🔍 Bajaj Finance Q4 FY25 Analysis: Can India’s Fintech Giant Regain Its Profit Mojo?
What is Bajaj Finance?
Bajaj Finance Limited (BFL), a flagship NBFC of Bajaj Finserv, is a powerhouse in India’s consumer and SME lending ecosystem. With over 102 million customers and a broad product suite—ranging from personal loans and gold loans to mortgages and margin trade funding—BFL has quietly become one of India’s most systemically important financial institutions.
Its strength? A deeply embedded cross-sell engine, strong tech capabilities (now shifting toward AI), and a retail-first lending model that keeps customer engagement high.
Q4 FY25 Highlights: Resilient Growth Amid Credit Concerns
| Metric | Q4 FY25 | YoY Growth |
|---|---|---|
| AUM | ₹4.16 Lakh Cr | +26% |
| New Loans Booked | 10.7 Million | Record High |
| PAT | ₹4,546 Cr | +19% (adjusted ~17%) |
| ROE | 19.1% | Down from 20.5% |
| Net NPA | 0.44% | Among industry’s lowest |
The quarter was strong operationally but was dented by two major one-time items:
- ₹359 Cr ECL provision from credit model refresh
- ₹348 Cr tax reversal gain
Key Themes from Q4: Beyond the Numbers
1. Growth Engine Remains Intact
- Added 4.7 million customers in Q4 alone
- Launched 137 Gold Loan branches, 30 new MFI locations
- Margin trade finance (MTF) AUM up 18% YoY
“Our market share is just 2.14% of India’s credit market. That tells you how much headroom we have to grow,” – Anup Saha, MD
2. Credit Cost the Achilles’ Heel
- FY25 loan loss: 2.07% of average receivables
- Elevated unsecured loan stress in Q1–Q3 FY25
- Rural B2C segment now recovering
Expectation: Credit cost to normalize to 1.85–1.95% in FY26
3. AI-Driven Operating Leverage in Sight
- FinAI platform to deploy 100+ AI use cases in FY26
- Shifted 44,500 outsourced staff to fixed-term roles
- OPEX/NTI improved to 33.1%, further 40–50 bps reduction expected
Management Mind Map: What’s the Strategy?
✅ Focus Areas
- Fix Credit: Tighten underwriting, improve vintage quality (3MOB, 6MOB, etc.)
- Cost Leadership: Use AI to reduce cost-to-income
- Controlled Growth: AUM guidance for FY26: 24–25%
❗Risks & What Could Go Wrong
- Unpredictable macro or rural slowdown
- Delay in cost reduction outcomes
- NIM compression if rates don’t fall as forecasted
🔄 Long-Term Orientation
- Maintain 19–21% ROE guidance despite surplus capital
- Organic growth bias—no major M&A in sight
- Continue winding down two-wheeler captive book (once 12% of credit cost)
Can Bajaj Finance Double Profits in 2 Years?
| Metric | FY25 | FY27 Doubling Feasibility |
|---|---|---|
| PAT | ₹16,779 Cr | ❌ Unlikely unless credit cost drops below 1.5% |
| AUM | ₹4.16 L Cr | 🟡 Possible if FY26 hits 25% growth |
Verdict: PAT doubling in 2 years is challenging, but AUM growth of ~20–25% CAGR is achievable, especially with FinAI and cost control levers kicking in.
Analyst Concerns Left Unanswered
- Why was reported NIM not disclosed?
- How will stage 2 delinquencies trend in Q1 FY26?
- What structural changes will offset elevated credit costs?
Final Takeaway: Cautious Optimism
Bajaj Finance has shown it can grow with discipline. But the next leap will not come from just pushing volumes—it will come from superior risk calibration, AI-powered efficiencies, and value-accretive cost management.
As we enter FY26, all eyes are on:
- Credit cost normalization
- FinAI rollout impact
- Growth from secured/rural segments
| Parameter | Findings | Details & Source |
|---|---|---|
| 1. Revenue Visibility / Order Book | ✅ Strong | Record loan bookings (10.7M in Q4), customer additions (4.7M), and growing app base (70.5M users). Guidance for 14–16M new customers in FY26. |
| 2. Capacity Expansion / Capex | 🟡 Moderate | No capex-heavy operations, but added 137 standalone gold loan branches, 30 MFI branches in Q4. FinAI deployment of 100 use cases planned in FY26. |
| 3. Operating Leverage / Segment Performance | 🟢 Improving | OPEX/NTI improved to 33.1% in Q4 from prior year. Full-year pre-provision profit up 24%. B2B, gold loan, and secured businesses show traction. |
| 4. Market Share / Leadership | ✅ Strong in niches | B2B financing holds 54%+ share. Overall market share remains low (2.14% of India’s total credit), leaving growth runway. |
| 5. New Products / Segments / Plants | 🟢 Expanding scope | Added cybersecurity (Protectt.ai stake), pushed FinAI transformation, rural B2C recovering, gold loan & MFI expansions, MTF (margin trade financing) also growing. |
| 6. Tone / Language Shift | 📉 Realistic & cautious | Management acknowledges credit cost issues and is focusing on conservative growth with strong emphasis on “credit first.” |
| 7. External Tailwinds / One-Time Gains | ⚠️ Mixed | One-time tax reversal of ₹348 Cr; ₹359 Cr ECL provisioning due to model redevelopment; positive bond market yields (cost of funds expected to ease). |
| 8. Unit Economics Improvement | 🔄 Transitioning | Cost to income improving. Employee onboarding shift (from outsourced to fixed term) to improve productivity. FinAI aimed at long-term efficiency. |
| 9. Debt / Working Capital | ✅ Stable | Capital adequacy ~21.93%. Tier 1 ~21.09%. Liquidity buffer strong. Deposit book grew 19%. GNPA and NNPA among lowest in industry. |
| 10. Strategic Changes (M&A, JV) | 🟡 Limited | Minor strategic investment in Protectt.ai (₹65 Cr). No large-scale M&A. Focus remains organic; winding down two-wheeler captive business. |
| 11. Revenue / Profit Doubling Potential (Next 2 Yrs) | 🟠 Possible but challenging | Growth guidance at 24–25% AUM; PAT grew 16%. Credit cost must normalize. FinAI + cost control + rural recovery = triggers. But no high-visibility on profit doubling yet. |
| 12. Risks / Where Management Can Go Wrong | ⚠️ Credit cost | Elevated credit costs (2.07% full year). Unsecured book pressure. Slow transmission of falling interest rates due to long-term borrowings. |
| 13. Unanswered Analyst Questions | ❌ NIM guidance vague | Management did not provide reported NIM. Evaded direct answers on long-term NIM compression despite cost easing. |
| 14. Mind Map of MD Vision | 🔄 Transformation in 3 Phases | (i) Stabilize credit cost & quality, (ii) drive AI-led cost efficiency, (iii) resume higher growth across secured + digital + cross-sell businesses. Bias towards organic growth with long-term sustainability. |
