Bajaj Finance rides high on digital expansion and asset growth—what’s next?

Despite macroeconomic headwinds, Bajaj Finance delivered a resilient performance, raising both investor optimism and target prices among analysts. While some remain cautious over valuation concerns and rising credit costs, the broader consensus points to sustained long-term growth.

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Q3 earnings beat

Bajaj Finance reported an 18% year-over-year rise in consolidated net profit to ₹4,308 crore, surpassing Bloomberg’s estimate of ₹4,136 crore. Net interest income (NII) jumped 23% to ₹9,382 crore, supported by a 28% increase in assets under management (AUM) to ₹3.98 lakh crore. Fee income also expanded 17%, reinforcing revenue momentum.

The company also recorded a 26% rise in net total income to ₹11,673 crore, while pre-provisioning operating profit (PPOP) grew 27% to ₹7,805 crore, reflecting strong underlying profitability. The capital adequacy ratio (CRAR) stood at a solid 21.57%, with tier-I capital at 20.79%, reinforcing financial stability and reassuring investors about Bajaj Finance’s ability to sustain growth while keeping leverage under control.

Despite robust earnings, asset quality saw slight deterioration. Gross non-performing assets (GNPA) rose to 1.12% from 0.95% a year earlier, while net NPAs climbed to 0.48% from 0.37%. This uptick pushed provisions for loan losses to ₹2,043 crore, a steep increase from ₹1,248 crore last year.

Customer acquisition remained strong, with 5.03 million new customers added in the quarter, bringing the total base to 97.12 million. Loan disbursals also hit a record 12.06 million, up 22% year-over-year.

Brokerage view

Bajaj Finance’s strong Q3 performance has prompted several global and domestic brokerage firms to raise their target prices, citing robust earnings visibility and a stable credit outlook. However, opinions diverge on short-term upside, with some analysts expressing caution over valuations and asset quality risks.

Bullish calls dominate

Morgan Stanley reaffirmed its ‘Overweight’ rating, raising its target price to ₹9,300, citing sustained lower stressed asset formation and management’s guidance for reduced credit costs.

Jefferies maintained its ‘Buy’ recommendation with a target of ₹9,270, pointing to strong loan growth and improving asset quality. “Valuations at 4.4x FY26 PB are attractive for high growth and RoE (20%), hence we retain BAF among top picks,” it noted in a report.

Nomura raised its target to ₹9,000, emphasizing Bajaj Finance’s ability to exceed profit estimates due to lower credit costs and AUM expansion.

HSBC revised its price-to-book value multiple to 5x for FY26, lifting its target to ₹8,900 while maintaining a ‘Buy’ recommendation.

Citi Research increased its target price to ₹9,060 from ₹8,150, highlighting stable net interest margins (NIMs) and a controlled credit cost environment.

Emkay Global revised its FY25-27 estimates upward by 2.5%, reinforcing its ‘Buy’ stance with a new target of ₹8,800.

Cautious voices

Despite the upbeat outlook, some analysts remain wary.

UBS issued a ‘Sell’ rating with a target of ₹6,500, citing concerns over declining return on assets (RoA) and fluctuations in asset quality.

Bernstein placed an ‘Underperform’ rating with a target of ₹6,400, warning of potential challenges in Bajaj Finance’s asset mix as it expands into newer lending segments.

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While opinions on short-term upside vary, the broader consensus suggests that Bajaj Finance’s solid earnings trajectory, disciplined expansion, and digital transformation position it well for long-term growth.

Future roadmap: Growth with caution

Looking ahead, Bajaj Finance aims to grow its AUM by 25% in FY26 and expand net profit by 20-25%. The company is also targeting sub-2% credit costs, supported by improved collection efficiencies.

“Saw better collection efficiency in December and we have pruned businesses in the last two quarters, with the largest contribution from two-wheeler loan book winding down,” managing director Rajeev Jain said in a post-earnings call. “We have cut growth in used car loans by 31% and as losses in the rural B2C portfolio peaked out.”

With credit costs expected to moderate in Q4 FY25, analysts believe that profitability will likely remain strong. The company is prioritizing sustainable expansion, balancing rapid growth with asset quality discipline—a strategy expected to bolster investor confidence and drive further stock appreciation.

Bajaj Finance is reshaping its business model through digital innovation while aggressively expanding its customer base. The company recorded its highest-ever quarterly increase in customers, adding 5.03 million in Q3 FY25. Its total customer base surged 21% year-over-year to 97.12 million, while new loans booked hit a record 12.06 million.

At the core of its digital push is the BFL 3.0 initiative, which integrates AI-driven processes across operations to enhance revenue, cut costs, and improve risk management. The company is also deploying a multi-cloud strategy and zero-trust security framework to strengthen its digital infrastructure.

Additionally, Bajaj Finance has scaled up its digital lending initiatives, leveraging AI-powered analytics and automated credit assessment tools to deepen customer engagement. As India’s fintech ecosystem evolves, the company is positioning itself as a leader in AI-driven lending, a move that could fuel exponential growth in the coming years.

Airtel partnership

In a landmark move, Bajaj Finance announced a strategic partnership with Bharti Airtel, gaining access to a potential 200-million-strong customer base distinct from its existing franchise. The alliance will allow Bajaj Finance to launch nine financial products on Airtel’s platforms, significantly expanding its digital lending footprint.

Analysts see the partnership as a game-changer, enhancing customer acquisition and reinforcing Bajaj Finance’s presence in retail lending. The company has already rolled out two pilot products, with the full suite expected to launch by March 2025. This expansion into telecom-backed lending platforms underscores Bajaj Finance’s ambition to dominate India’s digital credit ecosystem.

Leadership transition

Amid its growth momentum, Bajaj Finance is navigating a leadership transition—one of investors’ key concerns.

Long-time managing director Rajeev Jain, who has led the company since 2007, is expected to remain involved in strategic decision-making. Deputy CEO Anup Saha is the likely successor, a move seen as ensuring continuity and minimal disruption.

Jain has reiterated his commitment to staying actively engaged in shaping Bajaj Finance’s future. “This is how I would look at the future role, subject to how the board decides,” he said in a post-earnings call.

Market analysts believe Jain’s continued presence will help maintain strategic direction, reassuring investors during the transition. The company has been working on a 15-month succession plan, with final decisions expected by March.

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By balancing high-growth expansion with financial discipline, digital transformation, and leadership stability, Bajaj Finance is positioning itself for sustained long-term success.

Investor takeaway

With strong earnings momentum, a disciplined approach to credit costs, and an aggressive digital expansion strategy, Bajaj Finance remains a top pick among India’s financial stocks.

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While near-term risks—such as management transition and valuation concerns—persist, the company’s long-term growth prospects remain compelling.

About the author: Suchitra Mandal is a financial writer with expertise in delivering well-researched insights and detailed analyses of companies’ performance and market trends.