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Annual Report FY22 – gearing up for next leg of growth

Bajaj Finance’s FY22 Annual Report highlights the company’s continued focus on distribution expansion, technology and omnichannel presence as well as initiatives to enhance customer engagement.

In FY22, the company has refurbished its Experia app and included payments stack (wallets, UPI, bill pay service, single payment check out gateway) as a centrepiece. In FY23, the financier aims to transform web experience enabled by a common technology infrastructure layer between app and web. Further scale up of the payments business viz. deployment of EDCs and QRs will drive customer acquisition as well as higher engagement. In our view, payments is the most critical use case in financial services spectrum which enhances customer engagement and retention, and scale-up the lending business and marketplaces in next 2-3 years. We would closely monitor increments in new-to-Bajaj customers through the digital route. Omnichannel model integrates BAF’s entire slew of products and service offerings for the customer, and will help in delivering superior business velocity, eliminate friction and reduce opex in the medium term.

BAF’s existing business bounced-off from pandemic lows, given AUM expanded 29% YoY and asset quality improved to pre-pandemic levels (with GS3 at 1.6%). BAF is also extending its 2W loan offering to other OEMs and it has now launched credit cards in partnership with DBS Bank. EMI card was launched to rural customers in FY22 as well has begun growing the rural mortgages product in Tier 3 locations.

We believe BAF’s next leg of customer acquisition is likely to be more digital in nature (as its platform investments scale up) and razor sharp focus on risk management as well as strong capital position, should drive continued stock performance. Recent correction (-24% in 6 months) offers a strong entry point for long-term investors, in our view. Maintain BUY.

* Omnichannel – the way forward: Bajaj Finance was an early mover to transit to digital processes i.e. from Physical to Phygital. However, amidst first wave of Covid, the management went back to the drawing board and decided to take a further leap into digitalization. The Omnichannel model starts with customer and concludes with products/ processes vs. the traditional approach which starts from products/ processes and culminates with customers. The company has made significant headway in the following domains of Omnichannel strategy:

- Inclusion of payments stack: Payments is core in implementing Omnichannel strategy. BAF has built a robust payments stack including wallets, UPI, bill pay service and single payment check out gateway. It has also created merchant solutions and capabilities to enable merchant onboarding, payments and business, one view for merchants, and marketing campaign solutions and rewards for merchants. In FY23, the company plans to deploy Electronic Data Capture (EDC) terminals with on-us and off-us payment methods, Quick Response (QR) solutions as well as its own payment gateway. We note that payment is the only use case in financial services which will enhance the customer engagement and retention, and scale-up the lending business and marketplaces, viz. electronics, insurance and investments, in next 2-3 years.

- Mobile app revamped: In FY22, the company has refurbished its mobile app (Experia) to not only include more functionalities but also enhance user experience such as: i) updated interface layer, ii) enhanced and new customer engagement features - in-app programs, rewards, offers, deals and location based services, iii) improved service features and information with robust search mechanism, for loans and deposits, iv) frictionless purchase journeys for loans, investments and insurance, v) marketplaces for financing and distribution across electronics, insurance, investment and health; vi) capabilities of digitisation of EMI card and co-brand credit card with improved service features. All these encompassing over 55 core features were delivered in the new customer interface in FY22. In FY23, BAF pans to develop additional 50 features which would cover new and enhanced purchase journeys of loans, investments and insurance, personalised marketing, promotions, and data led features, integrated rewards in the loan journeys, augmented reality, and virtual reality features.

- Extending digital presence through Web: Web is an important driver of customer traffic, business volumes and service to customers in the digital space, consequently BAF would like to leverage this medium and offer platform agnostic experience to its users. In FY23, the Company plans to completely transform web experience by revamping the entire UI/UX of the web platform thereby offering a consistent experience across both app and web. Resultantly, customers will be able to initiate journey on one platform and continue it on the other platform. All the three marketplaces (electronics, insurance, and investments) will be integrated into the web platform.

- Sales One and Debt Management One Apps: BAF has developed Sales One app which enables sales teams for lead management, performance management, customer service, sales helpline, incentives and training. In FY23, the company plans to further improve it with additional features such as merchant onboarding, interactive reports and others. Debt Management One app enables the company’s debt management teams with host of capabilities and features such as mobile receipting, settlement workflow, call management and recording, debt management and others. In FY23 the company plans to enable features like agent onboarding, performance dashboards, agency allocation, meeting calendars, and repossession module. In addition to large operating benefits, these apps will significantly strengthen BAF’s compliance and controllership.

- Customer data platform (CDP) was implemented in 2QFY22 to enable multi-channel orchestration, customer communication, call governance with an integrated multidialler, multi-lingual architecture.

- Expanding physical presence: While digital transformation is on full-swing, geographic expansion continues to be an important driver of growth and portfolio management. In FY22, BAF expanded its geographic presence by adding 516 locations, thus taking its presence to 3,504 locations with a distribution network of over 133,200 points of sale. Out of the total branches, 2,136 (61% of total branches) are Rural branches. Mgmt. aims to be present in 5,000 locations over the next few years, guided by a well defined geographical expansion programme based on GDP contribution as a key parameter for selection of new locations.

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