Bajaj Finance Profit Rises 29% on Tight Credit Control and Margin Expansion
Bajaj Finance reported a 29% jump in quarterly standalone profit driven by disciplined credit provisioning and margin expansion, reinforcing its appeal to long-term investors despite macroeconomic headwinds.
Bajaj Finance reported a 29% year-on-year increase in standalone profit before tax to ₹7,163 crore for the June quarter. The lender’s shares responded immediately, climbing over 6% to a record high of ₹1,124.60 in early Friday trading.
This standalone performance is closely watched because it houses the company’s highest-yielding segments, including consumer, MSME, personal and gold loans. Net interest income rose 24% to ₹11,495 crore, outpacing the 22% growth in average assets under finance.
The most significant positive surprise for investors was the containment of credit costs. Provisions for bad loans increased by a mere 2% to ₹1,977 crore, a negligible rise given the substantial expansion of the loan book.
Management noted that earnings growth would have been even higher without an additional ₹296 crore provision set aside for macroeconomic prudence. Excluding this buffer, the credit cost stood at 1.3%, marking the lowest level since the pandemic.
Margin and Efficiency Outlook
Annualized standalone net interest margin expanded by 18 basis points to 12.04%. This combination of higher margins and controlled bad debts pushed return on equity up 180 basis points year-on-year to 20.2%.
Looking ahead, the company retained its consolidated assets under management growth guidance of 22% to 24% for the fiscal year. However, it cautioned that margins may moderate by 10 to 15 basis points due to an upward bias in funding costs.
To offset margin pressure, Bajaj Finance expects its operating-expenses-to-net-income ratio to improve by 25 to 40 basis points. This efficiency gain is anticipated as recent investments in its branch network begin to yield returns.
Valuation and Macro Risks
After adjusting for its 87% stake in the lower-yielding Bajaj Housing Finance, the standalone business trades at approximately 21 times estimated fiscal 2028 earnings. Consensus estimates view this valuation as attractive for long-term capital given the firm's sustained return ratios.
Despite this comfort, the lender remains exposed to potential asset quality deterioration. Management highlighted ongoing macroeconomic vulnerabilities, including risks stemming from the West Asia crisis and an uneven monsoon season.
