BAJFINANCE Q4 Call Highlights: Growth Projections, Credit Quality Focus and NIM Stability!

Bajaj Finance Ltd, a prominent Indian non-banking financial company (NBFC) offering a wide range of financial services, including loans, deposits, and other financial products, in its Q4 earnings call discuss its FY26 outlook, projecting slightly moderated 24-25% growth to prioritize credit quality improvement despite its small 2.14% market share. Management mentioned that their ECL model refresh increased provisions due to recent elevated credit costs, though early loan vintages show promising improvements from tightened lending standards and reduced customer leverage. Management expects credit costs to improve significantly by Q3-Q4, potentially falling below pre-COVID levels. Company maintained stable NIM guidance with possible 10-15 basis point improvement from lower funding costs. Executives explain that ROA/ROE metrics are temporarily compressed by surplus capital from their QIP and DHFL listing, which could add 70-90 basis points to ROA when normalized, while noting their portfolio composition has remained consistent with mortgages at 31% over five years.

Bajaj Finance demonstrated strong financial growth in Q4 FY25 despite regulatory challenges, with consolidated net profit figures increasing 19% year-on-year. The company’s Assets Under Management (AUM) grew by 26% to 4.16 lakh crore, while Net Interest Income increased by 22%. Despite RBI restrictions on its ‘eCOM’ and ‘Insta EMI Card’ products that reduced new loans by approximately 0.8 million, the company booked between 10.70 million new loans during the quarter. Asset quality remained strong with Gross NPA ratios between 0.85-0.96%.

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

Financial/Operational Metrics:

• Revenue: INR18,469 crores, up 24% YoY.
• Net Income: INR4,545 crores, up 19% YoY.
• EPS: INR72.35, up 17% YoY.
• Assets Under Management: INR4.16 lakh crore, up 26%.

FY26 Outlook:

• Fee Income Growth: 13–15% (Post rationalization & card business exit).
• ROA: 4.4–4.6%.
• ROE: 19–20%.

   

Analyst Crossfire:

• AUM Growth Drivers & Market Share, NIM Stability & Rate Environment (Chintan Joshi – Autonomous): Growth in FY26 is expected across all business segments, particularly in secured lending and gold loans, supported by the company’s small market share of 2.14% in total credit and 7–7.5% in count share. Despite some NIM compression due to moderation in unsecured businesses, benefits from reduced cost of funds (10–15 bps) are expected to stabilize NIMs in FY26; additional upside possible if current rate trends persist (Anup Saha – Deputy MD).

 

• ECL Model Provisions & Stage 1 Impact, Rural B2C Portfolio Outlook (Abhishek – HSBC): Higher provisions in Stage 1 result from recent elevated credit costs being fed into the ECL model, which assumes past performance continues into the future. Rural B2C is recovering, with improved early vintage metrics and no additional provisioning required in the recent ECL refresh; management is confident about 20–25% growth in FY26 (Sandeep Jain – COO).

 

• Growth Guidance & Credit Focus, Credit Cost Expectations & Risk Actions (Krishna Shah – Citi): While the company targets 24–25% AUM growth, focus is on restoring credit cost corridor and profitability via AI-driven operational efficiencies before accelerating growth. Credit costs are expected to normalize by Q3–Q4 FY26, with ongoing de-risking in products like 3PL and two-wheeler finance showing early results (Anup Saha – Deputy MD, Rajeev Jain – MD).

 

• Credit Cost Trends, NIM Outlook & Cost of Funds (Vishal Gupta – IIFL Securities): FY24 credit cost declined to 1.97% in Q4 from 2.07% YTD, excluding ESAL provision, marking the first meaningful QoQ drop in a few quarters. Net Interest Margins (NIMs) expected to remain stable, supported by 10–15 bps of potential cost of fund improvement, with current market yields already showing a downward trend (Rajeev Jain – MD, Sandeep Jain – COO).

 

• ROA/ROE Guidance & Excess Capital, Capital Deployment Plans (Analyst): The ROA corridor (4.3–4.7%) and ROE outlook (19–21%) reflect impacts of surplus capital from past QIP and DHFL listing; adjusted ROE would be ~60–90 bps higher without the capital overhang. Excess capital is being considered for organic business building, though inorganic options are explored. Dividend distributions remain a return enhancement tool (Sandeep Jain – COO & Rajeev Jain – MD).

 

• Credit Cost vs. Mix Stability & Captive Auto Finance Wind-Down (Finesh Singh – MK Global): Credit cost guidance (1.85–1.95%) reflects elevated costs in certain unsecured segments; mortgage mix has not shifted materially over five years, remaining at ~31%. The high-credit-cost captive 2W/3W loan book is reducing from ₹17,000 Cr to ₹4,500 Cr by FY26, which will structurally lower credit costs (Rajeev Jain – MD, Anup Saha – Deputy MD).