Bajaj Finance Limited — Q3 FY25 earnings call

Call held 29 Jan 2025

Management summary

Bajaj Finance delivered a strong Q3 FY25, marked by record AUM growth and new loan bookings, alongside significant customer franchise expansion. Profitability remained robust with 18% PAT growth, while operating efficiencies improved. Management expressed confidence in stabilizing credit costs and outlined ambitious growth targets for the next fiscal year, supported by strategic partnerships and proactive risk management.

Highlights

  • AUM grew by ₹24,119 crores, reaching ₹398,000 crores, a 28% YoY increase.

  • Booked 12 million new loans, the highest ever in a quarter.

  • Added 5 million new customers, bringing the customer franchise to 97.12 million.

  • PBT grew 18% to ₹5,765 crores; PAT grew 18% to ₹4,308 crores.

  • Opex to Net Total Income improved to 33.1% from 33.9% YoY.

  • Net NPA stood at 48 basis points, with GNPA at 112 basis points.

  • Credit cost stabilized at ₹2,043 crores, with loan loss to average AUF at 2.16%.

  • Net Interest Income grew 23%, and NIM remained steady in Q3.

What they filed

Q1 FY27: revenue up 18.6%, net profit up 29.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue14,488 15,371 15,638 16,697 17,184 +19%17,870 +16%18,430 +18%19,802 +19%
Net profit5,614 3,706 3,940 4,133 4,251 −24%4,581 +24%4,840 +23%5,346 +29%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Customer Franchise

  • Total Customers Customer Franchise · FY25 · High confidence 100 million
    Customer franchise stood at 97.12 million. So well on course to cross 100 million as we finish the current fiscal year.

    — Rajeev Jain, Managing Director

Headcount

  • Employee Headcount Addition Headcount · Fiscal '26 · Medium confidence Smaller and lower
    employee headcount addition will continue to be smaller and smaller or lower and lower as we move into fiscal '26.

    — Rajeev Jain, Managing Director

Credit Cost

  • Loan Loss to Average AUF Credit Cost · FY25 (full year), Q4 FY25 · High confidence 2.2% (full year), 2% to 2.05% (Q4)
    On a full year basis, we estimate loan loss to average AUF to be in the range of 2.2%, for quarter 4 to be in the range of 2% to 2.05%.

    — Rajeev Jain, Managing Director

  • Credit Cost Credit Cost · Next year (FY26) · Medium confidence Up 2%
    if Q4 is in the range of 2% to 2.05%, then clearly next year number is up 2% is what I would say.

    — Rajeev Jain, Managing Director

Asset Quality

  • GNPA Asset Quality · Medium-term · High confidence 1.2% to 1.4%
    remain reasonably well under the long-term guidance of 1.2% to 1.4%.

    — Rajeev Jain, Managing Director

  • NNPA Asset Quality · Medium-term · High confidence 40 to 50 basis points
    well within 40 to 50 basis points of NNPA guidance.

    — Rajeev Jain, Managing Director

  • 3-plus unsecured loans (pre-COVID level) Asset Quality · Exit Q4 FY25 · High confidence Pre-COVID level
    As we exit Q4, we'll be back to where we were at a pre-COVID level.

    — Rajeev Jain, Managing Director

Strategic Partnership

  • Products live on Airtel Thanks app Strategic Partnership · By March 25 · High confidence 9 products
    two products have gone live, nine products will be live on Airtel Thanks app by March 25.

    — Rajeev Jain, Managing Director

  • Target customer base for Airtel partnership Strategic Partnership · High confidence 200 million
    Roughly about 200 million is the set we are targeting, which is -- does not overlap here.

    — Management

AUM Composition

  • Two-wheeler and three-wheeler composition AUM Composition · Ongoing · High confidence Continue to go down
    two-wheeler and three-wheeler composition go down... So this number would continue to go down.

    — Rajeev Jain, Managing Director

  • Two-wheeler and three-wheeler composition stabilization AUM Composition · Q4 FY26 · Medium confidence 3.5% to 4%
    It may probably stabilize sometime next year at around quarter 4 FY '26 at around 4-odd percent, between 3.5% and 4%.

    — Rajeev Jain, Managing Director

Rural B2C Business Growth

  • Growth Rate Rural B2C Business Growth · Next fiscal (FY26) · High confidence 20%-23%
    That business should grow between 20%-23% in the next fiscal as we move from here.

    — Rajeev Jain, Managing Director

Management Transition

  • Board review of succession plan Management Transition · Q4 FY25 · High confidence Decision by Q4 FY25
    We expect the Board to take a view on the way forward by Q4.

    — Rajeev Jain, Managing Director

Gold Loan

  • Number of Gold Loan Branches Gold Loan · End of FY25 · High confidence Cross 1,000
    branches... have moved from 537 last year same time to 827. And this quarter, we are adding so we'll cross 1,000 end of this year.

    — Rajeev Jain, Managing Director

Consolidated Growth

  • Balance Sheet Growth Consolidated Growth · Next fiscal (FY26) · High confidence 25%
    balance sheet should grow by 25%... as we venture into next year, next fiscal.

    — Rajeev Jain, Managing Director

  • Credit Costs Consolidated Growth · Next fiscal (FY26) · High confidence Below 2%
    maintain credit costs at below 2%... as we venture into next year, next fiscal.

    — Rajeev Jain, Managing Director

  • Profit Growth Consolidated Growth · Next fiscal (FY26) · High confidence 22%-23%
    deliver a corridor of 22% - 23% profit growth as we venture into next year, next fiscal.

    — Rajeev Jain, Managing Director

Balance Sheet

  • Balance Sheet Size Balance Sheet · End of FY25 · High confidence ₹420,000 crores
    We'll end this year with INR420,000-odd crores of balance sheet, would have 25% share of total credit in India.

    — Rajeev Jain, Managing Director

NIM

  • Cost of Fund Impact NIM · Next year (FY26) · High confidence Not more than 4-5 basis points play
    we don't see more than 4 - 5 basis points play on cost of fund in the next year

    — Sandeep Jain, Chief Financial Officer

  • Asset Side NIM NIM · Next year (FY26) · High confidence Protect
    Asset side, we should be able to protect the NIM.

    — Sandeep Jain, Chief Financial Officer

  • Overall NIM NIM · Ongoing · Medium confidence Stable
    overall, we would we foresee stable -- mix stable pricing at this point in time, but this is depending on the external environment.

    — Rajeev Jain, Managing Director

Strategic Direction

  • Company Status Strategic Direction · Short to medium term · High confidence Remain a nonbank
    we said we would like to remain a nonbank... So I think you should expect business as usual for the short to medium term.

    — Rajeev Jain, Managing Director

Market Share

  • Total Credit Share in India Market Share · Medium confidence 3% to 4%
    to be a 200 million consumer company a share of 3% to 4% of total credit and 4% to 5% of retail credit in India

    — Rajeev Jain, Managing Director

  • Retail Credit Share in India Market Share · Medium confidence 4% to 5%

    — Rajeev Jain, Managing Director

Operating Expense

  • Operating Expense Growth Operating Expense · Ongoing · High confidence Further lower
    operating expense growth is to further be lower, which is really you are sitting in the front seat, I presented at the Investor Day.

    — Rajeev Jain, Managing Director

Fee Income

  • Fee Income Growth Fee Income · FY26 · Medium confidence Remain in current state (stable/sideways)
    Fee income growth, I would say, given the environment, we would remain in the current state. And we have remained sideways on how the flows you're seeing in Q2 and Q3 is how the number should remain.

    — Rajeev Jain, Managing Director

2 min read

Detailed narrative

Bajaj Finance reported a robust Q3 FY25, demonstrating strong growth across key metrics and a clear strategic outlook. The company achieved its highest-ever AUM growth of ₹24,119 crores, pushing total AUM to ₹398,000 crores, a 28% year-on-year increase. New loan bookings also hit a record high at 12 million, contributing to a significant expansion of the customer franchise by 5 million, reaching 97.12 million and putting the company on track to cross 100 million customers by the end of FY25. Profitability remained strong, with Profit Before Tax (PBT) growing 18% to ₹5,765 crores and Profit After Tax (PAT) also up 18% to ₹4,308 crores. Operating efficiencies improved, as evidenced by the Opex to Net Total Income ratio falling to 33.1% from 33.9% in the prior year.

Segment-wise, the company noted stabilization in credit costs, with loan loss to average AUF at 2.16% for the quarter. While GNPA and NNPA stood at 112 basis points and 48 basis points respectively, management emphasized these remain within their medium-term guidance. Certain segments like two-wheeler/three-wheeler financing, business and professional loans, and rural B2C were classified as 'Amber' or 'Yellow' due to elevated Stage 2 assets or slower collection efficiencies, prompting proactive risk actions such as pruning exposures and cutting volumes in used car and unsecured loan segments. Conversely, new car financing and MSME books showed healthy performance.

Strategically, Bajaj Finance is progressing with its 'FINAI' transformation and expanding its digital footprint. The partnership with Bharti Airtel is a significant initiative, with two products already live and nine expected to be live on the Airtel Thanks app by March 2025, targeting a non-overlapping customer base of 200 million. The company also continues to expand its gold loan branch network, aiming to cross 1,000 branches by the end of FY25. Management reiterated its commitment to remaining a non-bank for the short to medium term, focusing on achieving a 3-4% share of total credit and 4-5% of retail credit in India.

Looking ahead to FY26, management provided clear guidance, expecting consolidated balance sheet growth of 25%, profit growth between 22-23%, and credit costs to be maintained below 2%. They anticipate the two-wheeler and three-wheeler portfolio composition to stabilize around 3.5-4% by Q4 FY26. While NIMs are expected to remain stable, the company foresees no more than a 4-5 basis point impact on the cost of funds in the next year. Rajeev Jain also addressed his succession plan, confirming the Board will review the 15-month transition plan by Q4 FY25.

Overall, the management conveyed a bullish yet cautious tone, acknowledging the ongoing 'mini credit cycle' and the need for prudent risk management. They highlighted their data-driven approach and ability to adapt to market conditions by cutting exposures in riskier segments while continuing to invest in technology and strategic partnerships for long-term growth. The focus remains on balancing growth, margins, and risk, with a strong emphasis on operational efficiency and leveraging their extensive customer franchise.

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