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What the record says.
Bajaj Finance reported a 22% PAT growth YoY and 25% AUM growth to ₹4,41,450 crore, driven by record loan bookings of 13.5 million and 4.7 million new customer additions. However, credit costs remained elevated at 2.02% of average AUM, with stress concentrated in the winding-down two-wheeler/three-wheeler captive book and the MSME segment, where a sudden slowdown in 13 of 17 tracked industries has led to higher delinquencies. Management guided for FY26 AUM growth of 23-24% (down from earlier 24-25%) and credit costs of 185-195 bps, with improvement expected from H2. Cost of funds improved 20 bps QoQ to 7.79%, and NIM is expected to expand ~10 bps for the year. Key risks include further deterioration in MSME asset quality and political risk in Karnataka affecting portfolio performance.
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Guidance to track
- Management revised AUM growth guidance down from 24-25% to 23-24% for FY26, citing slower MSME and auto finance growth.
- Credit costs expected to remain in the 185-195 bps range for the full year, with improvement from H2 as auto finance book winds down.
- Net interest margin expected to expand by about 10 basis points by end of FY26, driven by liability repricing and lower deposit costs.
- Retail deposit share of balance sheet to fall from 19% to 15-16% as the company shifts to cheaper NCD and bank borrowings.
Risks flagged
- MSME portfolio stress has increased suddenly, with 13 of 17 tracked industries showing slowdown and credit supply contracting. Restructuring may not fully contain losses.
- Management cited political risk in Karnataka, which accounts for 11% of the balance sheet, leading to a 40-50% business cut in the state. Further escalation could impact growth and asset quality.
- The winding-down two-wheeler/three-wheeler captive book continues to generate higher-than-expected loan losses, with GNPA rising to 6.38%.
- Management acknowledged that succession planning remains a work in progress, with no clarity until closer to March 2028, creating potential leadership risk.
Key quotes
- Consumer leverage continues to remain an area of concern. Company across lines of businesses continues to take several actions across all products to reduce contribution of customers with multiple loans.
- We are watching offers data on these customers. That is not necessarily giving a good picture. It is the only point I would leave you with.
- I think we have built distribution which is able to generate that kind of top of funnel. Mind you, in the private sector, there will be only two, three players, and we are much younger who are above 100 million franchise.
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