Growth accelerated, with a caveat
- Assets under management
- ₹5.85 lakh croreUp 26% from a year earlier at 30 September 2026.
- Profit after tax
- ₹6,367 croreBefore minority interest and up 29% year on year.
- Macroeconomic provision
- ₹337 croreIncluded in second-quarter loan losses and provisions.
Bajaj Finance on Monday raised its forecast for growth in assets under management to 26-27% for the year ending March 2027, from 23-25%, after its loan book reached ₹5.85 lakh crore in the September quarter. Net interest income rose 24% year on year to ₹13,335 crore, while profit after tax before minority interest increased 29% to ₹6,367 crore, according to its investor presentation. The company nevertheless charged a ₹337 crore prudent-management and macroeconomic provision against earnings.
The combination matters more than the profit headline. Bajaj Finance is accelerating from an already large base while retaining an extra buffer for risks that its credit models may not capture. Excluding the buffer, provisions fell 12% from a year earlier and profit would have grown 34%. Management’s confidence in demand therefore has support in the reported numbers. Its caution about the economy does too.
Bajaj Finance’s higher growth guidance is supported by earnings and credit costs, but the ₹337 crore buffer shows management does not regard the outlook as risk-free.
The faster the book grows, the more valuable that conservatism becomes.
Credit improved, but not everywhere
- Gross non-performing assets
- 1.06%Up from 0.96% at the end of June, but below 1.24% a year earlier.
- Stage 2 and Stage 3 loans
- 2.02%Up from 1.87% at the end of June.
- Loan-loss ratio
- 1.56%Would have been 1.32% without the macroeconomic provision.
Reported credit costs strengthened year on year. Loan losses and provisions were ₹2,166 crore, only 4% higher despite 27% growth in assets under finance. The loan-loss ratio fell to 1.56% from 1.88%. Gross non-performing assets were 1.06% of the book and net non-performing assets were 0.42%, both below their levels a year earlier.
The sequential comparison is less comfortable. Gross non-performing assets rose from 0.96% in June, while Stage 2 and Stage 3 loans increased to 2.02% from 1.87%. Gold loans accounted for ₹1,047 crore of the ₹1,601 crore increase in those categories. Urban personal loans and micro, small and medium-sized enterprise lending also recorded higher gross bad-loan ratios from June. Bajaj Finance says the gold-loan movement reflects short-tenor products that it has stopped offering and should not raise credit costs. Investors will need performance data, rather than the product’s collateral, to verify that claim.
The mix of faster lending and weaker sequential delinquency measures makes credit quality the main test of the upgraded guidance.
Rates can dilute the benefit
- Cost of funds
- 7.31%Improved by 9 basis points from the June quarter.
- Liquidity buffer
- ₹19,995 croreAt 30 September 2026.
- Capital adequacy ratio
- 20.33%Tier 1 capital was 19.43%.
Bajaj Finance’s cost of funds fell 9 basis points sequentially to 7.31%, but management said calculated net interest margins still appeared to have declined. It has allowed for two further policy-rate increases during the financial year and expects a little more pressure than its previous forecast of 10-15 basis points of margin compression, Moneycontrol reported from the earnings call.
The financial mechanism is straightforward. Borrowing costs can reprice before yields on existing loans, reducing the spread on every rupee of assets. Faster loan growth then produces less incremental profit than the headline increase in assets suggests. Bajaj Finance has two offsets: lower credit costs and better operating efficiency. Its operating-expense ratio was stable at 33%, while annualised return on assets improved to 4.6% and return on equity to 20.6%. A ₹19,995 crore liquidity buffer and a 20.33% capital adequacy ratio limit balance-sheet risk, but they do not protect earnings from a narrower lending spread.
Funding costs have started to fall, but further policy-rate increases could still compress the spread earned on new lending.
The optimistic case is substantial
- Underlying provisions
- ₹1,829 croreExcludes the ₹337 crore prudent-management and macroeconomic charge.
- Annualised return on equity
- 20.6%Up from 19.1% a year earlier.
- Customer franchise
- 12.89 croreUp from 11.06 crore a year earlier.
The best case against caution is that Bajaj Finance is not sacrificing present profitability to manufacture growth. Excluding the discretionary buffer, provisions declined to ₹1,829 crore even as the loan book expanded. Annualised return on equity rose to 20.6% from 19.1%, and gross and net bad-loan ratios remained better than a year earlier. Its customer franchise reached 12.89 crore, giving the lender scope to cross-sell without relying entirely on new borrowers.
Growth was also broad. Urban consumer finance expanded 43%, rural consumer finance 63%, mortgages 30% and Bajaj Housing Finance’s assets under management 25%. Gold loans more than doubled, but remained 4.14% of consolidated assets under management. On these figures, the rise in delinquency measures could be seasonal or transitional rather than an early credit-cycle warning. That case changes the conclusion from scepticism to conditional confidence. The results justify higher growth guidance, provided margins stabilise and the newer loan vintages continue to perform as management expects.
The strongest counterargument is that Bajaj Finance is expanding while its underlying credit cost, returns and funding position are improving, not deteriorating.
The next quarter carries the proof
- FY27 AUM growth guidance
- 26-27%Raised from 23-25%.
- New-loan guidance
- 6-6.2 croreManagement’s target for the full financial year.
- Gross NPA guardrail
- Below 1.4%Management’s stated sustainability threshold.
Bajaj Finance’s upgraded forecast rests on three assumptions: festival demand persists, the central bank’s rate increases cause only modest margin damage, and the rise in Stage 2 and Stage 3 loans does not become a rise in losses. The first assumption drove management’s higher growth view. The second is already under pressure. The third is the most important because rapid unsecured and small-business lending can look strongest just before repayment data weakens.
The faster the book grows, the more valuable that conservatism becomes. The ₹337 crore provision is therefore not a contradiction of management’s confidence. It is the cost of admitting that weather, inflation and oil prices may not yet be visible in borrower-level models. Bajaj Finance’s December-quarter results will provide the decisive evidence: sequential gross bad loans, the Stage 2 pool, net interest margin and the loan-loss ratio excluding discretionary provisions. If those measures stabilise while assets grow at the upgraded rate, the quarter’s confidence will have been earned.
The next results must show whether faster growth can coexist with stable margins and lower underlying credit costs.
Sources
- nsearchives.nseindia.com: BAJFINANCE SEIntimation InvestorPPT
- Bajaj Finance Investor Relations – Investor Presentation · bajajfinserv.in
- Bajaj Finance Q2 net profit rises 29% to ₹6,367 crore on strong NII ... · business-standard.com
- Bajaj Finance raises FY27 AUM growth guidance by 4% to 27% after Q2 · moneycontrol.com
- Earnings call transcript: Bajaj Finance lifts FY27 growth view after strong Q2 By Investing.com · in.investing.com
- Bajaj Finance BAJFINANCE Q2 26/27 Summary | Quartr · quartr.com
