BAJFINANCE Q3 2024-2025 Call Highlights: Stable NIMs, Lower Credit Costs, and Expansion Plans!

Bajaj Finance Ltd., India’s most diversified non-banking finance company, in its Q3 earnings call projected a 25% balance sheet growth and 22-23% profit growth for the upcoming fiscal year, contingent on stable external conditions, while aiming to keep credit costs below 2%. The management discussed strategic adjustments, including reducing exposure in two-wheeler and used car loans due to higher losses, while seeing potential in urban B2C and MSME sectors. The company also confirmed its non-banking status and detailed a management transition plan with the CEO’s ongoing role, alongside emphasizing digital enhancements in debt management and the strategic expansion of gold loans in smaller towns through branch-based operations.

Bajaj Finance demonstrated strong financial performance in Q3, achieving significant growth across key metrics. The company reported an 18.4% year-over-year increase in net profit, with a 22.6% rise in Net Interest Income. Assets under management expanded by 28% to INR3.98 lakh crore, and the customer base grew 21% to 97.12 million, with record new loan bookings of 12.06 million. Despite a slight increase in gross non-performing assets from 0.95% to 1.12%, the company’s subsidiaries performed impressively, with Bajaj Housing Finance’s profit growing 25% and Bajaj Financial Securities’ profit more than doubling.

Continue Reading: Discover the Vital Insights from Bajaj Finance Ltd.’s Earnings Call!

Financial/Operational Metrics:

• Total Revenue: INR18,035 crore, up 27.5% YoY.
• Net Profit: INR4,308 crore, up 18.4% YoY.
• Basic EPS: INR68.63, up 15.5% YoY.
• Total Expense: INR12,295 crore, up 32.6% YoY.
• Net Interest Income: INR9,382 crore, up 23% YoY.
• Total Deposits: INR68,797, up 19% YoY.

Outlook:

• Loan Loss Projection: Expected to be 2.2% for FY25, with Q4 expected at 2-2.05%.
• GNPA & NNPA: Expected to remain within long-term guidance of 1.2-1.4% GNPA and 40-50 bps NNPA.
• Export Growth Strategy: Increasing exports across 100 countries, leveraging “Make in India”.

  

Analyst Crossfire:

• Credit Cost Outlook & Management Transition (Kunal Shah – Citigroup)? Despite an increase in Stage 2 and Stage 3 loans, improved early MOB trends and better collection efficiencies in December give confidence in credit cost trending lower. Full-year FY26 guidance is expected to be sub-2%, pending Q4 performance. The company is executing a 15-month transition plan, with the Board expected to decide on the way forward by Q4 (Rajeev Jain – CEO).

 

• Debt Management & Collection Costs, Bharti Airtel Partnership (Antariksha – ICICI Prudential)? The company has refined its capacity planning model, with 20,000 employees managing debt collections. About 48% of collections remain physical, but digital collections are increasing for efficiency. The collaboration targets 200 million new customers with an initial offering of nine products, including personal loans, business loans, and gold loans (Rajeev Jain – CEO).

 

• Asset Quality & 1DPD Trends, Used vs. New Car Loans (Piran Engineer – CLSA)? Urban B2B remains strong, two-wheeler loans are flagged as a concern, and Urban B2C collection efficiency is still lagging despite lower default rates. Rural B2C and SME lending are showing signs of improvement. Used car loan volumes have been reduced by 30%-35% due to market pressure, while new car loans continue to be a strong growth driver (Rajeev Jain – CEO).

 

• AUM Growth & NIM Outlook (Chintan Joshi – Autonomous)? Despite tightened credit standards, AUM growth remains strong at 28%. Future growth guidance will be provided next quarter, with expectations to maintain a 25% balance sheet growth, sub-2% credit costs, and 22%-23% profit growth. NIMs are expected to remain stable, with only a 4-5 bps variation in the cost of funds (Rajeev Jain – CEO, Sandeep Jain – CFO).

 

• Bank Conversion & Succession Planning, Fee Income & New Partnerships (Shubhranshu Mishra – PhillipCapital)? The company intends to remain a non-bank as RBI has no clear roadmap for NBFC conversions. Succession planning is in progress, with Rajeev Jain likely to stay in a strategic role post-March 2025, subject to board approval. Fee income is expected to remain stable. The Airtel partnership could drive significant medium-term growth as both companies work on a deep, compliant collaboration. Cost optimizations through the FinAI strategy will help manage margins if NIMs compress (Rajeev Jain – CEO, Sandeep Jain – CFO).

 

• Profitability & Growth Strategy (Bharat Shah – ASK Investment Managers)? The company acknowledges that its historic strategy of balancing risk, margins, and growth remains intact. However, the recent credit cost cycle has temporarily impacted profitability leverage. Management expects stabilization within 1-2 quarters, with renewed confidence in long-term growth exceeding asset growth rates (Rajeev Jain – CEO).

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