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Bajaj Finance Ltd

| Q4 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤29th Apr 26

Summary : Bajaj Finance delivered a strong Q4 FY26 with robust AUM and profit growth, driven by customer additions and significant AI transformation, projecting continued strong performance for FY27.

Management Perspective positive : Management repeatedly used terms like 'pretty strong quarter,' 'reasonably high degree of optimism,' 'confident of a 20% to 24% AUM growth,' and 'bulletproof business.' They expressed confidence in navigating challenges and achieving future targets.

Concall Report Analysis & Insights

Business Overview

  1. Bajaj Finance reported a strong Q4 FY26 across all key metrics.
  2. AUM crossed INR 5 lakh crores, growing by 22.4% in Q4.
  3. PAT grew by 26.7% in Q4, with a record INR 25,500 crores AUM growth.
  4. The company added 3.93 million new customers, reaching 119.3 million.
  5. Gold loan portfolio grew by 115%, now contributing 3.5% to overall AUM.

Future Growth Prospects

  1. AUM is expected to grow by 20% to 24% in FY27, aided by new businesses.
  2. Gold loan portfolio is projected to cross 5% of total AUM by FY27.
  3. MSME business is expected to return to double-digit growth from H2 FY27.
  4. Significant acceleration and deployment of AI use cases across all business functions are planned.
  5. The company aims to add 15-17 million new customers in FY27.

Management Insights

  1. Rajeev Jain stated Q4 was a 'pretty strong quarter across all key metrics'.
  2. Management is 'reasonably confident' of strong growth momentum across all key metrics.
  3. The company is 'bullet proofing the balance sheet' to withstand potential impacts.
  4. AI transformation is about 'reshaping the business model' and covers all aspects.
  5. Management expects FY27 to be the 'busiest year' for FinAl transformation outcomes.

Signs of Skepticism

  1. Analyst questioned if credit cost guidance accounts for geopolitical issues; management confirmed it does not.
  2. An analyst's calculation of 35-40% profit growth was met with management's 'more than happy to be positively surprised' comment, implying it might be too optimistic.

Risk Factors

  1. FY27 assessment is contingent on easing geopolitical tensions and macro stability.
  2. MSME growth was muted due to proactive risk actions taken since Q2 FY26.
  3. Marginal NIM moderation is expected, dependent on interest rate movements.
  4. The credit cost guidance does not account for adverse geopolitical impacts.

Good To Know

  1. The company recommended a dividend of INR 6 per equity share.
  2. Revised disclosure of recoveries now reports under loan losses, impacting opex to NTI and loan loss to AR ratios.
  3. Full-time employees stood at 71,613, with 1,800 added in Q4, mainly in gold loan and MFI.
  4. AI unit has 203 dedicated people, expanding to 363 by June 2027.
  5. The company aims to be among the top 5-6 financial services lenders in India.

Key Drivers

  1. Strong AUM growth expected.
  2. AI transformation to boost efficiency.
  3. Gold loan portfolio expanding.
  4. New customer additions robust.

Key Analyst Discussions

Competitive Environment

  1. Market share in personal loans is 8.5-9% at the India level.
  2. The company aims to grow at 2x the system's total credit growth.
  3. Market share in most businesses remains small, providing significant growth headroom.

Market Trends & Consumer Behavior

  1. Consumer momentum is strong, with expectations to cross 5 million loans monthly.
  2. FY27 outlook is based on expectations of easing geopolitical tensions and macro stability.

Financial Highlights

  1. Credit cost guidance for FY27 is 145-160 basis points, down from 165 bps in Q4 FY26.
  2. ROA guidance for FY27 is 4.4% to 4.6%, consistent with core performance.
  3. Opex to NTI is expected to improve by 25-40 basis points from current levels.
  4. PBT grew 26% and PAT grew 27% on a core profitability basis in Q4.
  5. Provision coverage ratio is at 60%, up from 54% last year.

Product Composition

  1. MSME business growth was 6% in FY26 due to proactive risk actions.
  2. Gold loan portfolio grew 115% and is expected to reach 5% of AUM by FY27.
  3. Captive 2-wheeler and 3-wheeler business is winding down, reducing credit costs.
  4. New car finance and used car finance see 35% of volume from existing customers.

Strategic Considerations

  1. AI transformation is focused on reshaping the business model, not just use case deployment.
  2. AI investments aim to reduce manual effort, improve customer experience, and lower costs.
  3. The company is deploying 600+ autonomous agents across operations, HR, and risk in FY27.
  4. AI-powered systems processed 600,000 loans on Diwali peak, aiming for 1 million next Diwali.
  5. Management is investing deeply in security and compliance infrastructure for AI.
Bajaj Finance Ltd (BAJFINANCE) Concall Report Analysis & Insights | Dhanarthi