Bajaj Finance Ltd

NSE:BAJFINANCE

Earnings Call Transcript 2023-Q1

[Sameer Bhise, analyst]

Good morning, everyone, and welcome to the conference call of Bajaj Finance Limited 1Q FY '23 Earnings. First of all, I would like to thank the management of Bajaj Finance Limited for giving us the opportunity to host the call.

Without much ado, I would like to hand over the floor to Mr. Rajeev Jain, MD and CEO, Bajaj Finance Limited; Mr. Sandeep Jain, our CFO; and the entire leadership team of Bajaj Finance and its subsidiaries is also with us on this call. Over to you, Rajeev sir. Thank you.

[Rajeev Jain, executive]

Thank you, Sameer. Good evening, good morning, or good afternoon, depending on which part of geography you're in. I'll take you through the quarterly results. From the investor -- the presentation is on the Investors section of the website, and I'll be referring to that. Let's jump right in. Let's go to Panel 4 quickly. Principally, I would say, an excellent quarter. The word excellent, I'm using after a long time. Last 2 years, we had -- we've gotten to good. We finally got into excellent across balance sheet growth, portfolio quality and profitability. Highest ever new customer acquisition in Q1. Overall, strong -- very strong start to the fiscal, I would say. And as our previous Vice-Chairman used to say, that a good first quarter -- if your first quarter is good, then in general, your year is good. And we saw -- we've seen that happen over time over the last 15 years.

In general, back to all long-term guidance metrics for the last 3 quarters in a row now. On track to go fully digital across all products and services on app by January '23, across all products and services and on web across all products and services by March '23. Core AUM came in at INR 204,000 crores. Core difference being IPO financing, which still used to sit till third quarter depending on the quarter ending. Core AUM came in at INR 204,000 crores. It's a 31% year-on-year growth. OpEx to NII came in at 35.9%. PAT came in at below INR 2,600 crores to INR 2,596 crores. ROE annualized 23% and net NPA came in at 51% (sic) [ 0.51% ].

Let me just take you through some of the highlights. Let's go to Panel 5. As I said, core AUM, just a tad below INR 12,000 crore. Growth quarterly run rate, that principally gives us anywhere between INR 50,000 crores to INR 54,000 crores of net balance sheet growth in the current year is really how we are looking at it. AUM growth was secular across all lines of business. I'll cover that. Completed 7.42 million loans. It's just about the highest ever that we've ever done as a company, the last was 7.6 million. But at that point in time, we used to have wallet loans and REMI loans, which we -- wallets loans we stopped in 2020. REMI loans, we curtailed to less than 25% of the volumes. So if I knock that off, it's the highest ever loans that we have done in a quarter as a company. B2B disbursements were up 83% year-on-year. Year-on-year numbers are not that comparable given that last year was delta, but still refer to them on and off. Overall, INR 16,000 crores of disbursements. That gives us a INR 60,000 crores, INR 64,000 crores of run rate on overall B2B disbursements for the year.

We launched our noncaptive 2-wheeler financing business on 6th of July, first month of -- first month, we should land up doing 3,000, 3,500 2-wheeler loans in the first month of loan, comes with a 2-wheeler marketplace at [ stat ] level comes with preapproved limits of 30 million of our customers out of 33 million EMI card customers, we've preapproved 30 million customers for noncaptive 2-wheeler and full point-of-sale infrastructure that we built over the last 15 years in the B2B space. We added 2.73 million new customers to the franchise, pretty comfortable with 9 million to 10 million new customer addition on a full year basis. Overall, franchise came in at 60 million. And the cross-sell franchise, which we're willing to do multiple products, cross-sell to is 30 -- just a tad below 35 million. Added 82 new locations from an omnipresence standpoint. Total geographic presence, now 3,700 locations.

Competitive intensity continues to remain elevated across products. We continue to focus on margin rather than growth. Margin first, growth second. We've so far managed to deliver both. Started to increase pricing across all the products gradually from June '22. We took first action in June, we're taking second action in August and so on and so forth. Cost of funds came in at 6.64% given the strong ALM that we manage the overall strong treasury management. The impact of recent interest rate hikes on the overall cost of funds in the current fiscal will only be gradual.

So even if you see sequentially -- I think sequentially, we marginally dropped. I don't recall right now, but we've dropped sequentially, 7 basis points we dropped. So overall, I think we managed treasury quite well. So -- and as you plot over the next 3 quarters and do simulation in sensitivity, we are reasonably comfortably placed here. Deposits book, we are -- we think it's a great time to gather deposits. So we continue to grow that rapidly. Net growth was, in a way, sequentially 10% -- 10-odd percent, 20% of overall borrowings. We did 4 deposit rate -- 4 hikes we did. Sequentially, we increased deposit rates were [indiscernible] 70 basis points depending on the maturity. We are accelerating retail deposits. We think it's a great time, and we think in a 3-year horizon, we can take the base to 25% of our overall liability profile.

OpEx to NIM, 35.9%. We continue to invest in teams and technology. Given the deep investments that we are making in our omnichannel for omnipresence strategy, which is geo, app, web, and payments. We expect OpEx to NIM to continue to remain between 35% and 36% for FY '23. Hopefully, we should start to see some tapering as we exit the year. Loan losses came in good, INR 755 crores, included a INR 190 crore impact on full provision of -- full provision and write-off of a commercial account. So adjusted for that, the -- and management overly came in at INR 1,000 crores. So INR 60 crores in a way was consumed from the management overlay towards this account and INR 130 crores was a onetime provision in Q1. So the flow basis loan losses and provisions were actually INR [ 625 ] crores. So that's really the run rate that as we are doing -- as you're looking at the risk metrics across portfolios is what we're seeing.

GNPA and NNPA came in at historic lows at 1.25 and [ 51 ] basis points. Now this number will, as it seems at this point in time, will continue to trend downwards for the next 2-odd quarters. Stage 2 remained -- came down by INR 300-odd crores. Stage 3 came down by INR 600-odd crores. 10 portfolios are green, 1 is yellow. This is the same view even in Q4. PAT, while it grew 159%, as I said, year-on-year metrics are not really comparable, but INR 2,596 crores is the PAT for the quarter. Capital adequacy quite strong at 26%. Tier 2 capital -- Tier 1 capital was 23.84%. Mind you, this includes INR 2,500 crores of capital infusion that we did in BHFL on 7th of April. Total headcount stood at just a tad below 38,000 people.

Bajaj Housing Finance, we now started to provide a little more texture and color on Bajaj Housing Finance. AUM was up 40% at INR 57,500 crores. Home loan AUM grew 41%, loan against property grew 33%, LRD grew 43%, DF grew 68%. The mix, however, as you see on point number 25 is 63% is home loan, 11% is LAP, 13% is LRD, DF is 4% and rural is 3%. So read the growth in the context of the portfolio composition. Approvals grew 127%, came in at INR 16,000 crores. Disbursements grew 118%, came in at INR 9,255 crores. Geographic footprint was 158 locations. Overall, a pretty strong position. The company delivered a -- BHFL delivered a post-tax of INR 316 crores, a growth of 96%. OpEx to NII came in at 26.8%. Loan losses and provisions were only INR 7 crores for the quarter, and we are very well covered there. Gross NPA, net NPA came in at 27 basis points and 11 basis.

Overall Stage 2 for BHFL was INR 492 crores, came down, as you can see, sequentially, by INR 110 crores. Stage 3 came down by INR 12-odd crores. Total headcount in that company stood at 3,567 people. Bajaj Financial Securities, 36,000 customers we added. We are -- as I had articulated in Q3 and Q4, we are repivoting towards customer who uses their account rather than customers. And just for the sake of it, we have sufficient number of customers. We have 60 million customers. We don't need customers. We need active customers. So we are repivoting total franchise stood at 370,000-odd. Margin trade financing book is now INR 740-odd crores, and made a profit. So they are new kid on the block to -- and as I said in the AGM, just now that next year should be year that should belong to them. The last year anyway and in the current would belong to BHFL as a subsidiary. And by next year, BHFL should also be ready.

Very quickly, omnipresence, we have now changed the format. I'm providing an update. I'm not going to spend too much time on it. This is more for -- from a disclosure standpoint is where we are headed. But more importantly, we're now started to provide data. And we'll keep adding on this data as we go along in the balance of the year.

So more products will get added, in the process more metrics will get added. But just on the panel 10, what is relevant and important is the Phase 1 platform is live. As you're aware, Phase 2 will have 3 sprints. We last provided update on this in November. This is the second update I'm providing. I'll provide a final update in January quarter. By the time you would a gone live with 2 major sprints, which is the 31st August sprint and November -- 15 November sprint, a very small residual less than 10% work would be left on Sprint 3, which is on 31st January. Actually, by then, even that would have -- that would be close to going live. So that is really when we'll go the next update. 3, 4, 5 are some texture and color on how the UI and UX will look as the new phase come in. Principally 3, 4, 5 means, it's a significant expansion in the way the asset is being organized.

Payments. Phase 1 features are live, as you're aware. We gave some -- I gave some texture and color even the AGM's. Just now, we are continued to move along. Sprint 2 on payments will go live by 15 November, it's a big sprint. It will allow a whole lot more features and much better experience on UPI registration and so on and so forth. On web platform, 2 phases. Phase 1 will go live on 1st of October and Phase 2 on 1st of March. As I said in AGM that fundamentally, by March 23, across all our products and services, products that we manufacture and products that we distribute, end-to-end, journey-to-journey, we would have actually fully gone digital.

So our digital transformation, as I would like to call it, would have actually completed by 1st of January '23 or if I say, including web equal -- app equal to web by March '23. So we'll provide the next update on this by January. The reason I'm also saying we'll not provide update after that because as I said, that this is a means to [indiscernible]. This is the way we will conduct business from here on or we are conducting business. So if there's anything -- if there's a big change in UI/UX, if there's a full refresh that we're doing, that's what you provide update, Otherwise, we'll -- after January, this is the way we run business. What I want to spend 2, 3 minutes on is in this panel, which is Panel #12, we now start to provide some data, on our omnipresence strategy. So I'll go a little slowly, so that we're all on the same page, just to provide the format of it.

Locations, you are aware. Gold loan branches now, we have 155 just to omnipresence, we'll have 232 stand-alone gold loan branches by end of the year. These are -- so we have 650 branches from where we offer gold loans, but 155 are stand-alone branches. They will get another -- we'll do another 75 more branches in the current balance of the fiscal to get to 232 stand-alone branches. On app metrics, so there are 4 blocks between Panel 12 and 13, there are app metrics, there are app payment metrics, there are app business metrics, there are marketplace metrics and digital EMI card metrics. This is really how we'll provide data. What we will keep expanding the scope of these lines or rows as Phase 2 get delivered and has more data, we feel has reached the level of maturity for us to start to share this. And when I say maturity, I mean, stability of the data rather than anything else.

Let's just quickly cover app metrics. Downloads in the quarter, we had 11 million downloads. We forecast that we'll 53 million to 55 million downloads of the new app platform by the end of the year. Net installs are 23 million now, we'll end the year with between 35 million and 38 million. In-app programs of 62, we'll have 100 plus in-app programs by end of the year. In terms of wallet accounts, we added 9 million. We expect that we'll have 18.5 million cumulative wallet accounts. UPI handles, we forecast 12 million UPI handles. We added 3.6 million -- we have 3.6 million UPI handles as of now. We had 2 million BillPay transactions. We forecasted on a full year basis, we'll have 12-odd million. QR deployment has gone live for P2M, 18,000 we think we'll have 100,000. The P2P QR will go live in another 1 month time. That will be a separate line, just to give you a texture on what I mean by -- how more lines will get [indiscernible].

Now the app business metrics. As I said, technologies means to an end. This app was never supposed to be anything else, but help us do more business, help us grow our AUM, help us eventually reduce our cost, help us manage credit better, risk better.

So digital EMI card acquisition, overall came in at 522,000, but from the app came in at 70,000. Now overall, we expect 300,000 to 325,000 digital EMI cards acquisition through the app. Personal loan disbursements of INR 2,109 crores in the quarter. We expect full year to be between 9,000 and 10,000. Credit cards are 30,000, we expect 200,000 on a full year basis. Flexi loan transactions were 866,000 tractions pay in and pay out both. We expect between 3.6 million to 3.8 million. DMS receipts, clients came and paid $644,000 in the quarter. We expect on a full year basis 3 million to 3.2 million.

Bajaj Mall visits, 32 million in the quarter, expect 140 million to 150 million visits to Bajaj Mall -- to Bajaj mall loans and so on and so forth. So I mean, I thought I'll just provide a drift to the frame. And as I said, we'll keep adding more rows, may not be columns as we continue to provide more disclosure.

Let me just jump right on to Panel 46 now. So that I can leave time for questions. This is the consolidated AUM. As you can see what is relevant is on the right-hand side, which is what was the AUM composition 30 June '21 and composition '22. 7% was auto finance, is now down to 5%. Rest of the lines are all remaining plus/minus 7, 8, 20, 21, 2, 2, 8, 8, 13, 13, 4, 5, 2, 0. Of course, IPO financing is going away. That's the conversation on core AUM. Commercial lending, 6, 6 and 31, 32. Product mix remaining same, largely, as you can see, other than auto finance business. This is the provisioning coverage. Overall, gross NPA, net NPA sequentially continues to go down, 1.73% in December quarter, down to 1.6 and it's at 1.25. Net NPA down from 78 basis points to 68 to 51 basis points.

This is consolidated ECL provisioning. We are pretty strongly placed there. Just on the last portfolio quality section. As I said, out of 11 businesses, 10 are green, better than pre-COVID, I would say, at this point in time, in most of them. And while 2-wheeler looks to be better than pre-COVID. As you can see in February, it was 86%. But even in February '20, we had marked this as yellow because 86% is not what the current portfolio ought to be. It used to be 89%, 90%. So as and when it gets back to 89% and 90%, that's when we will principally make this green. So that's really the quarter. And happy to take questions.

[Operator]

[Operator Instructions] The first question is from the line of Dhaval from DSP.

[Dhaval Gada, analyst]

Rajeev, congrats on good set of numbers. I had 2 questions. First one was related to the cross-sell rate. So I've been seeing that it's been improving in the last few quarters. But if you look at adjusted for the wallet loans that we used to offer pre-COVID and also the REMI business, I know you scaled it down. But even adjusted for that, it used to be [indiscernible] 7% pre-COVID. So still the cross-sell rates are not back yet. And there is significant scope for normalization. So I just wanted to understand when do you see this sort of playing through? And also, is it a value proposition issue or a risk [ filter ] issue? If you could give us some more color around that, that would be useful. That's the first question. The second question...

[Sandeep Jain, executive]

What do you mean by cross-sell ratio of 7% because we are not able to correlate.

[Dhaval Gada, analyst]

No, no. So what I was referring to, if you look at wallet loans and REMI, they used contribute about 7% of loan bookings pre-COVID. Today, if you scale them down to 0 as well, still the current cross-sell rate is materially lower than pre-COVID run rate. So because the franchise has grown, the loan bookings adjusted for them are still not grown in the same proportion. So that's where I was coming from that. When do you expect this normalization? And is it a value proposition or a risk [ filter ] or any other factor that is driving this behavior?

And the second question was related to -- we've seen on NII to OpEx, so cost to income basically. So we've seen conversion rates on the [indiscernible] were improving. We've seen share of digital EMI cards increasing. So all the metrics seem to be operating in the right direction. But just I wanted to understand as we complete our transformation journey at the end of '23, what could be a realistic expectation of OpEx to NII maybe in FY '24 or beyond, if you could give some sort of perspective around that, that would be useful.

[Sandeep Jain, executive]

Yes. So on the cross-sell rate, Dhaval, in fact, if you were to adjust the wallet loan and REMI loan the cross-sell rate is up versus where you were, let's say, in quarter 3 of FY '20, which was a pre-pandemic period that we are referring to. So maybe again, we [indiscernible] but we added, I think, 2.5 million customers in that year -- in that quarter. In the current quarter, we added 2.74 million customers -- new customers. And a number of loans are by and large, same. So and if I were to remove REMI and wallet that we used to do earlier, which would get counted as cross-sell, the ratio has actually improved. But on the OpEx to NIM Dhaval, I think we had guided even in the last quarter given that we continue to invest in technology, teams and resourcing for propagating the omnipresence business model. The OpEx to NIM for the current year may remain elevated. 35.5% to 36% in the corridor that we are looking at from a full year perspective. Quarter 1,we have seen the [indiscernible] . I have reason to believe that quarter 2 could be flattish and then after that, you will start to see some gradual reduction.

[Rajeev Jain, executive]

Separately, I mean, because he's asking actually more so '24. Look, fundamentally, we do believe that we -- and we have taken that decision that we've reached the level of inflection point on investments and mainly our investments is people and technology. So we actually taken a pause for -- from 1st of July till let's say, 31st of December at a design level to not add incremental resourcing on additional investments. So -- because we also want to see the investments start to pay off. [ Plus ] rising interest rate environment plus expected demand slowdown in Q3. So between both these areas, one, being prudent about make an investment pause, make an investment pause from approach standpoint; and two, given headwinds on potential demand slowdown in third quarter, rising interest rate. So it's -- that's where we are, and Sandeep guided on where we think it will go in '23, '24. We're also, let me be honest with you, still trying to find the sweet spot. Because the fact is, it's a significant investment committed by us to build out both the app and web. The fact is, will operating leverage emerge? The answer is yes. As we start to see it, I think we can guide better rather than make a point. Lastly, [ 35 36 ] with geography, app, web and payments, all firing, it's a great number. That's the [indiscernible] point, but I'm not the judge for that, you are, is the point I would make.

[Operator]

Next question is from the line of Bharat Shah from ASK Investment Managers.

[Bharat Shah, analyst]

Rajeev, congratulations. If I have to put it graphically, soon as the pandemic clouds have receded, Bajaj Finance has come out blazing. So delighted to see this results that one has been waiting for. When I look at the asset quality, there seems to be a dramatic improvement on GNPA. So is that actual improvement or write-offs have occurred?

[Rajeev Jain, executive]

Actually write-off for the quarter are not -- of course, we have written off the commercial account. That's one part of the conversation. But actually, write-offs if I take the last 3 quarters is flattish. So other than the INR 390 crore account that we've written off. There is structurally significant improvement in asset quality Bharat bhai or at a design level, I just said that even in AGM that if I take -- of course, leave '20/'21 and '21/'22 aside, '19/'20 was a slow year, we ourselves, if I take till February, [ went 260-odd ] basis points of average credit cost to AUM. '18 -- because it was a slow year in general for the economy well. '18/'19 is the right number to benchmark. We'll probably look closer to '18/'19 at this point in time, 4 months of the year are over, maybe even lower if the current momentum was to continue. So there is marked improvement is what I would say.

[Bharat Shah, analyst]

That's delightful. And -- given that our philosophical stance always there's been trinity of superior growth, superior capital efficiency and controlled super [indiscernible] quality. All angles seem to be kind of now firing appropriately as soon as challenges kind of receded. So given the fact that people, technology, products, medium through which we enhance our footprint with the distribution and products and all that. What would you say will be the most important priorities from the next year onwards. So what is it that you will be watching most closely?

[Rajeev Jain, executive]

So one, I'll make a philosophical point. I said this is AGM that our business of retail is about everyday improvement. We cannot let that guide down in all dimensions of our business. I think that's an important point I must make. I think there's remains tremendous opportunity in all our lines of business from a growth standpoint. Other than [indiscernible] if I may say so, in this finance business, because we are very, very dominant there. And more people are getting into the business. Every new incremental guy, whatever he does to himself, but does keep away something from our end. So other than that, I think the growth opportunities in every line of business remains structurally, from a medium-term standpoint, quite large. And we are investing in each one of the areas. I think as we get to next year, Atul Jain is here with me as the Managing Director of BHFL, I think mortgage will fire much more as they complete their fifth year of transformation will fire more BFSL should start to fire more. So we -- as a parent, BFL, should continue to fire more. So overall, we need a cleaner runway. Country needs, I would say, for a little while, a cleaner runway. I think 2 years have been very, very hard. So I'm not seeing -- of course, is interest rate an issue, is demand potential demand slowdown an issue. As I tell people that we are used to interest rates going up and down as a country. I mean we see over 8 quarters, interest rates go up over the last 15 years, up by 200, 225 basis points, then they go down 200 to 225 basis points and so on and so forth. So we need not be as worried about interest rate rises and going down than as the rest. We are used to inflation. So I would say we are reasonably well placed as a nation, I would say, or as a company at a micro level. So -- and remain at it, that's the important dimension, not let the guard down.

[Bharat Shah, analyst]

Fantastic. So -- just last point, as we run through our elevated investment in people, technology, creating other platforms to satisfy our ambition and our kind of inspiration, it will be fair to say now that things are indeed beginning to look kind of normal in most respects. The next year should be once again a defining year, the way Bajaj Finance picture has always been. Even though pandemic has been a rude interruption, but I think we are [indiscernible] beautifully. And therefore, now we hold preparations either being clear, '24 should be a year of firing, I hope on all cylinders.

[Rajeev Jain, executive]

I think so. We will go fully digital. We would have -- I keep telling people that digital is like magic. Until you get it 0 once we get it as 1. So it's a [ 0 1 ]. And we are committed to get it. We, as a management, are behind it. In some, we would have found 1. In some, we would still be 0. It's a matter of time before we will find it. And as you find it, given the large franchise and the large product that we bring to the table, the entire product suite [ is in ] table should be a stronger year. I hope so. We'll take quarter time at this point, Bharat bhai at this point in time. And a year at a time, we deliver the next 3 quarters a stronger exit and a stronger entry into next year should make us stronger.

[Operator]

The next question is from the line of Ashish Sharma from ENAM Asset Management.

[Ashish Sharma, analyst]

Congratulations on a great set of numbers, Rajeev. A couple of questions. One on the fee income side. Is there any -- I mean, if the bank that we have tied up -- I mean RBL Bank if there is a slowdown in terms of card additions, any impact on the fee income side, Rajeev? First question is that.

And second would be on the gold loan. So we -- you mentioned that we are opening stand-alone gold loan branches. So just from a perspective that we've seen that gold loan yields have compressed for the system. Does the gold loan product still makes sense? I mean, I'm just trying to understand, given that we have owned stand-alone branches. So some color on that would be helpful, Rajeev.

[Rajeev Jain, executive]

Sandeep, please. RBL, yes. So I mean, we have a [ deep ] strategic partnership with them. We -- in partnerships, you have ups and downs. We are not a partnership for up. We are a partnership for up and down. We remain committed to continue to partner with them. In a given year, they will be slow for the last -- prior to that, for 4 years, they were strong. I think that's really the nature of partnership is, parallelly as agreed with them and given our ambition, we've kicked off the DBS partnership, that's gone live. We are now booking between 9,000 and 10,000 accounts. We think we'll exit with 30,000, 40,000 accounts -- between 30,000 and 40,000 accounts per month with DBS partnership as well. So that the heads that we wanted and because we know in partnerships things can at times be up and down. I think this is really where having multiple partnership structures deep and strategic albeit help. So -- and I'm hopeful with the changes in RBL, and they have said whatever I've seen in public domain that they want to grow the microfinance or the card business. I'm hoping -- and we are well positioned to assist them meet that objective, and in the process, help us grow as well. Parallelly, DBS partnership should grow. I think that's really what -- gold loan, it's an interesting business. We've been at it for a while. We have come to a conclusion that as an adjunct frame, which means in the branch doing business, only [indiscernible] takes you that far. So we started a test with "stand-alone" gold loan branches, the way a gold loan company would do, and we've seen significant results. We've seen that it exactly works out then for a leading gold loan player. So that's really what we are chasing. Behind it, we put the power of digital. I mean one of the metrics that sometime in Q3 or Q2, we start to release is how much business is coming digitally from a conversion standpoint, from our franchise of gold loan just to give you texture. It's one of the metrics sometime in Q3 or Q4 we would start to release. We are quite satisfied with the return profile. It's not dilutive to Bajaj Finance shareholders at all or to us as a company. And there's opportunity to improve that profile as we go along. So only thing that business did very well in FY '21, then '22 gold loan rates came down and went through a shock, I would say, because it's commodity linked right now, it's again looking up. So -- but overall, we are quite positive and optimistic about the business. And we think in a 2- to 3-year horizon, this could be a reasonably large business.

[Ashish Sharma, analyst]

Great. That's helpful, Rajeev. Just lastly, on BHFL. I mean the profitability was quite strong. I mean, are there any one-offs? Or I mean, because ROA and ROE metrics looked very good. I mean, is this a sustainable run rate? Or I mean, are there any sort of one-offs...

[Rajeev Jain, executive]

Stand-alone, there is. Unconsolidated, is not, but...

[Sandeep Jain, executive]

Yes, BHFL has grown reasonably well even in terms of balance sheet they have grown at 40% versus last year. In the current quarter, they have done some assignment transaction, which results in upfront [indiscernible] recognition. But on a consolidated basis, that has knocked off. So there's a onetime sitting in BHFL financials; but on a consolidated basis, there is none. Secondly, as the interest rate starts to go up, as you would have seen with other housing finance companies also, the spread for next 2, 3 quarters may look elevated. That's also a benefit that's sitting in the quarterly results.

[Rajeev Jain, executive]

Because of a better treasury management that pass-through on the liability side is slower because of our long-term locking.

[Ashish Sharma, analyst]

Sure. That's helpful. And congratulations, first of all, and all the best, Rajeev, for the very bold guidance you've given at the AGM.

[Rajeev Jain, executive]

I thought INR 2 lakh crore is a good time to give a guidance.

[Ashish Sharma, analyst]

Absolutely, absolutely.

[Rajeev Jain, executive]

So we don't give guidance generally. I think INR 2 lakh crore is the right time to give guidance. We'll give the next guidance when we achieve the guidance that [indiscernible] today.

[Operator]

Next question is from the line of Kunal Shah from ICICI Securities.

[Kunal Shah, analyst]

Rajeev and Sandeep, and team congratulations. So firstly, with respect to the housing finance business, in fact, the fee income, which is there, maybe what would have led to that? I don't know if you have explained it earlier, but I missed the part of the call. So -- and it seems like we are growing more of LRD and construction finance out there. So any particular proportion wherein we would actually want to take that, in fact, ticket size is also rising on the LRD side. So how are we particularly seeing this segment?

[Sandeep Jain, executive]

Sorry, sorry, sorry. I'm sorry. We lost you in between.

[Kunal Shah, analyst]

No, I was just saying that...

[Rajeev Jain, executive]

Particularly 2 point that you're making.

[Kunal Shah, analyst]

No. So the overall LRD and developer finance book, so LRD also that the size is rising, now developer finance is almost 7% of the book. And all put together, it is like LRD plus developer finance is 20% now. So any particular proportion wherein we would want to take that up to over a period because I think that's growing at a much faster pace within the overall book.

[Rajeev Jain, executive]

The risk profile is structurally different. I think that's a fundamental point. I would like to grow LRD more. I mean you've done that business for 12 years, even through pandemic where offices were all -- I mean, we've all lived through the pandemic. LRD is a very different risk profile than [indiscernible]. So read them -- don't read them as commercial exposures. They are commercial, of course, they are, but they are -- I would like to do more LRD than I would like to do, let's say, LAP. Or I would like to do more LRD than I would like to do a home loan, let me make a point at a design level. So let me just make that point distinctly clearer. So DF, we've been at it, as you can see, it's 4% now come to DF, okay? As I -- that's why I rightfully made the point. You look at the growth percentages in the context of the contribution of the balance sheet. We've been in DF now for -- we've been at DF for 5 years more. 5, 6 years has been 2%, 3% of the balance sheet. We see no hits on -- in any given manner, it is a good business. We built capability and a domain expertise after 5, 6 years of business, and we feel comfortable growing the business. Our exposure is still not more granular. Our exposure in DF remains at between INR 25 crores and INR 35 crores, we don't want to take [indiscernible] which is not for the case, let me make a point in LRD. We are a lot more comfortable. We are -- it's a 2 layers of risk management that we naturally as a lender gets -- get taking. So we're willing today even a INR 400 crore, INR 500 crore exposure in LRD. But then we are going to remain between -- on an average between INR 25 crores and INR 35 crores, maybe do a peak exposure INR of 100 crores to INR 120 crores. So that's -- I wouldn't club them together. Atul, anything you want to add anything?

[Atul Jain, executive]

No. See, as Rajeev has rightly called out, LRD is -- over the cycle also, it's not today, even if you look at the industry cycle or over the cycle, the construct of LRD, if it is backed by the marquee [indiscernible] which is the construct what we follow because there's no execution rate. So both bases are very different. Developer finance by definition, has a combination of execution risk and then consequently, subsequent sales risk. None of these risks exist in LRD, and that is where we are focused on LRD. As an asset mix, you will keep on seeing that if you look at last 2 years, mix that home loans constitute between 60% to 64%, which is what it will remain because that is the constant, which is not changing. The balance portion between LAP, LRD and DF, with DF upper cap would be close to 10%, 12%, even when we mature as a business because we would not want to cross around 12% kind of a number in developer finance. But balanced between LAP and LRD is a number where we will keep on moving around.

[Rajeev Jain, executive]

Based on our assessment...

[Atul Jain, executive]

Based on our assessment. As of today, our assessment is if we have to do a honest assessment of the LAP rates, rate of interest in the market versus LRD rates and the risk profile, we are better off doing LRD rather than doing any LAP based on today's risk returns on the pricing available in the market, [indiscernible].

[Kunal Shah, analyst]

And our rates and our yields on LRD would be competitive with respect to the market or we would be lower given the profile?

[Atul Jain, executive]

We have onboarded. We are working with almost all the top market developers in the country. So the -- it is a very competitive industry because if a product has been absolutely considered to be safe in the industry, then the pricing is very fine, and we compete with all the large players...

[Rajeev Jain, executive]

Super [indiscernible] and the fee income would be related to that in terms of a higher disbursements towards the segments.

[Sandeep Jain, executive]

Fee income, like was a onetime income in terms of an assignment income of INR 109 crores. That's where the fee income is the income appearing in the quarter [ is ] that this is an assignment of INR 950 crores LAP portfolio. That is an income generation because as per industry standards, we have to book income upfront. So that's the fee income, which is reflected.

[Operator]

Next question is from the line of Piran Engineer from CLSA.

[Piran Engineer, analyst]

Congrats on the quarter. Just one question for Sandeep. Firstly, what percentage of your bank borrowings would be REPO linked versus MCLR linked. And are you seeing banks now moving back towards MCLR-linked loans as liquidity dries up?

[Sandeep Jain, executive]

So Piran, we are seeing significant shift happening in terms of mix of REPO and MCLR incrementally just because rates are going up. In fact, in the last quarter as well, we have got lots of approvals from bank linked to MCLR. And I think banks are thinking even -- even today, banks are taking time in terms of passing on the cost increase in MCLR because savings -- interest have not gone up. So that's the thing. And in BHFL, we do have REPO link borrowing from banks because they also have a natural hedge in terms of home loan being linked to REPO...

[Atul Jain, executive]

REPO and EBLR.

[Sandeep Jain, executive]

REPO and EBLR, both.

[Atul Jain, executive]

[indiscernible] generally preferred to borrow in REPO link or EBLR link rather than MCLR.

[Sandeep Jain, executive]

Yes, in BFL, contribution of REPO-linked bank borrowing is lower.

[Rajeev Jain, executive]

And contribution of bank borrowing itself is lower between [ bond ] markets and deposits, which are all of the...

[Piran Engineer, analyst]

Understood. And if you could just give some color on your new to Bajaj customers or customer acquisition was very strong this quarter. So out of these [ 2.7 million ], let's say, how many are new to credit. If they are not, then what is their average credit score? Are you acquiring them to point of sale or through the app? Any color on the profile of the...

[Operator]

Can I request the speaker to be louder, please?

[Operator Instructions]

[Rajeev Jain, executive]

No, I can hear, that's fine. So principally, as you saw, 522,000 customers in the quarter came from the Insta EMI card. Only 10% of customers that are in what I would call that we did not want. We wanted to -- rest, we wanted them to become our customers. So we stimulated using a web ecosystem or the app ecosystem, as you saw the numbers. The -- we don't -- if a client is [ summing ] about EMI card only or at point of sale, you could be 0 minus 1 or [indiscernible] 750. We don't do in between other than some of the design of experiments or DOEs, as we call them, that we may run. But otherwise, very, very little. So it's 750. It could be 0 or minus 1, which is really where new to credit comes in. So in general, 60% of the customers -- 60%, 65% of the customers for many, many years have been [indiscernible] 750 and above, and balance are new to credit. So 30%, 35% are new to credit at a design level, 60%, 65% of [indiscernible] 750 and above. It's not changed materially over time.

[Piran Engineer, analyst]

Got it. Got it. And just to clarify one last thing, 37,000 employees that is on-roll plus off-roll or...

[Rajeev Jain, executive]

It's only on-roll.

[Piran Engineer, analyst]

Okay. So you've added 6,000 employees this quarter, roughly?

[Rajeev Jain, executive]

Did we say 31,000?

[Piran Engineer, analyst]

31,000 is in your annual report.

[Rajeev Jain, executive]

[indiscernible] doing apple-to-apple.

[Praful Kumar, analyst]

That's my question.

[Rajeev Jain, executive]

Yes. So 37,000 is console. To console to console, I don't think the number is 6,000. So there's something wrong. I mean we could be wrong. Sandeep will clarify it to you, because you would have published the number in annual report, you started to give this number, we've not added 6,000 that I can tell you. So it could be a typo error. But I'm not saying it is, but it's possible.

[Operator]

Next question is from the line of Rahul from Goldman Sachs.

[Rahul Jain, analyst]

Great. I mean, great, great results, congratulations. Just had 2 or 3 questions. First, just getting the usual stuff out the liabilities management. So you talked about gradual increase in cost of funds and the ALM table that you give out is, I think, behavioral based. So fair to say that the margin should not really see any undue pressure because of increasing cost of funds from the...

[Rajeev Jain, executive]

Yes, not for the next 3-odd quarters. You will see gradual movement, yes. And we are also incrementally passing through all new acquisitions. As I said, we've raised rates by 25 to 40 basis points, depending on the business. And as rates keep rising, we'll gradually pass them. So yes.

[Rahul Jain, analyst]

Okay. Okay. That's helpful, Rajeev. The second is, again, on fee income. You think this -- I mean talking more at the level, can we understand what portion would be more balance sheet or disbursal linked, what portion would be from third party? And then given that some of these digital properties are going live, have you seen any material shift on the PPD side which is driving the fee income?

[Rajeev Jain, executive]

Rahul, read it as quarter 3 2019, '20. Look at these numbers as that. This is increasingly -- and the reason I am making the point is even in Q2, Q3 last year, we still had, let's say, IPO financing income sitting there. Now there's nothing sitting there. There is no lumpiness. There's all pure flow base business, pure, pure flow. This is a normalized quarter from all lines. Actually, last 2 quarters have been. But in Q4, because 15-odd days were lost to Omicron, Omicron, right, Omicron, so there is still some noise. But now this is a fully normalized P&L frame is what my point is. Sandeep can provide some color.

[Sandeep Jain, executive]

I think it's reasonably granular. We have multiple hedged in which fees and commission is recognized and received. It's reasonably granular, and this is purely, purely the fact, as Rajeev said, as we are coming out of pandemic and we are getting into normalcy, this number also now getting normalized.

[Rahul Jain, analyst]

Got it. Rajeev, just going back to one of the statements that you made that the competition across different segments is inching up. You are seeing that in the sales financing business or even credit card, et cetera. But when I look at our own numbers, excluding mortgages, the ROAs are now north of 6% versus 4.5 pre-COVID. So does it mean that structurally, profitability has moved up in the businesses that we are doing. And therefore, the competition, even if that is inching up, it is more than enough for everyone to sort of grow and get -- make enough profits.

[Rajeev Jain, executive]

I don't know about others. I mean, we are mining more and more of our customers. We are going deeper and deeper into India. We're just keeping our head down and had it work. So when I say competitive intensity is more intense, we also run leverage analysis, let me make a point. Interestingly, nobody has asked a question, [Foreign Language]. When we looked at the retro data of 2019 franchise to today, we are actually not seeing material movement at all on our franchise, not at all, actually. I mean, adjusted for 6%, 7% inflation, we are not seeing movement across the unsecured portfolios, any material movement at all.

So whether this pays for all or not or so on and so forth, Rahul, you now have a point of view on. We remain quite small. As I said, other than the sales financing part of the business where we are very dominant. So I think there's tremendous opportunity in every line for us to make a difference.

So now coming back to -- so clearly, one of the structural changes, if you see -- and we provide the 10-year data, so it's there in our deck only, where cost used to be [indiscernible] office so that we are all on same page as to how is the -- so I think there is that line at play. I think that's an important point I must make, so that -- have we done a good job of it in the last 1.5 years to make sure that we'll bear the benefit of it now in the next 3 quarters and going even to some extent into next fiscal? Yes. That's why we are accelerating deposits while it puts pressure on OpEx, but our average deposit tenure is 33 months. We are now originating between INR 1,700 crores to INR 1,800 crores of retail deposits on a month-on-month basis. That's locking in for 33 months, maturity is 7.1%.

So we're doing a few things on the liability side, which should then by the time I'm hoping, Rahul, that someday the operating leverage part, which is one of the earlier questions was asked and I responded. By the time, we should have hopefully found magic or one in most of the products and services, and that should mitigate principally or theoretically, the -- when normalized cost happens, by the time I should get operating leverage or we should get operating leverage in the business on the OpEx side. That's how we are looking at the business and the business model. We'll take quarter at a time.

[Rahul Jain, analyst]

So basically, underlying is 6% ROA, there are enough and more levers within the frame to sort of...

[Rajeev Jain, executive]

When we look at consolidated ROA, I mean, I won't look at stand-alone ROA, I would look at consolidated ROA. We used to be at 4.7% exiting. That was also an ever high in December '19 quarter. Our guidance is 4.4 to 4.7. The current year will look higher. It's looking reasonably clear. Will long-term guidance change? We'll take a view end of FY '23. At this point in time, we're holding the guidance. Also holding the guidance in the next 3 quarters, they should not -- there will not be material reduction.

[Rahul Jain, analyst]

Just a small last question, Rajeev, if I may. On the mortgage business, how much have you invested so far? What are the requirements of the capital infusion going forward? And if at all, we plan to monetize the investment in this business?

[Rajeev Jain, executive]

So INR 7,500 crores is the total investment in the -- so that's just a tad about close to $1 billion. They are now well capitalized for INR 85,000 crores, INR 90,000 crores -- INR 90,000 crores. They're well capitalized for INR 100,000 crores. That gave them in a way we as BFL provided 2-year capital. So they don't even need capital for next 2 years. And we'll take a view on unlocking and so on and so forth at the appropriate point in time. I mean -- as consolidated, our design is consolidated unless and until regulations require us to is what I would say.

[Sandeep Jain, executive]

If I can cover the previous point, open point on employee head count...

[Rajeev Jain, executive]

Yes, not your, Rahul...

[Sandeep Jain, executive]

[indiscernible] made a point on that. We had 35,400 employees as of 31st March as per annual report, and we are at 37,873 consolidated head count as on 30th June, that's addition of 2,400.

[Operator]

Next question is from the line of Saurabh from JPMorgan.

[Saurabh Kumar, analyst]

So following up on this competition point..

[Operator]

Saurabh, you are sounding a little distant. Can I request you to speak through the handset?

[Saurabh Kumar, analyst]

Following up on this competition point, what's -- I mean, are you facing some pressure on the sales finance business from likes of [indiscernible] Paytm, using POS financing to do EMI generation? I mean -- and what's your view? And have you seen your to counter market share kind of get affected because of that?

[Rajeev Jain, executive]

Yes. So we remain, as I said, even in AGM, Saurabh, between 65% and 68% of manufacturer subvention pool in CD, between 55% to 57% manufactures subvention pool in digital lifestyle only we play. We keep staying in the corridor. We are very clear that business is for 2 reasons. One is for customer acquisition, two for margin profile. And actually, during this period, our margin profile has expanded. Let me make that point. And as I keep saying, whether for that business or for any business, it's margin first, growth later because margin saved us through the last 2 years of close to fatal crisis that we went through. So I mean, we track them every month. No material change, as I said.

Also, we are very deep. Let me make the point. So only noise is in 20 cities, 30 cities, farthest it goes is 40 cities. We offer this in 3,504 cities. And we'll add, as I said, 400-odd cities or towns this year further. So that's also one of the drivers for margin expansion because it -- but it needs significant controllership orientation, you need to perfect the model of how to open branches and how to scale them and how to ensure controllership is not lost. Credit metrics are better. So this all conversation is for 30, 40 cities. But do they represent 50% of the business? The answer is yes. Do these 40 cities represent 50% of the business, and do the balance 3,504 minus or 3,586 minus 40, which is 3,543, represent the balance 50%? The answer is yes. So we are making them up in different ways. Does it answer your question?

[Saurabh Kumar, analyst]

Yes, partly, sir. Just 1 more question, sir. This Bajaj Mall business, what is the sourcing you are getting at Bajaj Finance because of from Bajaj Mall yet?

[Rajeev Jain, executive]

We've provided data. Where's the PPT, just -- so if you see on that panel only of where we've provided data that, sorry, yes, Slide 30, 227,000 -- sorry, sorry, no. Bajaj Mall loans, 645,000 loans came through Bajaj Mall.

[Saurabh Kumar, analyst]

No, but sir, in value terms, how much will it be...

[Rajeev Jain, executive]

Value doesn't change. So you should assume this value to be 23,000. So 645,000 into 23,000. That's how we should read it as. So it's INR 300-odd crores.

[Operator]

The next question is from the line of from Dhaval Gala from Aditya Birla Sunlife Asset Management.

[Dhaval Gala, analyst]

Am I audible?

[Rajeev Jain, executive]

Yes, you are audible. Little feeble, but audible.

[Dhaval Gala, analyst]

I just had a couple of questions. One being, if you could talk about the SME lending piece and also our B2C business. I just wanted to understand how are you seeing things or trends on the ground in terms of growth? And what could be a prospect in these 2 segments?

[Rajeev Jain, executive]

Yes. So I'm happy at least somebody is interested into boring businesses. They do generate reasonable profitability.

[Dhaval Gala, analyst]

I [indiscernible] IRR businesses.

[Rajeev Jain, executive]

Yes. So principally, look, the SME Lending business, the denominator itself has expanded. What we call -- we are not in SME, we are in MSME. I mean, I must clarify that. Some time we'll change that SME itself is MSME. People with turnover between INR 2 crores to INR 15 crores, that's really plus/minus, give or take. Our segment is 65%, 70% of them are traders, balance are manufacturers. Clearly, inflation has helped traders, number one. So the denominator itself with a lot more people are now doing this business, the denominator itself has expanded. So that's one part.

The denominator in this business always existed. People were not willing to serve. I'm still not sure they are -- they will be able to serve for long, but we'll let -- because we've seen too many people come into the business and gone away after 6 months, 9 months, 12 months, 15 months. We and one of the other leading lenders are the ones who've stayed on for the last 12, 13 years. So that's one point I must make.

So denominator has expanded. A lot more people are providing services. Inflation is requiring greater working capital for MSMEs. Our segment is INR 2 crores to INR 15 crores. And we -- given very strong domain that we've created over the last 15 years, the business is growing quite well. Having said that, its contribution, as you can see on aggregate basis, 13 has remain 13. [Foreign Language].

And we remain -- we are very deep in this business. We don't do this in top 30, 40 cities. We do it in 1,200 -- 1,800 cities in India. So this is very deep. We built a degree of competence and capability in this business, which is quite strong. I would say after B2B business, this is one business where we built a tremendous domain competence. And that's why we've survived through cycles in this business.

So -- and growing denominator eventually will help us as well because more people are sharing the burden of growing. I just hope it's not a false dawn for competitors because this business can provide false dawn.

B2C, mostly cross-sell, we stay with top of the funnel. We stay with top the funnel, mind the franchise, run campaigns, keep going along. I mean, I think it's a boring business and -- but needs high level of efficiency and a high level of risk management capabilities, a high level of data management capabilities, campaign orchestration capabilities, and we do this for a living. So we are at it.

[Dhaval Gala, analyst]

Sure. Also one question on EMI card business. Basically, we now have more than 32 million EMI card already been given. What could be potential here? And also any metrics you would suggest that if at all, there are 2 loans on the same EMI cards for the same customer?

[Rajeev Jain, executive]

Sorry, EMI card? EMI card 32 million? Sorry, sorry. I'm sorry. I'm sorry, Dhaval.

[Dhaval Gala, analyst]

Sorry, what I'm asking is, the EMI card, one is the potential, how much -- how many more customers do you think can get -- take the EMI card because I think looking at your cross-sellable of the franchise where customers do want to do business. And second is how many customers or EMI card holders have more than 2 loans or more than 1 loan running right now?

[Rajeev Jain, executive]

Our loans or in-market loans?

[Dhaval Gala, analyst]

Yes. Yes. Our loans, our loans. Only Bajaj...

[Rajeev Jain, executive]

Our loans would be 10%, 12% of the franchise. I mean, which means at a point in time, 1 customer running 2 loans, he could be running a CD or a personal loan or a home loan, 10%, 12% of the franchise. [indiscernible] franchise would possibly be running 1 product at a point in time. Okay, credit card, if you add it, maybe number will be 15%, 18%. On 34 million, it will be 20, 22 [indiscernible]. On 34.6 million, number will be 22% to 25%...

[Unknown Executive]

20, 22 [indiscernible].

[Rajeev Jain, executive]

Yes. Exactly. Yes. Yes. So number would be -- so 25% would be running multiple products, multiple products. 23 million are running 1 product today...

[Unknown Executive]

33 million [indiscernible]...

[Rajeev Jain, executive]

He is asking 2 products of the 34.66. So to the point Kurush is making, let me make the point, so I'm clear. We have 35 million best customers, as you call it. 60 million total customers, best customers, 34.66. We are banking today 23 million customers. If I take a unique customer view, it will probably be 18.5 million, 19 million customers would be unique. That I mean plus/minus give and take between 18.5 million would be unique banking.

[Dhaval Gala, analyst]

And just to reconfirm. Today, we have 34.66 million cross-sellable franchise as we classified, and we have close to 32.8 EMI card holders as well. So largely, the penetration level is done in this piece, I mean, the EMI card. So the now new franchise additions will only be the potential EMI card holders. Is that the right understanding?

[Sandeep Jain, executive]

Your understanding is correct, Dhaval. Most of the customers who purchase electronics do offer EMI card. We do have reasonably decent penetration of customers taking a loan from us, also buying EMI cards. The number that we report is net of those which have been blocked or closed. This will represent in a way, cross [indiscernible].

[Dhaval Gala, analyst]

Yes. So because I see a very strong growth versus our last couple of years in the people who already have EMI card and also if I tally that number with the cross-sellable franchise this year.

[Sandeep Jain, executive]

Correct.

[Operator]

Next question is from the line of Param Subramanian from Macquarie Group.

[Parameswaran Subramanian, analyst]

Congrats on strong numbers. Rajeev, if I could ask this, you've given the data on disbursements in the B2B segment, what would it be for pre-pandemic days 1Q FY '20 perhaps, what would this run rate had been then?

[Rajeev Jain, executive]

So we used to provide sometimes -- I don't the number of the block. 2 things have happened, Param. The value share has grown much, much faster. That part of it is inflation, manufactured prices input, the value share, value share and volume growth...

[Operator]

Sir, sorry to interrupt you. Param, may I request you to mute your line from your side.

[Rajeev Jain, executive]

I don't have the number of the -- I don't think we -- I don't have it of the -- off hand at this point in time, but we can -- we'll be happy to share. Sandeep can provide that data.

[Parameswaran Subramanian, analyst]

Sure. Sure, Rajeev. Continuing on another question from a participant. So on the cross-sell fee, now if I look at the number of loans being booked, roughly 7.5 million loans being booked on a 60 million franchise in this quarter. Now if I go back to, say, a pre-pandemic days, say, 1Q FY '20 or 3 years ago, you were booking at a similar run rate. Of course, the wallet loans also add to that. But we're booking 7.5 million loans even then on a 35 million, 36 million customer base. So just trying to understand if repeat customer transactions have come down? Or is that something that you're worried about from the side of franchise level?

[Sandeep Jain, executive]

Param, I think, while the point is correct, it can be seen with respect through the cross-sell franchise as well. But the fact of the matter is that the sales in the market is not necessarily driven by customer franchises. Sales is driven by the number of customers walking in the store and buying product. The penetration level, as Rajeev explained earlier, has continued to remain range within 68% and 70% for us. So these are the customers who are going in the market and buying. And whenever they are buying, we're getting a 70% market share of those customers.

[Parameswaran Subramanian, analyst]

Got it. Got it. And just 1 last question on the omnichannel data that you provided on Slide 13. You are saying that roughly on the digital EMI card base, you're booking about 227,000 loans per quarter. Now does the digital EMI card base itself is almost doubled. So if I'm looking at the number of loans being booked, it's a bit flattish over there. Is this something that you think is going to pick up and [indiscernible] these products now and going to pick up? Or is there something [indiscernible]?

[Rajeev Jain, executive]

So really look at it like a credit card, right? Credit card usually doesn't mean credit card active. In fact, our activation rate on EMI card on a 12-month basis are much higher than credit card activation rates. Whatever is published domain, I'm talking in public domain. So you do look at it that way that customers buy. In this case, 522,000, we used to provide the data until last quarter, 60% of the customers pay INR 550 and buy the product. So anybody who pays for it and buys a product, their activation rates are distinctly higher. 12-month vintage, we see anywhere between 45% to 50% activation rates.

And we are also seeing that more customers coming on to our asset, more is fee-paying customer because his confidence is much higher that given whatever has happened in the payments industry over the last 2 years and customers have got, if I may say so, based on wishing, fishing, so on and so forth. So their confidence is much higher as they come on to the Baja Finserve app. So these activation rates are much, much higher than what a traditional payment product would offer. And we continue to stimulate them. There is a level of seasonality in it. But 60% paying for itself should give a very high degree of confidence because he is more accretive to me. He's not taken an asset and he's 60% [indiscernible] 520,000 have paid INR 550. And we make money on every account on day 0. So we are very comfortable with the conversion rates.

[Operator]

The next question is from the line of Shubhranshu Mishra from UBS Group.

[Shubhranshu Mishra, analyst]

The first question is from the annual report. This would be the first year where we have seen a lot of board members going out, almost like 3 or 4, which is for the first time in the last 13, 14 years. So is there -- is this like a precursor into any further management changes, and if there are, do we see you getting into a nonexecutive role. That's the first part -- first question. Second is that, thanks that we've diversified into non-captive 2-wheelers. But then for a long period, we have been talking about data analytics and preapproved offers. So why can't we have preapproved offers for utility [ vehicles ]?

[Rajeev Jain, executive]

For utility vehicles?

[Sandeep Jain, executive]

Shubhranshu, we lost you. We are unable to hear you, Shubhranshu.

[Operator]

Shubhranshu, can I request you to speak through the handset, please?

[Shubhranshu Mishra, analyst]

Hello, can you hear me now?

[Rajeev Jain, executive]

You are asking a question on utility -- commercial vehicle, right?

[Shubhranshu Mishra, analyst]

So what I was asking is that why have not we diversified into other vehicle formats. For example, we can do a cross-sell and a preapproved offer for our rural customers who can do -- who can buy utility vehicles, and card loans for our urban customers. Again, we can use data analytics and cross-sell. That's the second question I have.

[Rajeev Jain, executive]

So I mean, the -- at a board composition and management composition are not connected. Board composition is changing. I would say, a generational shift is happening, is how you should look at it. So that's in response to the first question.

On CV, we so far have a retail consumer view rather than a productive asset view. We do it only in our captive business, where we do 3-wheeler financing, that's for captive reasons and for legacy reasons. Otherwise, so far, we don't have a commercial vehicle view. Do we have a new auto loan view? Answer is yes. We've just kicked off the non-captive 2-wheeler business. Sometime in FY '24, we will launch even the new auto loans business. That is the last product "or the final product" that we launch on the retail side.

Our customer -- used car, we already do, to the point Anup is making. The last 4 years, we are doing used cars as used car sales to hopefully $0.5 billion of balance sheet by end of the year. We should -- that makes money. New autos take much longer to make money. So -- and then we'll venture into what takes longer to make money. So that's really how we are -- so new autos is part of the plan sometime in '24. CV is not part of our plan.

[Shubhranshu Mishra, analyst]

One question still remains unanswered. What happens when you -- if you move into a nonexecutive role...

[Rajeev Jain, executive]

I just got -- I think, by shareholders, I got reappointed for 5 years as Managing Director. So I'm here at least based on the approval of the shareholders. I am very much here. And we have a deep management bench, and we have a comprehensive succession planning process.

[Operator]

Next question is from the line of from [ Manjiri ] from SBI Life Insurance.

[Unknown Analyst]

Congratulations on your results...

[Rajeev Jain, executive]

Sorry. We are not able to hear you, [ Manjiri ].

[Unknown Analyst]

Congratulations to Bajaj Finance on the result. I have just 2, 3 questions. One regarding the composition of your AUM. Could you take us through the -- your perception of the risk profile and mitigation on the auto finance, which Q-on-Q, there is a degrowth. Is the conscious degrowth or a slowdown? And loan against securities, there is a jump of 72% June on June. So if you can give some flavor on that. And regarding deposits, what is the percentage of public deposits in it?

[Rajeev Jain, executive]

Yes. Deposits, public deposits is 70% and corporate deposits is 30%, plus/minus 1% or 2%. That's one. Loans against securities, there's normally some degree of lumpiness. It's related to market, it's volatile at times. So I've seen this portfolio go to in 2018 to INR 8,000 crores, went down to INR 3,000 crores in March '20, went to -- so we are amongst the largest lenders in India. It's a good business, profitable business, and we are dovetails into the HNI broking business that we're building and so on and so forth. So it's just volatile based on market volatility rather than anything else. We would like it to not be volatile. We would like it to be one way, but it doesn't work that way.

Management assessment or assurance on risk portfolio quality, as you can see in the portfolio quality panel, which is Panel 47, Panel 53 and 54 and 55, and we provided 9-, 10-quarter data. That should -- 2-wheeler and 3-wheeler, we would, as I said, 10 are green. This is the only 1 which is yellow, and it would get green at 90% because while based on February '20, it should be green, but that's not how it was not in the best of health even in February '20. So...

[Unknown Analyst]

Okay. Another question regarding the rural segment. Is the growth more like growth due to the ticket size of the borrowers? Are they borrowing more per individual? Or it has growth more on the number of centers added? And one last question on the LCR...

[Rajeev Jain, executive]

Sorry. Sorry. Go ahead. Go ahead.

[Unknown Analyst]

Yes. Yes, last question on the LCR that it has grown from 134% in March quarter to 196% in June. So any reasons for that, any conscious uptick taken, if you can elaborate on that, please.

[Sandeep Jain, executive]

[ Manjiri ], on LCR, we have consciously been keeping much higher liquidity in the balance sheet, and that is the reason why you've seen this number increase in the current quarter. So it's by design than anything else. We have been able to raise a decent amount of long-term money from money market as well as from banks in the current quarter. And the surpluses that we have raised during the quarter has also gone -- has also got deployed by LCR [indiscernible].

[Unknown Analyst]

And regarding the rural segment, you're seeing growth for the number of centers, that is propelling the growth or the ticket size is increasing?

[Rajeev Jain, executive]

So we don't look at it ticket size that way. Ticket size adjusted by inflation largely remain flat. So it's mainly locations and deepening the locations that we are in. In general, location kicks in from a maturity standpoint at 21 to 24 months. That's all.

[Operator]

I now hand the conference over to Mr. Sameer Bhise for closing comments.

[Sameer Bhise, analyst]

Thank you, everyone, for joining this call today, and thank you to the leadership team of Bajaj Finance Limited for giving us this opportunity. That ends the call. Thank you so much.

[Rajeev Jain, executive]

Thank you.

[Sandeep Jain, executive]

Thank you all. Good night.

[Operator]

Thank you very much.