Skip to content

    Bajaj Finance Limited

    BAJFINANCE
    Financial Services·24 Jul 2025
    Management Summary

    Bajaj Finance reported a strong Q1 FY26 with 25% YoY AUM growth and 22% PAT growth, driven by record loan bookings and customer additions. Asset quality remained stable with Net NPA at 0.5%, and cost of funds improved. However, credit costs remained elevated due to stress in MSME and auto finance segments, leading to strategic pruning of these businesses. The company is also navigating a leadership transition and focusing on digital transformation.

    Highlights

    5

    • AUM growth of 25% YoY to INR 4,41,450 crores, demonstrating strong business expansion.

    • PAT grew 22% YoY and ROE stood at 19%, indicating robust profitability.

    • Record 13.5 million loans booked and 4.7 million new customers added, expanding customer franchise to 106.5 million.

    • Cost of funds improved by 20 basis points sequentially to 7.79%, supported by NCD and bank borrowing strategies.

    • Net NPA remained low at 50 basis points (0.5%), reflecting stable asset quality despite elevated credit costs in specific segments.

    Concerns

    4

    • Credit costs remained elevated in Q1 at 2.02%, 5 basis points higher QoQ, primarily due to 2-wheeler/3-wheeler and MSME segments.

    • Consumer leverage continues to be an area of concern, leading to pruning of most businesses and slower growth in MSME and auto finance.

    • Deposit contribution to the balance sheet is expected to decline from 19% to 15-16% by year-end, increasing reliance on other funding sources.

    • MSME business showing strains with 13 out of 17 key industries experiencing slowdown and 3 showing contraction.

    Key financials

    Single quarter

    17 metrics
    1. 01AUM₹4.41L Cr+25%YoY
    2. 02PAT—+22%YoY
    3. 03PBT—+21%YoY
    4. 04ROE19%
    5. 05Net NPA50%

    Segment breakdown

    Mortgage
    31% Share of Balance Sheet
    MFI
    40% Share of Balance Sheet
    Gold Loans
    2.3% Share of Balance Sheet
    2-wheeler and 3-wheeler
    6.4% GNPA
    MSME Lending
    1.8% Sequential GNPA
    List

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Liquidity

    Liquidity disclosed

    Liquidity buffer stood at just a tad below INR 15,000 crores as of 30th June. Tier 1 capital was at 21.19%. The company is increasing reliance on NCD, ECB, and bank borrowings as deposit contribution is expected to decline. NCDs are being borrowed at 7%-7.1% (down from 8% corridor), and 85% of bank money is on external benchmark rates with full 100 bps transmission. CP rates have seen 80-90 bps improvement. Retail deposit volumes have come down as they are now priced similarly to NCD/bank money.

    Guidance & targets

    9
    CategoryTargetPriority
    Cost of Funds
    Cost of Funds
    7.60% to 7.65%
    		High
    NIM
    NIM Expansion
    10 basis points
    		High
    Fee Income
    Fee Income Growth
    13% to 15%
    		High
    Credit Cost
    Credit Cost Guardrail
    1.85% to 1.95%
    		High
    AUM Growth
    AUM Growth
    23-24%
    		Medium
    Customer Franchise
    Customer Franchise
    120 million
    		High
    New Customer Acquisition
    New Customers from App
    2-3 million
    		High
    Deposit Contribution
    Deposit Contribution to Balance Sheet
    15% to 16%
    		High
    2-wheeler/3-wheeler business
    Book Size
    3,500 - 4,000 crores
    		High

    What to watch in Q2 FY26

    5

    AUM Growth Trajectory

    after Q2
    Current23-24% (assessment)
    TargetClearer view on FY26 AUM growth

    Why it matters

    Management indicated a clearer view on AUM growth guidance will be provided after the completion of Q2, which is crucial for assessing full-year performance.

    I would think about one more quarter, Abhishek, before we give you a very clear view. Right now, I would hold between 23-24%. But we would have -- also have a clearer view as we complete Q2.

    Risks & concerns

    6
    RiskSeverity

    Elevated Credit Costs

    Credit costs remained elevated in Q1 at 2.02%, 5 basis points higher QoQ, particularly in 2-wheeler/3-wheeler and MSME businesses. — Management acknowledged

    medium

    Consumer Leverage and Business Pruning

    Consumer leverage is a concern, leading the company to prune most businesses and reduce contribution from customers with multiple loans. — Management acknowledged

    medium

    MSME Business Strains and Slowdown

    13 out of 17 key MSME industries are showing slowdown, with 3 in contraction, creating a 'perfect storm' with reduced credit supply. — Management acknowledged

    high

    Political Risk in Karnataka

    Political risk in Karnataka has led to a 40-50% cut in business in the region, impacting rural B2C. — Management acknowledged

    medium

    Leadership Transition and Succession Planning

    MD and Director Anup tendered resignation; Board has asked for a detailed succession plan within 6 months, with clarity closer to March '28. — Management acknowledged

    medium

    Intense Competitive Activity in Mortgage Business

    Intense competitive activity is leading to pressure on volumes and attrition in the BHFL mortgage business. — Management acknowledged

    medium

    Q&A highlights

    8

    “I have to go back to the Board and the NRC in the next 6 months' time with a detailed succession planning process is all I would like to comment at this point of time on this point, Viral. And I hope you appreciate the sentiment.”

    Analyst questioned the transition process and future plans for leadership, which management indicated would be addressed internally and presented to the Board within 6 months, with clarity closer to March '28.

    asked by Viral Shah

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 FY26 Performance Overview

    Bajaj Finance reported a strong start to FY26 with AUM growing 25% YoY to INR 4,41,450 crores. PAT increased by 22% and PBT by 21%, with ROE at 19%. The company booked a record 13.5 million loans and added 4.7 million new customers, expanding its customer franchise to 106.5 million. Net NPA remained low at 0.5% (50 basis points), indicating stable asset quality.

    02

    Asset Quality and Credit Costs

    Credit costs remained elevated in Q1 at 2.02%, a 5 basis point increase QoQ, primarily driven by the 2-wheeler/3-wheeler and MSME businesses. The 2-wheeler/3-wheeler segment saw GNPA move from 3.4% to 6.38% YoY, while MSME lending's sequential GNPA moved from 1.48% to 1.76%. The company has taken actions to prune these businesses and expects credit costs to move sideways in Q2 before declining from Q3 onwards. Overall PCR stood at 52%, down from 53.73% due to restructuring of Stage 1 accounts.

    03

    Strategic Adjustments and Business Pruning

    Management highlighted consumer leverage as a key concern, leading to actions across most products to reduce exposure to customers with multiple loans. Since January, the company has been pruning businesses, particularly in MSME and 2-wheeler/3-wheeler segments. The 2-wheeler/3-wheeler book is expected to wind down to INR 3,500-4,000 crores by March '26. Business in Karnataka was cut by 40-50% due to political risk, and MFI business was also cut by 35-40%.

    04

    Funding and Liquidity Management

    The cost of funds improved by 20 basis points sequentially to 7.79%. For FY26, the company estimates cost of funds to be 7.60% to 7.65%. Deposit contribution to the balance sheet, currently at 19%, is expected to decrease to 15-16% by year-end, increasing reliance on NCD, ECB, and bank borrowings. NCDs are now being borrowed at 7%-7.1% (down from 8% corridor), and 85% of bank money is on external benchmark rates with full 100 bps transmission. Retail deposit volumes have reduced as they are now priced similarly to other funding sources.

    05

    Digital Transformation and Customer Franchise

    The company's FinAI transformation strategy is starting to go live, with AI capabilities being deployed to improve productivity. The customer franchise reached 106.5 million, with a target to reach 120 million by year-end. The company's app is evolving into a 'super app' with BALIC (insurance) already live and government services accessible by end of July. New customer acquisition from the app is projected to add 2-3 million customers annually.

    06

    Leadership Transition and Succession Planning

    Anup, the MD and Director of BFL, tendered his resignation for personal reasons. The Board has accepted this and requested a detailed succession plan within the next 6 months. Rajeev Jain will continue in an operating role until March '28 to ensure continuity and stability, with clarity on succession planning expected closer to that date.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.