← Throughline · holding view Deep analysis ↗ Q4 FY25
BAJFINANCE Bajaj Finance Ltd · NBFC Q4 FY25 · concall
Pattern: fy26 aum growth distribution

Karnataka 'political risk' retired after Q1FY26.

2 weak · 4 clean — pushback across 2 of 6 Q&A turns

Focused evidence 2 of 6

Chintan Joshi · Autonomousweak

On FY26 AUM, where will growth be easier vs harder to find? On NIM, what is the reported NIM for the current quarter and why should we not expect NIM expansion with falling rates - what's different this time? Also is the cost-of-funds guidance conservative?

Anup: At an aggregate level we remain very small - 2.14% market share of India's total credit (~7-7.5% on count share), and ex-B2B (54%+) every business has small share, so growth will come across all businesses, helped by new secured businesses and very robust Gold Loan growth. On NIM, moderation in select unsecured businesses has compressed NIM, but ~10-15 bps cost-of-funds benefit should keep NIM stable; if cost of funds falls more, there could be upside. Rajeev: Conservative by maybe 5-7 bps - upside is more like 10-15 going to 20-25 bps, not 30-40, because we lock in long-term liabilities (liquidity risk is not a risk we take), so pass-through takes longer. Bigger drag is the moderated fee/charge growth (13-15% vs prior 24-25%) - that is a larger headwind than cost of funds. Sandeep: ~75% of borrowings are fixed-rate (FDs, NCDs) and reprice slowly; bank money repriced faster. NCD rates have softened 40-45 bps and CP rates 70-80 bps in the last 30 days. We don't report a NIM number, but Q4 NIM is below the FY25 full-year NIM, so 'stable in FY26' implies some catch-up next year.

Kunal Shah · Citigroupweak

Why a 24-25% AUM growth for FY26 vs the long-term 25%+ guidance you sounded confident on last quarter? Which segments are pulling back? Does the 1.85-1.95% credit cost imply the stage 2 build-up is concerning?

Anup: We design to grow 2x nominal GDP and 2x industry. We are a credit business - the FY25 miss was on credit cost and that is the priority. We need to (a) get the credit cost corridor back, (b) use this period to drive the FinAI transformation for OPEX to NTI improvement, and then (c) restart growth. Once credit and OPEX are sharper, we will take growth as it comes. 25% remains a rightful long-term sustainable growth rate. Rajeev (lighter point): on a Rs 420,000 crore base, 25% growth means Rs 105,000 crore net addition - that would be a first. The book has to fully churn; by Q3-Q4 of FY26 credit cost should be reasonably lower than pre-COVID, absent macro shocks. The previously captive two/three-wheeler book (used to be 5% of book / 12-14% of credit cost) is winding down - down to ~Rs 10,000 cr from Rs 17,000 cr a year ago, heading to Rs 4,500 cr by March '26 - and the new open-architecture two-wheeler business has half the loss rate (50% scooters in mix). Three PL has come back to pre-COVID 6-7% (had peaked at 12%); in rural it is at 2.5-3%.

▸ Other Q&A (4)
Abhishek Murarka · HSBC

On the ECL model refresh - what history is used and why the additional provision? Is high-credit-cost FY21/FY22 entering the window and could next year see releases? Also confirm if quarterly write-off is around Rs 1,700 crore. And commentary on rural B2C growth - is the 20-25% FY26 outlook still intact?

Sandeep: Stage 1 uses 12-month historical and 12-month forward-looking; the last three quarters of elevated credit cost feed into the model and result in higher stage 1 provisioning, with bias more on stage 1 than stage 2. If FY26 improves, releases are possible in future. Stage 2/3 use 5-7-8 year horizon for PD/LGD/EAD; stage 2 coverage moved up marginally (recent digitization), stage 3 holds well as only LGD can move and longer-term LGD averages have not deteriorated. Aggregate standardized provision is up from 69 bps to 77 bps, majority in stage 1. The technically correct write-off number for the quarter is Rs 2,100 crore, not Rs 1,700 crore. Sandeep added that rural B2C did not contribute to the Rs 359 crore - that catch-up was already taken in FY24. Anup: Rural B2C grew at 36% two years ago, was throttled to 5%, and has now started growing back nicely; 3-MOB / 6-MOB vintages improving, debt management capability strengthened, supported by a rock-solid rural B2B - so we are confident rural B2C grows from here. Rajeev: Across the firm we watch 3-MOB / 6-MOB / 9-MOB / 12-MOB closely (since Aug/Sep tightening) - in some cases vintages are now lower than pre-COVID, so as the book churns (BFL standalone churns in 18-19 months) losses should be significantly lower in current fiscal.

Viral Shah · IIFL Securities

The asset-quality panels still show amber and stage 2/3 inching up - what gives confidence FY26 will be much better, beyond a possible ECL release? Also, with BHFL drag at consol level, can NIMs really stay flat YoY? And what rate-cut path does the cost-of-funds benefit assume?

Sandeep: I did not say ECL release is a given - the model has to show that during FY26. Rajeev: The book churns in 18-19 months and we are 7-8 months into tightening. 3/6/9-MOB vintages are tracking - in some cases - lower than pre-COVID. We don't have 12-MOB yet (action started in August). It is a structurally better, lower-leverage customer mix being acquired, which is what gives confidence; growth could be higher once credit is back in corridor but credit is the priority right now. Sandeep: Q4 already came at 1.97% (ex one-time ECL) vs FY25 full year at 2.07% - the trend has started turning. The pain has been concentrated in unsecured (mainly PL) and the wind-down captive auto book; used-car has had ~1/3 of the business let go. On NIM: 10-15 bps cost-of-fund benefit is enough to maintain NIM; bias is to the upside given recent money-market improvement. Rajeev: Our planning cycle since February has baked in three front-loaded rate cuts till June; if there are more, upside is possible.

Kuntal Shah · Auckland Capital

Long-term consol guidance has AUM, profit growth, GNPA and NNPA unchanged but ROA and ROE corridors widened/lowered - how do you reconcile that, even adjusting for BHFL dilution? And any plans to deploy the excess capital?

Sandeep: Current-year ROA range is 4.5-4.6%, so the new 4.3-4.7% corridor covers it. On ROE, we have been sitting on surplus capital for over a year (Rs 10,000 cr QIP, ~Rs 6,500 cr from BHFL listing) which puts pressure on ROE; medium-term guidance is 19-21%, with FY26 specifically 19-20%. Rajeev: Over the next two years we still have to bring our BHFL stake down to 75% per regulation - that frees up more capital. If you adjust for excess capital and its interest cost, the underlying ROE is roughly 70-90 bps higher (so ~19.7-19.8% vs reported 19.1%). On excess capital deployment: bias remains organic (we like to build businesses). M&A is explored but we typically conclude we can build in 3 years, so no inorganic action absent an event - we will announce if and when. Today's dividend (and special interim dividend from BHFL exceptional gain) is one way to improve ROE.

Vinay Singh · MK Global

FY26 credit cost guidance of 1.85-1.95% looks higher than originally guided for FY25 and higher than pre-COVID despite mortgages now being a meaningful part of mix - what is structurally driving this? Has portfolio mix shifted away from low-credit-cost mortgages?

Rajeev: Mix has not actually moved - mortgages were 31% five years ago and are 31.1% today on a consolidated basis; all lines have compounded together. Anup: We are not fully out of the woods on certain businesses (urban PL) - early vintages look fine but the legacy portfolio has to mature; H2FY26 should print better than the full-year average. Segment mix can shift only ~1-1.5% sideways per LRS. The captive two/three-wheeler book continues to wind down (it has been an elevated credit-cost portfolio) and that is accretive to credit cost. Rajeev: That book used to be 5% of AUM and 12-14% of credit costs; it is down to ~Rs 10,000 cr from Rs 17,000 cr a year ago, heading to Rs 4,500 cr by March '26.

▸ Prepared remarks (5 blocks)
Rajeev Jain framed Q4FY25 as a good quarter on volume, AUM, OPEX and credit costs, with PBT (excluding the additional ECL provision) up 18%, and called out two one-timers: a Rs 359 crore additional ECL provision from the annual model redevelopment (mostly stage 1 assets, driven by higher flow-forward rates and elevated credit costs in the last three quarters) and a Rs 348 crore tax reduction from re-evaluation of income tax positions on deductibility of certain expenditures (Rs 249 cr from prior years and Rs 99 cr from the current year). Reported PBT was Rs 5,647 crore (+11%) and PAT was Rs 4,546 crore (+19%); ECL-adjusted PBT growth was 18% and tax-adjusted PAT growth was 17%.
(1) subdivision of face value from Rs 2 to Rs 1 plus four bonus shares for every one fully-paid equity share (effectively a 1:10 impact on share count); (2) a final dividend of Rs 44 per share (~<strong>18.88%</strong> of standalone profit excluding the BHFL exceptional gain, in line with the long-term ~19% payout policy); and (3) a special interim dividend of Rs 12 per share funded out of the BHFL IPO exceptional gain. On franchise and footprint: 10.7 million loans booked in Q4 (record), 4.7 million new customers added, customer franchise at 101.82 million, Bajaj Finserv App at 70.5 million customers. Geographic footprint expansion is mostly done; growth is in Gold Loan and MFI branches with 137 standalone Gold Loan branches added (total 964) and 30 MFI branches added (total 333).
Anup Saha will host the investor call from Q1FY26 onwards. Three new Deputy CEO positions created: Manish Jain (B2B), Siddhant Dadwal (B2C/SME) and Harjeet (Bharat Lending/MFI/strategic partnerships). The company also took a 12% stake in Protectt.ai (cybersecurity, mobile app security) for Rs 65 crore. Anup Saha then walked through the FY25 management assessment scorecard - greens on customer acquisition (18.818 mn vs 12-14 mn called out), AUM growth (26%), OPEX to NTI (80 bps improvement vs 20-40 bps), ROA (4.6%), ROE (19.1%), GNPA (0.96%) and NNPA (0.44%); reds on NIM (49 bps compression vs 30-40 bps due to delayed rate cuts), credit cost (2.07% vs 1.75-1.85%) and profit (16% vs cautiously optimistic). For FY26 he provided the new management assessment (see financial section). Rajeev Jain closed the prepared remarks by flagging two changes to long-term/medium-term guardrails on panel 33: ROA range widened from 4.6-4.8% to 4.3-4.7%, and ROE long-term range moved back to 19-21% (from 21-23%), described as one of the last residues of COVID.
Cross-sell franchise stood at <strong>64.45 million</strong> (63.3% cross-sell penetration). Provisioning movements YoY were marginal across portfolios, with the largest movement in two/three wheeler finance (which is in wind-down) - aggregate GNPA moved from 85 bps to 96 bps and NNPA from 37 bps to 44 bps. Q4FY25 standalone metrics: AUM Rs 416,661 crore (+26%), AUM addition Rs 18,618 crore. Cost of funds 7.99% (+3 bps QoQ); guidance is for cost of funds to drift down to 7.75-7.85% by end of FY26. Deposits book +19% standalone, +20% consolidated. NIM +22%, NTI +23%, OPEX to NII improved to 33.1%. Headcount 64,000; attrition 16.8%. The company onboarded 44,500 people from outsourced manpower to fixed term contract employment.
reported loan loss and provisions Rs <strong>2,329 crore</strong> (2.33% of average AR); adjusted for the Rs 359 crore one-time additional ECL provision (mostly stage 1) the number was Rs 1,970 crore (1.97%). Net increase in stage 2 + stage 3 assets came down to Rs 289 crore (stage 2 +Rs 784 cr, stage 3 -Rs 495 cr). Standardized provisioning ratio rose from 69 bps to 77 bps, mostly in stage 1. Asset quality: GNPA 96 bps (vs 85 bps prior), NNPA 44 bps (vs 37 bps prior) - amongst the lowest in industry. Capital adequacy 21.93% with Tier-1 at 21.09%. S&P upgraded standalone outlook to BBB- positive from BBB- stable. Consolidated pre-provision profit grew 24%; consolidated PBT 11% / ECL-adjusted 18%; PAT 19% / underlying 17%. ROA 4.6%, ROE 19.1%.
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