Detailed Narrative
Bajaj Finance reported its Q2 FY25 earnings, presenting a mixed financial picture. The company demonstrated robust operational performance with consolidated Assets Under Management (AUM) growing by ₹19,732 crores in the quarter, achieving a 29% year-on-year increase to nearly ₹3,74,000 crores. Loan booking volumes were strong, up 14% year-on-year to 9.7 million, and the customer franchise expanded significantly with 4 million new additions in Q2, bringing the total to 92.1 million. Operating efficiencies also improved, with the OPEX to Net Interest Income (NII) ratio declining to 33.2% from 34% in the same period last year.
Despite these positive trends, profitability was muted due to elevated credit costs. Profit Before Tax (PBT) grew 14% to ₹5,401 crores, and Profit After Tax (PAT) increased 13% to ₹4,014 crores. Gross loan loss and provisions remained high at ₹1,934 crores, with the gross loss to average assets stable at 2.16% compared to Q1. Net Non-Performing Assets (NPA) stood at 0.46% and Gross NPA at 1.06%. Management acknowledged the elevated loan losses, attributing them to broader market trends and a higher propensity to default among clients with multiple unsecured loans. They are actively tightening underwriting norms for such customer cohorts.
Looking ahead, management provided several key guidance points. They expect overall new customer additions to reach 15-16 million in FY25, aiming to cross the 100 million customer franchise milestone by year-end. The cost of funds is believed to have peaked, and NIMs are expected to stabilize. However, the FY25 net loan loss to average assets guidance was revised upwards to 2-2.05% (from the previous 1.75-1.85%), with an expectation for it to reduce to around 2% by Q4 FY25. The company projects full-year AUM growth of 27-28%, with new businesses contributing 2-3% and existing businesses growing 24-25%. Medium-term guardrails target 25-27% AUM growth and 23-25% profit compounding.
Strategic initiatives include the ramp-up of non-Bajaj Auto two-wheeler financing, expected to disburse nearly 500,000 accounts in FY25 and scale to 720,000 in FY26, fully replacing the AUM from Bajaj Auto products by FY27. New businesses and geographies are anticipated to move from loss to breakeven/profit in the next fiscal year. The festive season has started positively, with discretionary consumption businesses showing 20-22% count growth and 19-20% value growth in the first 19 days. Management maintained a cautious but optimistic tone, emphasizing continued investment in debt and risk management, alongside leveraging GenAI for operating efficiencies, to navigate the current environment and sustain growth.