Bajaj Finance showcased a robust performance in Q1 FY27, reporting significant AUM growth and a substantial increase in profit after tax, underpinned by strong segmental expansion and an aggressive push towards digital and AI-driven transformation.
Photograph: Courtesy, Bajaj Finserv
Key Points
- Bajaj Finance reported a 24 per cent year-on-year growth in assets under management (AUM) and a 28 per cent rise in consolidated profit after tax for Q1 FY27.
- The company saw robust growth across segments, including over 40 per cent in consumer financing, 112 per cent in gold loans, and 102 per cent in commercial vehicles & tractor loans.
- Bajaj Finance is committed to its FinAI transformation, with significant investments in AI and digital platforms to enhance customer acquisition and operational efficiency.
- Asset quality improved, with gross non-performing assets (NPA) at 0.96 per cent and net NPA at 0.39 per cent, contributing to low credit costs.
- The management projects 22-24 per cent year-on-year AUM growth for FY27, with potential for upward revision, and aims for a 20-21 per cent return on equity (RoE).
Bajaj Finance (BAF) reported a strong performance in the first quarter of financial year 2026-27 (Q1FY27).
There was 24 per cent year-on-year (Y-o-Y) growth in assets under management, or AUM (up 7 per cent quarter-on-quarter, or Q-o-Q) and 16.1 million new loan bookings (up 25 per cent Q-o-Q).
Consumer financing saw over 40 per cent Y-o-Y growth, gold loans were up 112 per cent and commercial vehicles & tractor loans were up 102 per cent.
A revival in micro, small, and medium enterprises (MSME), up 2 per cent Y-o-Y, was also positive.
Strategic Growth and Digital Transformation
The guidance is for 22-24 per cent Y-o-Y growth, with a target of 60-62 million new loans in FY27.
The management said it would revisit full-FY27 guidance in Q2FY27, and may revise it upwards if current trends sustain.
The management expects cost of funds (CoF) to stay flat or have a slight upward bias.
It aims for a 25-40 basis points (bps) improvement in operating expenditure (opex) in FY27 over FY26.
BAF expects to add 18-20 million new customers in FY27.
Bajaj is also committed to its FinAI transformation, with 400 dedicated workers in the artificial intelligence (AI) unit, and another 300 people to be added to digital platforms to accelerate transformation.
The company estimates that if it can hit 200 million customer base (currently 124 million), customer acquisition and net credit costs will likely dip below historical averages, improving return on assets (RoA) and return on equity (RoE).
The AI text & bot system generated Rs 2,500 crore of disbursements in Q1FY27, and aims to hit Rs 11,000-12,000 crore in FY27.
Asset Quality and Financial Metrics
Asset quality saw a turnaround, with credit costs (1.51 per cent) in line with guidance.
Despite a larger base (AUM of Rs 5.5 trillion), BAF can deliver loan growth at 23 per cent annually and a RoE of 20-21 per cent.
This is due to faster customer acquisition and a cross-selling model allied to optimisation of digital processes.
The net profit was reported at Rs 6,100 crore, up 28 per cent Y-o-Y and up 9.5 per cent Q-o-Q.
Net interest income (NII) grew 23 per cent Y-o-Y and net interest margin (NIM) increased 4 bps Q-o-Q to 9.5 per cent, with a 10 bps Q-o-Q rise in yields alongside a small 6 bps rise in CoF.
The management intends to maintain gross non-performing assets (NPA) at 0.96 per cent (down 5 bps Q-o-Q) and net NPA at 0.39 per cent (down 2 bps Q-o-Q).
Credit cost was at 1.5 per cent (versus 1.6 per cent in Q4FY26).
Adjusted for a management overlay of Rs 300 crore, credit costs would have been 1.3 per cent.
Other income grew 19 per cent Y-o-Y and opex grew 23 per cent Y-o-Y, resulting in pre-provision operating profit (PPoP) growth of 22 per cent Y-o-Y.
Branch Expansion and Portfolio Performance
Branch expansion will support growth. The company expects to close FY27 with 2,700-2,800 gold loan branches, and 520-550 microfinance (MFI) branches.
At maturity, each branch should generate Rs 14 crore business per annum.
In Q1FY27, BAF added 194 gold loan branches. BAF now has 1,701 gold loan branches and 447 MFI branches.
The management guided for NIM compression of 10-15 bps in FY27.
There was traction in rural business-to-business (B2B), which was up 49 per cent Y-o-Y and up 28 per cent Q-o-Q.
Rural business-to-consumer (B2C) was up 27 per cent Y-o-Y, urban B2B up 38 per cent Y-o-Y, and urban B2C grew 19 per cent Y-o-Y.
Loan against salary up 34 per cent Y-o-Y, and gold loans rose 112 per cent Y-o-Y, while MFI spurted 60 per cent Y-o-Y.
The commercial vehicle (CV) and tractor portfolio was up 102 per cent Y-o-Y on a low base, while mortgages increased 27 per cent Y-o-Y.
In contrast, the two- and three-wheelers (2W/3W) declined 25 per cent Y-o-Y, with a calibrated run-down in the captive book.
The captive 2W/3W portfolio gross NPA declined to 9.8 per cent, versus 14.4 per cent in Q4FY26.
Customer Growth and Future Outlook
Customers grew 17 per cent Y-o-Y to 124 million, while new loans booked spiked 20 per cent Y-o-Y.
Around 17-18 per cent of personal loan disbursements are via voice bot and data.
About 25 per cent of gold loans are from digital platforms.
The target is for gold AUM to reach Rs 29,000-31,000 crore in FY27, with 25 per cent from digital.
The custom AI model will help generate 0.5 million new B2B customers, and will go live in Q3FY27.
The firm continues to display good execution, with healthy AUM growth.
The digital drive should lead to higher efficiencies.
The asset quality is close to the best in the sector and that results in low credit costs.
The guidance implies an impressive RoA of 4.2 per cent and RoE of 22 per cent, and this is achievable over next two-three financial years.
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