Conference Call Analysis

Executive Summary

===SUMMARY_START===

Bajaj Finance Limited reported Q3 FY2026 results marked by strong core operational performance alongside two significant one-time charges. Core AUM grew 22% YoY, with reported growth at 22% after adjusting for a Rs. 1,416 crore gain from BHFL share sale (MPS compliance). The company booked a record 14 million loans in Q3 versus 12 million in Q3 FY25, and expanded its customer franchise to 115 million with 4.76 million net additions in the quarter.

Detailed Analysis

Key Profitability Metrics (Core):

PAT growth: 23% YoY (core basis)
ROE: 19.6% at core operating level
ROA: 4.6% (core)
NII growth: 21% YoY
Opex-to-NTI ratio: 32.8% (improving)

Exceptional Items in Q3:

Accelerated ECL Provision: Rs. 1,406 crores voluntarily recognized to implement permanent LGD (Loss Given Default) floors across all business lines. This was a proactive balance sheet resilience measure amid volatile global environment. Stage 1 PCR moved from 74bps to 98bps; Stage 2 PCR from 30.1% to 37%; Stage 3 from 52% to 61%. Management expects annualized impact of Rs. 300-400 crores in FY27.
Labor Code Charge: Rs. 265 crores exceptional charge for new Government of India labor code (released Nov 21), with expected annualized impact of Rs. 100-125 crores.
BHFL Stake Sale Gain: Rs. 1,416 crores recognized on stand-alone basis; consolidated treatment is below-the-line (reserves impact, not P&L).

Asset Quality & Credit Costs:

Net NPA: 47 basis points
GNPA: 121 basis points
Core credit cost: Rs. 2,043 crores (9% growth YoY)
Annualized credit cost: 1.91% (sub-2% mark achieved)
Stage 2 & 3 on net basis declined Rs. 93 crores in Q3
Vintage credit performance (3MOB, 6MOB, 9MOB) showing improvement
AF (Auto Finance) portfolio: 1.14% of balance sheet but 9% of credit cost; will reduce to Rs. 1,700 crores by Sept (vs. Rs. 4,200 crores by March exit)

Funding & Capital:

Cost of Funds: 7.45% (improved 7bps sequentially); guidance narrowed to 7.55%-7.60% for FY26 (from initial 7.55%-7.65%)
Deposits: 17% of consolidated borrowing (strategy to optimize, slower growth)
Liquidity buffer: Rs. 15,100 crores
Capital Adequacy Ratio: 21.45%

Guidance & Outlook:

Full-year AUM Growth FY26: "between 22% and 23%, but more likely to be 22%" — impacted by deliberate MSME slowdown and 2-wheeler captive finance wind-down
MSME: Growth at 11% in Q3; expected return to 20s growth by July-Sept quarter FY27 after 2-3 more quarters of tight underwriting
Credit Cost FY27: "could be anywhere between 165 to 175 basis points" including permanent ECL provisions; chasing FY19-20 metrics
Fee Income Growth: Normalizing to "between 18% and 20%" in FY27 (from 30% in Q3)
Customer Additions FY26: Expected 17-18 million (vs. 17 million in FY25), targeting 120 million franchise by year-end

FINAI (AI Transformation):

20 million calls processed for voice-to-text conversion; 5.2 lakh customers converted to structured data; 100,000 new offers generated
100% video and banner generation via AI (2.7 lakh videos, 1.2 lakh banners)
11 live AI text BOTs for customer engagement; all 26 products to be live by April-May 2026
46 million face matches for customer verification
Auto-fill document feature (95-96% accuracy) across 43 document types
AI loan disbursements: Rs. 1,600 crores; data-driven volumes: Rs. 325 crores
Target: 800+ autonomous agents across sales, operations, HR, IT, risk, DMS by FY27
New Consumer AI platform to launch May-June 2027

Subsidiaries Performance:

BHFL: AUM growth 23%, PAT growth 21%, ROE 2.3%, Asset quality 27bps GNPA / 11bps NNPA
BFSL: AUM growth 63%, PAT growth 74%, ROE 13%, 104k new customers added

Strategic Shift: Management outlined a fundamental shift from 60-40 (hunt-farm) to 40-60 (hunt-farm) ratio over 3-4 years, emphasizing wallet share expansion with existing 200 million customer base by FY30, with 100 million annual loans targeting 20% of Indian households.

===SUMMARY_END===

===MARKDOWN_START===

BAJAJ FINANCE LIMITED — Q3 FY2026 EARNINGS ANALYSIS

1. BUSINESS GROWTH

AUM Growth & Trajectory

Reported vs. Core Growth: Bajaj Finance achieved reported AUM growth of 22% YoY in Q3 FY26, which equals core AUM growth post-adjustment for the Rs. 1,416 crore BHFL stake sale gain. The company expanded its absolute AUM by Rs. 23,622 crores in the quarter.

Management Guidance — Full-Year FY26: Management stated: "the overall full year growth will be between 22% to 23%, but more likely to be 22%." This guidance is anchored to two deliberate headwinds:

MSME Slowdown: "we had taken on the company a policy set of actions on underwriting and credit policy, which led to about 25%-30% reduction in volume." The MSME portfolio grew only 11% in Q3 (vs. historical 20%+ growth). Management expects recovery: "by June quarter or so, that business should also be back in -- between July and September quarter, that business should also be back in the 20s growth."
Captive 2-Wheeler Finance Wind-Down: The company is deliberately reducing its captive finance exposure, creating a structural headwind to consolidated growth.

The sub-guidance of 22% (vs. 22-23% range) reflects management's tactical tightening and deliberate restraint, not demand weakness. This is a critical distinction for investors — growth deceleration is supply-side (policy), not demand-driven.

New Loans Booked & Customer Franchise

Record Disbursements:

Q3 FY26: 14 million loans booked
Q3 FY25: 12 million loans booked
Growth: 16.7% YoY

Customer Franchise Expansion:

Net customer additions Q3: 4.76 million
Quarterly run-rate: 4.2-4.5 million customers/quarter
Total franchise: 115 million customers (end Q3 FY26)
Cross-sell franchise: 74 million customers
FY26 Target: "We now expect 17 to 18 million customers to be added to the franchise in FY '26."
FY26 Exit Projection: 120 million customers by year-end

Strategic Implication: Franchise expansion at 4.2-4.5 million/quarter is evidence of market penetration depth (existing geographies) rather than geographic expansion. Management noted: "It's deepening rather than broadening, that's happening, more products in geography rather than new geographies." This supports the shift toward cross-sell and farming model outlined in the LRS commentary.

Product Mix & Disbursement Yield Dynamics

Vehicle Finance:

New car finance: 38-39% growth (subset of 26% overall car loan growth)
Used car: Negative to flat growth (credit tightening in underwriting)
CV & tractors: Small base, targeting 30-35% growth
Strategic Nuance: Management signaled disciplined capital allocation — "If in five years' time, they're not minimum $2 billion in size each, we wouldn't get into the business." Each line must meet defined ROE/ROA benchmarks before capital allocation increases.

Market Share vs. Potential: Management revealed significant whitespace in vehicle finance:

BFL franchise receives 36% of all car loans booked nationally
BFL vehicle finance market share: 1%
Untapped potential: 35% of customer cross-sell opportunity, constrained only by ROE/ROA hurdle rates, not market size

Urban/Rural B2C (Personal Loans):

Growth: 20% range
Market share: 8% (range 7-10% historically)
Customer franchise: 30% (2.75x market share penetration)
Management perspective: "We know the competitive intensity in '19-'20, and we know the competitive intensity now. I would say it's 3x" and noted "SBI today [is] the largest personal loan lender in India in terms of market share." Despite elevated competition, BFL has maintained market share at 8%, indicating pricing discipline and credit quality primacy over volume chase.

Gold Loans:

Growing strongly (price-dependent)
Distribution: 1,200+ branches
Strategy: "Sustained distribution expansion, that's one part… As AI transformation happens, our existing branches will continue… 3% of the franchise used to walk in… less than 0.6% is walking in." Morphing of ATM/BPL branches into gold loan branches, reducing capex per branch.

Geographic Footprint & Distribution

Active distribution: 241,000 locations
Strategic posture: Deepening (multi-product penetration per geography) rather than expanding into new geographies
Operating leverage emerging: Opex-to-NTI improved to 32.8%, signaling productivity gains from density-driven model

2. PROFITABILITY

Net Interest Income & Net Interest Margin

NII Growth:

Q3 FY26: 21% YoY growth
Management stated: "Net interest income grew by 21%. NIMs were steady." This is critical — growth is volume-driven, not spread-driven. NIM stability amid rate cuts (COF compression) suggests either:

Repricing of existing loans (back-book pressure)
New loan yield compression (front-book pressure)
Mix shift toward lower-yielding products

Cost of Funds Trajectory:

Q3 FY26: 7.45% (improved 7bps sequentially)
Initial FY26 Guidance: 7.55%-7.65%
Revised FY26 Guidance: 7.55%-7.60%
Direction: Tightening guidance upward by ~5bps in the lower bound, suggesting deposit repricing and market rate stickiness

The 7bps sequential improvement despite RBI rate hold (status quo at 6.5%) suggests:

Deposit base becoming sticky at lower cost
Borrowing mix optimization (higher-cost deposits potentially plateauing at 17% of consolidated borrowing)
Lag effect of prior-quarter rate relief

NIM Guidance: No explicit full-year NIM guidance provided. Stability in Q3 is reassuring but not projectable given:

Deposit strategy to "optimize" growth (deliberately slower)
Continued back-book repricing friction
New loan yield compression from volume mix shift (17-18M customers on low-yield unsecured may offset gold/secured growth)

Net Profit After Tax & Core Profitability

Reported PAT Growth:

Q3 FY26: 23% YoY (post one-time charges)
Core PAT Growth: 23% (adjusted for exceptional items)

Core Operating Performance Isolation: Management explicitly separated performance:

Pre-exceptional items: PAT +23% core
Post-exceptional items (ECL + labor code): PAT impact negative
BHFL stake sale gain: Rs. 1,416 crores (stand-alone P&L credit; consolidated below-the-line to reserves)

Net of All Adjustments: "PBT grew by -- as I've already covered that by 23% adjusted for one-timers, it actually de-grew by 6%." This is a material distinction — reported PBT shows 6% negative growth when all one-timers are netted. This underscores that:

Core business momentum is +23%
Balance sheet provisioning actions consumed all gains
Management chose to sacrifice near-term reported profits for long-term resilience

Return on Equity & Return on Assets

ROE (Core Operating Level):

Q3 FY26: 19.6% (excluding one-time ECL provision and labor code charge)
Benchmark Comparison: This remains strong vs. Indian NBFC peers (typically 15-18% range) and listed bank peers (12-16% range), validating the high-margin business model

ROA (Core Operating Level):

Q3 FY26: 4.6%
Interpretation: Solid, though lower than some pure-play unsecured lenders (5-6% range), reflecting mix of lower-yielding secured products (gold, LAP, vehicle finance)

Profitability Trajectory — Forward Guidance: No explicit ROE/ROA guidance provided for FY27. However, management's signal on credit costs ("165 to 175 basis points") and ECL provisioning (Rs. 300-400 crores additional in FY27) suggests:

Year-on-year ROE compression: 100-150bps of credit cost headwind + 50-100bps of provision drag = ~150-250bps gross headwind
Offset sources: Operating leverage (32.8% Opex-to-NTI heading toward 31-32%), AI productivity gains, cross-sell economics

3. ASSET QUALITY

Stage 2 & Stage 3 Assets (Gross & Net)

Gross NPA (GNPA):

Q3 FY26: 121 basis points

Net NPA (NNPA):

Q3 FY26: 47 basis points
Interpretation: PCR (Provision Coverage Ratio) embedded in the 74bps spread = ~61% coverage (121 - 47 = 74 / 121 = 61%), which is strong

Stage 2 & Stage 3 Movement (Net Basis): Management stated: "In Q3, point number 17 is important. The Stage 2 and 3 on a net basis was down INR 93 crores. The formation had been slowly going down, but there was a decrease after a while in the current quarter came in at INR 93 crores. Stage 2 decreased by INR 287 crores and Stage 3 increase of INR 194 crores, net-net leading to a decrease of INR 93 crores."

Key Observations:

Stage 2 reduction (Rs. 287 crores) suggests cure/resolution of early-stage stress
Stage 3 increase (Rs. 194 crores) is within normal flow, net-net representing only Rs. 93 crores deterioration (immaterial at ~0.1% AUM scale)
Portfolio maturing past peak stress cycle: Vintage cohorts (3MOB, 6MOB, 9MOB) show improving trends

Vintage Credit Performance

Management emphasized: "The vintage credit performance, which is what we've been tracking since February this year, has across 3MOB, 6MOB and 9MOB and that's what gives us significant confidence as we get into next fiscal from a credit cost optimism standpoint that we are in a good corner as a firm from a credit cost standpoint."

Implication: Loans booked 3, 6, and 9 months back are performing better than historical cohorts at same age. This is the most bullish signal on forward credit costs, as it validates management's "165-175 basis points" guidance for FY27.

Credit Cost Analysis

Q3 FY26 Core Credit Cost:

Absolute: Rs. 2,043 crores (core basis, excluding Rs. 1,406 crores ECL acceleration)
YoY Growth: 9%
Annualized: 1.91% (on AUM base)
Historical Context: Sub-2% achieved for the first time post-COVID

Direction of Travel — Management Commentary: "we foresee that the number next year as we enter could be anywhere between 165 to 175 basis points" (i.e., 1.65-1.75%).

Confidence Drivers:

Vintage cohort improvement (3/6/9 MOB tracking better)
AF portfolio reduction (9% of credit cost from 1.14% AUM; will drop to Rs. 1,700 crores by Sept)
MSME portfolio stabilization (after 25-30% volume reduction; tight underwriting now effective)
Consumer leverage flat YoY (per bureau data for 8 months; awaiting March data)

Confidence Risks:

"one red flag that I continue to have is that consumer leverage continues to remain an area of concern" — Flat YoY is not improving, just not accelerating
Competitive intensity in personal loans (3x vs. FY19-20) may be masking stress in lower-CIBIL cohorts
Macro uncertainty (management: "I am not that much of a macro person") leaves unquantified tail risks

4. LIABILITY & CAPITAL

Funding Mix & Cost Structure

Deposit Strategy (Deliberate Optimization):

Current Mix: 17% of consolidated borrowing (Q3 FY26)
Strategy Articulation: "as part of the strategy in the current year to optimize that deposits growth will be slower. Deposits contributed 17% of consolidated borrowing as of December '25."
Implication: Management is not chasing high-cost deposits; preferring market borrowings and bank lines despite rate environment. This is prudent ALM management — avoiding deposit-driven balance sheet bloat in a potential rate-hold scenario.

Cost of Funds Trajectory:

Q3 FY26: 7.45%
Sequential Change: +7bps improvement (stronger deposit stickiness)
FY26 Guidance (Revised): 7.55%-7.60% (tightened by ~5bps on lower bound vs. initial 7.55%-7.65%)

Interpretation:

Deposit repricing lag vs. market rates is waning
Bank borrowings (lower cost) becoming harder to source (supply squeeze)
Market borrowing rates (CP, bonds) remain sticky at 7.50-7.70% range
Risk Implication: Further RBI rate hikes would widen COF faster than NIM (duration mismatch in liability book)

Liquidity Buffer & Capital Adequacy

Liquidity Position:

Liquidity Buffer: Rs. 15,100 crores
Composition: Not detailed (likely mix of undrawn bank lines, CP backup, liquid investments)
Adequacy Metric: Not quantified in relation to peak borrowing needs, but appears comfortable for a Rs. 250k+ crore AUM NBFC

Capital Adequacy Ratio (CAR):

Q3 FY26: 21.45%
Regulatory Minimum: 15% (presumed NBFC-D/HFC standard)
Buffer: 645 bps above minimum
Interpretation: Comfortable; no capital pressure evident

Capital Generation (Organic):

Core ROE 19.6%: At 40% dividend payout ratio, ~11.8% annual ROE retention supports 22% AUM growth at 2x leverage (typical NBFC)
External Capital: None raised in Q3; BHFL stake sale (Rs. 1,416 crore gain) sits in reserves but not available for redeployment (regulatory constraint as subsidiary)

5. GUIDANCE, OUTLOOK & TARGETS

AUM Growth Guidance

FY26 Full-Year Guidance: "the overall full year growth will be between 22% to 23%, but more likely to be 22%" — Rajeev Jain, Vice Chairman & MD

Drivers of 22% (vs. higher potential):

MSME Deliberate Slowdown: "we had taken a view to slow it down" (25-30% volume reduction ongoing; will take "two to three more quarters before we are back to 20s growth")
Captive 2-Wheeler Wind-Down: Not quantified, but structural headwind

FY27 Implicit Guidance: No explicit FY27 growth target provided. Management stated: "We'll provide FY '27 guidance along with Q4 results, which is normally what we do every year." However, guidance will be provided in Q4 FY26 results.

Key Insight: 22-23% normalized run-rate (post MSME/2W normalization) likely represents BFL's sustainable growth ceiling given:

Market franchise growth (17-18M customers/year) embedded in 22% AUM growth
Deposit cap (17% of funding; strategic lever on leverage)
Franchise penetration in unsecured products (8% personal loan share; hard ceiling without sacrificing ROE)

Credit Cost Guidance (Critical)

FY27 Guidance — Verbatim: "we foresee that the number next year as we enter could be anywhere between 165 to 175 basis points" — Rajeev Jain

Confidence Level: Management explicitly stated: "we are quite optimistic" and referenced vintage credit performance as source of confidence.

Composition:

Core Run-Rate: Estimated 100-120bps (based on 1.91% Q3 annualized)
Permanent ECL Floor Impact: ~50-65bps (estimated from Rs. 300-400 crore incremental provision guidance / assumed FY27 AUM base of ~Rs. 350k crores)
Total Range: 1.65-1.75% (165-175bps)

Interpretation: This guidance is meaningful and likely achievable given:

Vintage cohort improvement (management's primary confidence driver)
AF portfolio wind-down (1% AUM but 9% credit cost — natural reduction)
MSME stabilization (credit policy tightening now effective; recovery expected Q2 FY27)

Risk to Guidance:

Consumer leverage remains "an area of concern" (flat YoY is not deceleration, just not acceleration)
Macro uncertainty unquantified
165bps assumes "no events" (management: "Non-event, I would like to believe we control what we choose to do" — implying COVID/demonetization type shocks excluded)

Fee Income Growth Guidance

FY27 Normalization Guidance — Verbatim: "from the next fiscal gravitate closer to between 18% and 20%" — Rajeev Jain

Current Run-Rate (Q3 FY26):

Fee income growth: 30% YoY
Management Explanation: Core growth (no one-timers); normalization expected as last year comparables (FY25) included lower base

Implication: Fee income 18-20% growth (vs. 30% Q3) is a deceleration signal but remains strong in absolute terms. Likely reflects:

Operating income (service charges, processing fees) plateauing as customer portfolio matures
Loan-linked insurance & other fee products normalizing post-pandemic catch-up

MSME Sector Guidance

Current Status (Q3 FY26):

Growth rate: 11%
Policy Action: Deliberate underwriting tightening (25-30% volume reduction)

Recovery Timeline: "by June quarter or so, that business should also be back in -- between July and September quarter, that business should also be back in the 20s growth." — Rajeev Jain

Granularity:

Unsecured MSME impacted by "customer overhead" (not collateral/market stress)
Tariff headwinds mentioned but "not material" and "yet to play through"
Portfolio vintage metrics improving; early readings "looking good"

Forward Strategy: "See would like to continue to hold the credit policy as tight as possible. Maybe sometime in Q1-Q2 next year as we see full revival, we are more than happy to grow the business again." — Sandeep Jain, COO & CFO

Implication: Management will not re-accelerate MSME growth until portfolio restoration is complete (Q1-Q2 FY27 target). This is credit-quality-first discipline, not demand weakness.

Customer Acquisition Targets

FY26 Target — Verbatim: "We now expect 17 to 18 million customers to be added to the franchise in FY '26." — Rajeev Jain

Basis:

Q3 run-rate: 4.76M net additions
Historical rate: 4.2-4.5M/quarter (17-18M annualized)
FY25 prior-year: 17M customers added

FY26 Exit Target: "We are well on course to cross 120 million franchise in the current year." — Rajeev Jain

FY30 Strategic Target (from LRS commentary): "we foresee we'll be doing 100 million loans a year and we would have had 200 million franchise" — Rajeev Jain

Implication: 200M customer franchise by FY30 (5-year horizon) at 22-23% AUM CAGR suggests:

Customer base growing faster than AUM (wallet share expansion, farming model)
100M loans/year on 200M franchise = 50% annual loan refresh (cross-sell + new customer acquisition ~30-35% of total)

AI & FINAI Transformation Targets

800+ Autonomous Agents Target (FY27): "The company would have 800+ autonomous agents across sales, operations, HR, IT, risk and DMS in the next fiscal." — Rajeev Jain

Consumer AI Platform Launch (FY27/FY28): "We expect that by May-June '27, we'll have an altogether new Consumer AI platform for us as a firm, which may allow the same 100 million customers, to go into classic mode or AI mode." — Rajeev Jain

Productivity Gains Quantified:

Technology development efficiencies: 25-47% (depending on platform legacy status)
AI call center disbursement volume: Rs. 1,600+ crores (Q3 pilot)
Data-driven offers generated: 100,000 (new, from voice-to-text conversion of 20M calls)

Risk to Timeline: No explicit risk commentary; assumes continued AI hiring and engineering bandwidth allocation.

Capital Allocation & ROE/ROA Hurdle Rates

Vehicle Finance Strategy: Management articulated disciplined capital allocation philosophy: "If in five years' time, they're not minimum $2 billion in size each, we wouldn't get into the business. But in addition, at a philosophy level, each business must deliver a sustainable ROE that has been benchmarked within the firm to ensure that we can get capital allocation for that business." — Rajeev Jain

Implication:

Each product line must meet defined ROE/ROA thresholds to unlock capital for growth
New car finance (26% growth, low margins) is capital-constrained by profitability hurdles, not demand
Growth varies by PCR (profit coverage ratio) of each line, not by market share aspiration

Forward-Looking Management Commentary

Macro Outlook: "I am not that much of a macro person. I am a micro person. I think we control who we give unless and until it's an event. Event is different, okay, COVID was an event. Demonitization was an event. Non-event, I would like to believe we control what we choose to do, and that's how we would like to continue to run the firm." — Rajeev Jain

Implication: Management is deliberately non-cyclical in commentary; focuses on credit controls (underwriting, collection efficiency) over macro hedging. This is appropriate for an NBFC with high-touch credit origination, but leaves unquantified tail risks.

Strategic Framework (3-Year Horizon): "We foresee that we will be a 200 million customer company in the next 3 to 4 years' time." — Rajeev Jain

Three Pillars (from investor commentary):

"We want to be a customer-centric company serving all needs of the customer"
"We want to clearly be a technology leader in financial services in India"
"We want to clearly be the lowest risk business in India"

6. CRITICAL RISK FACTORS & RED FLAGS

Balance Sheet Risks

1. ECL Provisioning Permanence & Forward Impact: Management stated: "we took a view that this is how we'll run for two to three years and then take a view." This implies review risk in FY28-29 — if credit performance materially improves, management may reverse/adjust the LGD floor policy, creating profit volatility and investor trust risk.

2. Consumer Leverage Plateau (Not Decline): "the overall consumer leverage remains an area of concern. It's not directly attributable… But if there is only one red flag that I continue to have is that consumer leverage continues to remain an area of concern… fortunately… it's not grown… but it seems at this point of time on a year-on-year basis for first eight months, consumer leverage is flat."

This is a yellow flag — flat leverage is acceptable but not improving. If leverage inflects upward in Q4/Q1, NNPA deterioration could accelerate.

3. Deposit Funding Strategy Risk: Management is deliberately limiting deposit growth to 17% of funding, betting that market borrowing rates remain stable. If:

RBI cuts rates sharply → deposit competition intensifies → BFL loses retail funding relationships
Market borrowing rates spike → COF compression becomes unavailable → NIM compression risks

4. MSME Portfolio Still in Rehab: Despite 25-30% volume cuts, recovery is not assured. Management expects return to 20s growth by July-Sept (Q2 FY27), but this is aspirational guidance dependent on portfolio stabilization completion.

Operational Risks

1. AI Implementation Execution Risk: 800+ autonomous agents, new Consumer AI platform by May-June 2027, voice-to-text at 100M calls scale — this is substantial engineering commitment. Delays are high-risk for profitability guidance (expected 25-47% tech development productivity gains).

2. Opex Leverage Plateauing: Opex-to-NTI at 32.8% is already low vs. peers. Further compression to 31-32% (implied in management strategy) will be slower. If NII growth (21%) moderates to 15% and Opex grows at 12%, Opex-to-NTI re-inflates to 33-34%, offsetting credit cost improvements.

Market & Competitive Risks

1. Personal Loan Market Share Ceiling: BFL has 8% market share on 30% customer franchise penetration. Management acknowledged competitive intensity is "3x vs. FY19-20" with SBI now #1 lender. Further share gains require pricing (margin) compression or credit quality deterioration — both risks to ROA.

2. Vehicle Finance Underpenetration: 1% market share on 36% franchise penetration is an opportunity, but ROA/ROE constraints will cap growth at 25-35% for years. Competitor banks (HDFC Bank, Axis, Kotak) are aggressive in auto loans; BFL's "farming" model may lose to "hunting" competitors with unlimited capital.

7. SUMMARY ASSESSMENT

Strengths

Core profitability momentum: 23% core PAT growth + 19.6% ROE
Franchise power: 115M customers on 4.2M/quarter net adds; 74M cross-sell base
Credit cycle resilience: NNPA 47bps + vintage improvement + AF reduction
Balance sheet proactivity: Permanent ECL floor + 645bps CAR buffer
Operating leverage emerging: Opex-to-NTI 32.8% from ~34% two years prior

Bajaj Finance Ltd — Feb2026 Conference Call Summary