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Bajaj Finance
Our verdict on Bajaj Finance isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →Does management do what it says?
The MSME business grew by 11% in Q3, aligning with the moderated guidance of 10-12%. Management expects it to take 2-3 more quarters to return to 20%+ growth. (1 met, 1 missed across 2 tracked commitments)
“We now expect MSME business to grow in the current full fiscal by 10-12% only.”
New car financing is projected to grow in the early 30s next year. — target: Early 30s percentage growth
“That means that new car financing next year would probably still grow in the early 30s.”
Management expects NIM to experience marginal moderation in the coming year. — target: marginal moderation (+1 more commitment)
“NIM, we expect marginal moderation. It's a little bit contingent on how interest rates play out, caused by geopolitical tensions.”
The company is implementing a permanent LGD floor across all business lines to strengthen provisioning. — target: Permanent implementation of LGD floors (+1 more commitment)
“we expect significant improvements in credit costs for FY'27. ... That should also lead to significant improvement in loan loss to average AUM metric in second half of the year and also in FY'27.”
Management targets the gold loan business to reach INR 27,000 to 30,000 crores by March 2027. — target: INR 27,000 - 30,000 crores
“It should be between INR 27,000 crores to INR 30,000 crores business by March '27.”
See the full cited Management analysis of Bajaj Finance
How durable is the business?
The Rural B2C segment has seen a significant improvement in asset quality, moving from a 'yellow' internal risk rating to 'green', allowing for a potential rebuild and faster growth. (1 expanding)
“And talking about rural B2C, after a long time, we have now revised the management assessment from yellow that it was tagged for close to about 2 years to green.”
The company's deposit-led funding moat is expanding, with deposits now contributing 17% of consolidated borrowings, up from 13% in Mar'19. (2 expanding, 1 stable)
“Deposits book stood at ₹ 68,534 crore... It contributed to 15% of consolidated borrowings.”
The mortgage segment continues to expand its share of the total loan book, growing from 30.7% to 31.5% of consolidated AUM, driven by 25% YoY growth. (5 expanding across 3 engines)
“Mortgages... Consolidated as of 30 Jun 2026 ₹ 1,73,624... Composition as of 30 Jun 2026 31.74%”
The 'FinAI' transformation is expanding rapidly, with AI voice bots now contributing to significant loan originations and resolving 85% of customer service queries, aimed at lowering long-term operating costs. (5 expanding)
“doubling down in expanding its FINAI transformation with 400 dedicated people in AI unit... help augment customer-centricity, tech transformation”
Physical distribution is expanding significantly, with location presence growing from 4,039 to a target of 4,900 by FY30, alongside a massive jump in digital web visitors. (1 expanding, 1 shifted)
“Geographic presence stood at 4,073 locations and active distribution points were over 250K as of 30 June 2026.”
See the full cited Business Model analysis of Bajaj Finance
Where does growth come from?
The gold loan branch expansion is accelerating, with 85 stand-alone branches added in Q1 alone, bringing the total to 1,254 locations as the company aggressively builds this high-margin vertical. (5 accelerating across 5 signals, 1 leading indicator)
“In Q1, the Company added 194 Gold Loan branches. BFL now has 1,701 Gold loan... The Company expects to close FY27 with 2,700-2,800 Gold Loan branches”
Customer franchise growth is accelerating, with the base reaching 110.6 MM in H1 FY26 and a long-term target of 200-220 MM by FY30. (5 accelerating across 5 signals, 1 leading indicator)
“In Q1, the Company added 5.10 MM customers to its franchise. The Company expects to add 18-20 MM new customers to its franchise in FY27.”
The FinAI transformation is accelerating, with 80 of 123 identified high-impact areas set to go live by February 2026. AI is already handling 42% of B2B loan quality checks. (5 accelerating across 5 signals, 2 leading indicators)
“In FY27, your Company is doubling down in expanding its FINAI transformation with 400 dedicated people in AI unit and adding another 300 people in digital platforms unit”
Capital adequacy remains exceptionally strong and steady at 21.19% Tier 1, providing a massive buffer for growth despite elevated credit costs in specific segments. (5 steady across 5 signals)
“Capital adequacy remained strong at 20.90% as of 30 June 2026. Tier-1 capital was 20.01%.”
LRD growth remains a high-velocity driver for the housing subsidiary, maintaining a 39% YoY growth rate. (3 steady, 2 accelerating across 5 signals)
“Lease rental discounting grew by 41%... AUM as of 30 Jun 26: 34,604 [Cr]”
See the full cited Future Growth analysis of Bajaj Finance
What could break the thesis?
The risk is intensifying as Gross NPA (GNPA) has risen to 1.24% and Net NPA (NNPA) to 0.60%. Management attributes 18-20 basis points of this increase to a seasonal 'peculiar situation' in Q2 where the quarter has more days, pushing borderline accounts into the 90-day NPA bracket. (5 intensifying, 1 high-severity)
“Captive 2W & 3W Finance... GNPA % 30-Jun-26 15.37%”
The 'FINAI' transformation is scaling rapidly with 700 dedicated staff and 62 AI agents live, increasing the complexity of the operational overhaul. (1 intensifying, 4 stable)
“In FY27, your Company is doubling down in expanding its FINAI transformation with 400 dedicated people in AI unit and adding another 300 people in digital platforms unit to rapidly accelerate this transformation.”
The risk is easing as the cost of funds improved to 7.45% in Q3 FY26 from 7.52% in Q2 FY26. (3 easing, 2 stable)
“In Q1, cost of funds was 7.40%, improving 1 bps over Q4 FY26.”
Efficiency is improving slightly. The Opex to NTI ratio is estimated at 33.2% for FY25, down from 34.0% in FY24. Management targets a further reduction to 31% (Opex to NIM) by FY30 through AI-driven automation. (1 easing)
“Opex to Net total income was 33.4% as against 33.1% in Q1 FY26.”
Leverage has improved (decreased) to 4.7x in FY25 from 4.9x in FY24, providing more headroom against the internal cap of 6.0x. (3 easing, 1 stable)
“Leverage Ratio... Jun'26 4.9... Leverage Threshold 6.0”
See the full cited Risk analysis of Bajaj Finance
Read the full thesis on Bajaj Finance
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