Bajaj Finance FY25 Annual Earnings Summary

Credit costs remain above long-term averages; management is cautiously optimistic but normalization may take longer if macro conditions worsen.

Management flagged that high-frequency data shows the economy slowing, which could worsen asset quality and delay credit cost recovery.

Credit cost guidance of 185-195 bps remains above pre-COVID levels, with urban personal loan portfolio still maturing.

Clients with 3+ live unsecured loans show higher default propensity; supply-side slowdown may not fully mitigate risk.

Bajaj Auto's captive financing unit is taking over two-wheeler/three-wheeler financing, impacting AUM and profitability in the near term.

Management declined to comment on regulatory matters; ongoing investments in compliance may not fully mitigate future actions.

Despite lower default rates, collection efficiency in urban B2C remains below normal, and management expects this segment to take the longest to normalize.

The two-wheeler and three-wheeler portfolio is classified as 'amber' with Stage 2 rising from 3.83% to 5.53% YoY, though part of the degradation is due to portfolio degrowth.

Management acknowledged that pricing pressure has intensified as credit growth slows, which could compress NIMs if not offset by operating leverage.

Management expects stable NIMs, but fee income growth is moderated to 13-15% and cost of fund benefits may be slower than anticipated.

Excess capital from BHFL listing and QIP is pressuring ROE; long-term ROE guidance reduced to 19-21% from 21-23%.

The winding-down captive portfolio (INR 10,000 crore) contributes disproportionately to credit costs; any delay in wind-down could impact asset quality.