Healthy credit growth, improving asset quality, margin expansion from lower interest rates, and stable deposits, position banks and NBFCs for earnings upgrades.
One company that has managed to ride the tailwinds and grow dramatically over the years is Bajaj Finance. In this editorial, we consider the prospects for the stock of Bajaj Finance in the next three years. However, readers should note that this is not a recommendation on the stock in any form.
About Bajaj Finance
Bajaj Finance is a subsidiary of Bajaj Finserv and is known for its diversified financial services including loans, insurance, investments, and payment solutions.
The company’s product offerings include personal loans, home loans, fixed deposits, insurance, easy EMI options, and digital financial services such as UPI wallets and demat accounts, making it one of India’s diversified NBFCs focused on financial inclusion and consumer finance.
How Bajaj Finance will drive growth in the future
Here are a few factors that will drive growth of Bajaj Finance in the next three years:
• Accelerating customer acquisition: The company aims to acquire the next 100 million customers by leveraging strategic partnerships and organic acquisition channels.
• MSME, the focus of growth: Bajaj Finance intends to focus on the unaddressed segments of MSME by leveraging both GST and Udyam-registered entities and offering at least 10 products.
• Personal Loans: Bajaj Finance intends to create a comprehensive range of personal loan products designed to cater to diverse customer segments across various geographies.
• Auto Loans: The company is taking initiatives to scale auto loans with low credit cost and create a viable payments business.
• Risk management: Bajaj Finance is returning to core principles that assess a borrower’s stability, ability, and intent to repay, and to re-emphasise univariate risk-based decision-making and the art of underwriting for prudent risk management.
• Product strategy: Bajaj Finance is investing in new product lines to seize the India opportunity and grow in a sustained manner: (i) leasing multi-product distribution; and (ii) green financing for both solar and EV.
- AI Strategy: The company is constantly identifying opportunities to utilise AI for revenue, cost-saving, design and engagement, credit, risk, productivity, and controllership.The Strengths that Can Propel Growth
Bajaj Finance has several clear advantages that position it well to deliver good returns and sustain growth. Let’s look at some of these…
- Strong customer base and geographic reach: Bajaj Finance has a large and growing customer base, with over 100 million customers as of FY25, and extensive urban and rural presence, allowing deep market penetration.
- Technology and digital leadership: The company leverages advanced technologies such as AI, multi-cloud infrastructure, and zero-trust security to enhance operational efficiency, improve customer experience, and foster innovation.
- Diversified product portfolio: Bajaj Finance offers a wide range of financial products including consumer loans, SME loans, gold loans, microfinance, and green finance, enabling it to tap into multiple high-growth segments.
- Robust risk management and asset quality: The company maintains strong risk management practices with stable asset quality despite growth, and has proactively increased provisions to mitigate risks.
- Favourable regulatory environment: The easing of risk weight norms by the Reserve Bank of India (RBI) on NBFC loans has improved capital efficiency and liquidity for Bajaj Finance, supporting margin expansion and growth initiatives.
- Focus on green finance and sustainability: Bajaj Finance is actively growing its green finance portfolio, addressing the rising demand for solar and electric vehicle financing.
Financials of Bajaj Finance
The company’s net interest income for Q2 FY26 was ₹13,167.6 crore, compared to ₹10,942.2 crore a year ago. The net profit was ₹4,944.5 crore versus ₹4,010.3 crore.
In Q2 FY26, Bajaj Finance saw a good quarter on volume, AUM, profitability, ROA, and ROE. However, credit costs remained elevated.
The company delivered AUM growth of ₹20,811 crore to ₹4.62 trillion, booked 12.17 million new loans and added 4.13 million new customers. The customer franchise stood at 110.64 million.
What to expect from Bajaj Finance in the next three years?
The company has outlined ambitious plans that could nearly double its customer base with ambitions to grow its customer franchise significantly over the medium term.
Bajaj Finance could emerge as a top diversified retail & SME NBFC and not just a consumer-credit or durable-goods-loan player. However, if macroeconomic headwinds, such as rate hikes, sluggish consumer demand, and NPA stress, build up, then growth could be slower.
Investors should evaluate the company’s fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
