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.