adding 110 new branches a month. Okay. Should take us to 2,700, 2,800 branches. 2,800 branches should mean, from a capacity standpoint in our assessment to deliver a peak outcome at maturity, an INR 14 crore per branch number. That is an INR 37,000-INR 38,000 crore capacity. We think in the current year, we will deliver between INR 29,000 to INR 31,000 crore AUM. 25% of the business comes through digital platforms. That's our principle mode. This 25, like an open market customer can also come through the digital platform or it's primarily— Of course. Actually, this is a question that is asked that how many are ETB and how many are NTB on the app? Anand has just stepped out. Yeah. Out of 86 million customers— Just overall would be useful. Yeah. Out of 86 million customers, my sense is ETB, NTB of app is 70%. 70% is ETB and 30% is NTB customers coming for payments business, coming for just downloads as a result of ASO activity. Between 70/30 is the mix. Understood. Just one other bank sort of mentioned that gold loans is cannibalizing their own personal loan business because they offer it at lower rates. Do you see that, not for your business, but in general as a threat to the PL segment where somebody could just easily take a gold loan and No. PL loses popularity? Two things are happening. I think it's a good business for self-employed. 90% of the customers are self-employed. 95%. 95% are self-employed. It's a good business for a self-employed customer. One, it has no friction costs. Entry/exit. Okay. Entry-exit costs are very low. Let me make a point in. Those who have small working capital needs, it's a very good proposition. That's the second point. Third, has much lesser credit filters, while RBI has tightened the requirements as a result of the comprehensive regulations that came out and that went into force from April 1 but still remains low on credit filters. I think that's the. Expanding the funnel rather than. Last point. Okay, sorry. Look, it's right now at INR 4,000; INR 4,100 gold is. At INR 4,500, INR 5,000, it was becoming a business in terms of what one could originate. Okay. One could easily say at $4,500, we track it, let's say, or INR 1.5 lakh rupees per 10 grams; it's a reasonable frame for a customer to raise eight, INR 10 lakhs of working capital. Which was never the case when gold was at $2,000. I think that's a fourth point. You're seeing expansion of the denominator itself, is the only added point. If it comes back to 2,500, the fourth point will go away; rest will remain true. Understood. Okay, yeah. That's useful color. Thanks. Wish you all the best. Thank you very much. Next question is from the line of Abhishek Murarka from HSBC. Please go ahead. Hi, Rajeev and team. Good evening, thanks for taking my question. Hi. Hi. One question is on your comment that you saw a 20% Y-O-Y growth in SKUs in, I think, consumer B2B. Now, one of the components, which is smartphone sales, that is not seeing much growth, right, on a Y-O-Y basis. What are the SKUs which are compensating? If you can give some color on how you got a 20% growth. Something would have substituted for smartphones, et cetera. The phones are also selling, Y-O-Y. Phones are selling. I'll let Manish comment. Hi. Yeah, you are right. If you look at it from an industry point of view, we all look at the same report, which is the Counterpoint Research report. Which basically talks about that the shipments of the smartphones in India have declined by almost 13%-15% in the last quarter. Right. Yeah. We continue to register very good growth in terms of smartphones, in the range of approximately 20%-23%. On top of it is obviously the increase in the ATS. The ATS or the ticket size between. Yeah Last year to this year, if I talk about the month of July, is about close to 30%-33% higher versus last year. There are two points. One contributed by Apple and another contributed by Yeah. It's actually a combination of both. Yeah, exactly. As Rajeev is pointing out that we see a 33%-35% higher increase in ticket size. One is the contribution of Apple to our overall sales increase vis-a-vis last year. Okay for every manufacturer, the ATS itself has also increased from last year to this year. It's a combination of both these two things for us. At an overall level, we see about between a 32%-33% increase in the ticket sales smartphone. On the other appliances and all, the ticket price is actually almost flat. If you basically talk about air conditioners, et cetera, that's also a result of the GST decree that happened. Basically, the air conditioner saw a GST decrease by 10%, which has now got made up because of the increase in commodity prices, et cetera. The air conditioner and the panel prices or the washing machine prices are almost flat versus last year. Primarily, it's just a penetration thing, smartphones. You're sort of bucking the trend in the overall industry just because you're improving penetration. Yes, that's right. The affordability penetration, we continue to mine deeper and deeper into our customer franchise. Therefore, both our franchise and distribution—that combination gives us a higher penetration of the overall attach rates. Since you made this point, Abhishek, I'll just add a dimension. As I've said, I should have probably captured it, that we looked at distribution and we said, as you've seen over the last seven, eight quarters, our branch expansion, non-gold loan and MFIs, either flat or going down, actually. Because when we look at India from the top, we think we are covered. We said, "I don't think, or we do not think it's covered." We're doing bottoms of work. We've done bottoms of work after, I would say, two odd years. We are very clear 4%-5% distribution expansion we'll continue to do. If India's opportunity is real, we've got to continue to do plumbing. We've now identified 160-odd branches so far that we'll open in the current year; it's an ongoing continuous work. We will add 170-250 odd branches every year as a firm, which have material outcomes on a two to three-year forward basis. Understood. By the way, thanks for that color. That was very interesting. Can you comment on this PL competitive intensity in personal loans and also in MSMEs? When do you see disbursement growth picking up? You said AUM starts improving from 3Q. Are you already seeing disbursement growth pick up over there? Some color on these two fronts. Thanks a lot. Competitive intensity is a way of life for every line of business. I am competing, and that's now for three, four years. It's nothing new. We're used to it across every line of business. It's not one competitor; it's five, six competitors. Actually, one has to look at competitors as PSU banks, private banks, non-banks. All three are competing. I'll make an important point. That's where the franchise value frame will come in. That's where, let me connect one last dot, what we are doing on customer centricity, digital transformation, and AI will ensure that our cost of originating a new customer, cost of managing a customer, cost of cross-sell, and cost of credit. As you mine more and more and more, and the example that Manish gave, we just keep doing that. I said in the last quarter that the color of the balance sheet in three odd years could change. I'm going to look lower; OPEX could look lower, credit cost could look lower. I made the point in the fourth quarter. It'll take us two, three years to get there, but that's where the direction will eventually go to at 200 million customers. Franchise. ETB contribution is now 63%. As Manish is saying, confirming, ETB contribution is? Yeah. Is now 63%, and it used to be in the range of close to about 60%. That will lead to lower credit cost only. 3% movement and 16 million loans will lead to lower credit cost. It's given, actually. Sure. Got it. Thank you, Rajeev, and all the best. Thank you. I request all the participants kindly limit yourself to one question per participant. Next question is- I think there is no questions this time. Next question is from none other, Bharat Shah from BCS Capital Ideas. Please go ahead. Hello, Bharat. Good evening. Yeah. Hi. First of all, just a comment. I was so glad to hear your comment that you as an individual leader and Bajaj Finance as a firm is deeply focused on micro rather than take refuge in macros. Our investing world is having too many people who look at macros; I feel very safe when you say that you and the firm are deeply focused on micro. That really gladdened my heart to hear that. Also, in terms of the performance, I think finally the symphony seems to be playing out, with all notes being struck well, and I think the final output is being sweet, and I hope that this is now going to amplify itself. Just one question. Probably you might regard that as being a bit of a greedy question. At 20 and a half ROE and about 4.7% ROE, I feel with the deep AI commitment that we have made, much like very early we were technology savvy and we were digital savvy. In AI, as I see, clearly we have taken a lead in the lending industry. Therefore, that should have deep implications over a period of time in terms of our business velocity, cost, credit quality, as well as OPEX containment. Can we think of, or when do we think of ROE touching about 24% and ROEs going beyond 5%? I'm mindful of the fact that Bajaj Housing Finance business is a low ROA and low ROE and would continue to remain within a certain boundary. Therefore, our Bajaj Finance net standalone is a much better number, but I'm saying consolidated. Do you think it is possible where ROEs will cross 5.25% and little bit of leverage stretch, and we touch closer to 24% ROE? Yeah. Bharat, if I was to maximize, the answer is yes. If I was to take a longer-term sustainable view. Now, taking a longer-term sustainable view, if it happens, nothing like it. That will be true symphony. We'll go for orchestra one day together. Okay. Continuing to reinvest in business, I am interested in long-term sustainability. There are two new lines of business that we are at this juncture, planning to launch by January, February. As I showed in my AGM today, that we continue to grow with India despite all the. We think India opportunity is real. I am not sure now is the time to maximize. Now is the time to continue to. We must remain responsible. Now, can 19, 21 become 2022? Very much possible. With investing. Which means we become more efficient. AI transformation starts to either accelerate top line or decelerate costs. Logically, it should do both, given our sustainability quotient of continuing to invest in building businesses, looking for new opportunities. I would say, instead of 19, 21, can we look at 2022? As the drag reduces of excess capital, that will also have a role to play. You will see improvement in Q2 in ROE because we would have paid dividend. Actually, that number will automatically improve. As I said earlier, we don't foresee raising capital. I hope I'm not trying to avoid your question. I'm not trying to avoid a number. I'm not one of those. I'm just saying. I know that. I'm just saying, you're our well-wisher. You should wish that we are getting to INR 10 lakh crore with the same sustainability and profitability metrics, which is really what I've shown today in AGM. I believe. Even I used to have doubts in my mind that is it possible that same ratios will hold at INR 6 lakh crore? They're holding. Now I have no doubt that even at 10 or 12, they'll hold. We have crossed that point where we should even evaluate that higher scale would lead to dilution. I hope I have tried to. No, absolutely. My question was not about immediacy. I was talking of a runway of three to four years where 20.5 touching, hopefully half a percent, three-quarters of a percent every year to say somewhere around 23%-24% over three to four-year timeframe. Let me connect this to strategy, Bharat bhai, for a moment. I think it's important as a point. We deliver customer centricity and people think I am making a good-to-make point. If my cost of originating customers goes down, it will dilute NIM marginally because I'm doing more with my customer at INR 200 million franchise, which nobody comes near, and we are very confident getting there. It'll bring down the cost of operations, and it'll bring down the cost of credit. That customer centricity is central to the strategy of us delivering that frame. Whether the number is 22 or whatever, that I don't know. It is so strategic; I spend virtually three-fourth of a day in a month on customer centricity. We've created a dedicated unit in the company. We are thinking of new products in the company. For the first time, I can't think of lending companies around the world who would have design thinking units. We've set up 10 design thinking units in the company because, as we're thinking of customer centricity, we are saying products the way they look today may not look that way tomorrow. We are investing in areas that are not logical, that have not been normal to us as well. Investing in customer centricity units, investing in design thinking units. These are all longer-term initiatives, let me tell you. We're doing primary research in that unit. We're doing secondary research. I've worked for 33 years; we've never done research. It doesn't come normally to bankers to do research. We are shaping the company, Bharat bhai, and to all investors, I would say, in a little different way. It's a reasonable work in progress. Whether AI transformation one side, design thinking on the other, customer centricity on the other, all this comes together to symphony. That's what we are working for. I can tell you my efforts and my actions, and number is an outcome. Thank you very much. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to the management for closing comments. Good night. Thank you so much. Thank you. Thank you for all your questions. Thank you so much. Good night. Thank you very much. On behalf of JP Morgan, that concludes this conference. Thank you all for joining us. You may now disconnect your lines. Thank you